Time and time again, we’ve seen Senator Elizabeth Warren (D-Mass.) reduce greedy bankers, fraudsters in the financial industry, and scam artists to rubble in Senate hearings. The way she handles these wealthy and powerful players in the banking and investment industries is pure art, her sharp words strike the heart of her targets and none can escape her dutiful wrath.
This time, it was Wells Fargo CEO John Stumpf who had the misfortune of crossing paths with Sen. Warren after it came to light that Wells Fargo employees had been “cross-selling” bank accounts to customers without their knowledge, who then had to pay fees associated with these accounts. The number of these extra bank accounts opened in customers names amounted to 2,000,000 fake accounts. The scandal started with one bank division under Carrie Tolstedt’s supervision and 5,300 employees and has now led straight to the top, but Stumpf denies it was orchestrated fraud.
Warren wasn’t buying it.
Warren pointed out that in 2010 Stumpf set the goal to cross-sell eight accounts to customers — most banks just sell three accounts per customer — which shows that the goal of eight accounts per customer was woefully unrealistic.
Warren held in her hand 12 transcripts of calls made to Wall Street investors and analysts, in which Stumpf cited the bank’s high cross-selling rate as a reason to invest in Wells Fargo stock. During the years the scandal took place the number of accounts held by individual customers continued to increase.
“Guess what? Wall Street loved it. Here is just a sample of the reports from top analysts in those years all recommending that people buy Wells Fargo stock in part because of strong cross-sell numbers…So when investors saw good cross-sell numbers, they did while this scam was going on, that was very good personally for you, wasn’t it Mr. Stumpf?”
While this scam was going on and investors were flocking to buy stock, Stumpf held 6.75 million stocks with Wells Fargo as share prices rose the CEO’s stock value rose to over $200 million dollars. Cross-selling was very personally beneficial to John Stumpf.
“Now, here’s what really gets me about this Mr. Stumpf, if one of your tellers took a handful of $20 bills out of the cash drawer, they’d probably be looking at criminal charges for theft. They could end up in prison. But you squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket. And when it all blew up, you kept your job, you kept your multi-million dollar bonuses and you went on television to blame thousands of $12/hour employees who were just trying to meet cross-sell quotas that made you rich.”
Warren then made the case that the only way for CEOs and Wall Street investors who preside over “massive fraud” be held accountable is to put them in jail. Until then, it will be “business as usual.”
Stumpf said he won’t resign, nor does he have plans to give back the money he made in bonuses while this scam was taking place. Tolstedt left the bank with a $124 million in stock options and benefits, while thousands of low-level employees lost their jobs.
The Department of Justice is currently investigating the scandal.
Featured Image via C-SPAN (Screen Capture)