A culture of high pressured sales tactics and lax regulatory oversight caused Wells Fargo to create millions of bogus accounts in customers’ names for years without being discovered, according to a Senate Banking Committee hearing.
Wells Fargo was recently fined a staggering $286 million after more than 5,300 employees were terminated after they created more than two million bogus accounts in order to meet sales goals and the saga along with the regulatory reaction were the subject of a hearing in the Senate Banking Committee on September 20.
“Banking is based on trust and that trust was broken” said Alabama Republican Senator Richard Shelby; Shelby further went on to note that a culture which pressured bankers and tellers to cross-sell account holders to open other accounts was the cause of this scandal.
Shelby noted a company moniker which set a goal of eight accounts per customer because “eight rhymes with great.”
There was a rare moment of bi-partisan agreement with both Democrats and Republicans equally condemning the bank.
“I call it fraud because I got tired of the euphemisms a long time ago,” said Democratic Ohio Senator and ranking committee member Sherrod Brown.
Wells Fargo Chief Executive Officer John Stumpf took responsibility saying: ““I accept full responsibility for unethical sales practices in our retail banking division.”
But Stumpf refused to resign, give back any unearned compensation and he refused to give his opinion on an upcoming bonus of the head of the retail banking division, Carrie Tolstedt.
“You haven’t resigned, you haven’t returned a single nickel of compensation and you haven’t fired a single senior manager.” Massachusetts Democratic Senator Elizabeth Warren noted.
Both sides of the aisle were in agreement that low level employees were being scapegoated for the culture and high pressure sales tactics of upper management.
Brown noted that nearly all the 5,300 employees terminated made less than $35,000 yearly while Tolstedt was allowed to retire at 56 with a golden parachute that Fortune Magazine recently estimated at $124 million in stocks and options.
While there was agreement on the conduct of Wells Fargo, Democrats took the hearing as an opportunity to bolster the case for the Consumer Financial Protection Bureau, one of three agencies along with the Los Angeles County Attorney’s Office and Office Comptroller and Currency, to investigated this matter.
The CFPB, created as part of the Dodd/Frank financial overhaul, has long been a flashpoint with Republicans arguing it is unchecked bureaucracy while Democrats argue it is a necessary police officer to protect financial consumers from predators.
New York Democratic Senator Chuck Schumer lauded the agency stating: ““This case exemplifies why the CFPB was created.”
New Jersey Democrat Bob Menendez noted that agency has recovered $12 billion for $27 million consumers since its inception.
“My Republicans colleagues are hell bent on killing this agency.” Menendez stated.
Warren noted that nearly one million complaints have been lodged to CFPB’s hotline.
While Republicans have been critical of the agency in the past, none took this opportunity to criticize CFPB in relation to this investigation.
After spending a decade in finance, Michael Volpe has been a freelance investigative journalist since 2009. His work has been published locally in the Chicago Reader, Chicago Crusader, Chicago Heights Patch, and New City. Nationally, Volpe’s work has appeared in a wide variety of publications including the Washingt
on Examiner, the Daily Caller, Crime Magazine, the Southern Christian Leadership Conference Newsletter, and Counter Punch. Volpe has been recognized by whistleblowers as leading the charge in getting their stories out. His first book Prosecutors Gone Wild was published in October 2012, his second book The Definitive Dossier of PTSD in Whistleblowers was published in February 2013 and his third book Bullied to Death was published in August 2015.