Mr. Stumpf went to Washington (again) yesterday, and it wasn’t pretty.
The Wells Fargo chairman and CEO appeared before Congress for the second time in the past couple of weeks and got bitch-slapped even more viciously by the House than he was by the Senate.
If you’re in a hurry, here’s the takeaway: John Stumpf’s tenure at the top of the third-biggest bank in America is over. He’ll be lucky to last the weekend.
If you have some time, here’s why:
- As one member of the House Financial Services Committee said, Stumpf has managed to do the impossible: Unite Democrats and Republicans in outrage over Wells Fargo’s reprehensible behavior -- stealing from its own customers (as the CEO agreed was the case) by opening some 2 million unauthorized bank and credit card accounts and charging fees for those accounts.
And all the heat is on Stumpf.
- One reason the smooth talker in the expensive suit and $200 haircut (just guessing here, could be more) was able to get the congressional rabble that mostly rages among themselves to join hands in condemnation is that it’s an election year. Given this year’s angry electorate, it’s particularly bad timing to be exposed as a greedy bank behemoth snatching middle-class dollars and firing low-paid minions (5,300 of them) who were pressured to perpetrate the fraud.
- Speaking of haircuts, Stumpf is having more than $41 million in compensation clawed back by the bank, and Carrie Tolstedt, the former executive in charge of the unit that defrauded customers, is losing $19 million. But the CEO got little credit for being penalized and no sympathy from the House lawmakers grilling him. In fact, one echoed Senator Elizabeth Warren who last week told Stumpf directly that he should step down.
Under Stumpf, Wells Fargo’s currency in Washington is now worthless.
- Since Bernie Sanders was vanquished in the Democratic primaries, his clarion call to rein in Wall Street and break up the big banks has been largely silenced. Yes, Hillary Clinton, mindful of the progressives she must muster, talks more about cracking down on the Street and the banks, but that’s not a centerpiece of her campaign. The financial community knew her as a reliable ally when she was a senator from New York and even when she was Secretary of State.
So if those in the C-suite at JPMorgan Chase, Bank of America, Citi and the rest were breathing easier when Bernie went bust, they exhaled too soon. The Wells Fargo scandal has dredged up all the financial crisis vilification of the big banks and brought the question of whether they should be broken up again. At the hearing yesterday, one representative berated Stumpf for what Wells has done to its industry.
“The brush with which you’ll be painted will stroke them, too,” he said.
“Sorry, John,” Stumpf’s peers must be saying, “you gotta take the bullet and get us off the front page.”
- Lying to Congress is never smart. It’s particularly stupid when every politician in the room wants to take you down. If Stumpf was truthful when he said he knew nothing about the cross-selling activities of his rivals, then he shouldn’t be the boss.
- On top of all that, there is the Buffett Factor. Berkshire Hathaway, the holding company controlled by Warren Buffett is Wells Fargo’s biggest shareholder with a 9.71 percent stake as of a June filing with the SEC. That makes it one of Berkshire’s five top investments. In July, Berkshire Hathaway applied to raise its stake in Well Fargo. Buffett is also said to own an additional 2 million shares personally.
Besides the spectacles on Capitol Hill, California has suspended its relationship with the bank for a year over the scandal, and Wells Fargo has lost about $20 billion in market value, according to Street.com. Doug Kass of Seabreeze Partner Management wrote yesterday in a financial blog that Buffett expressed his displeasure to the bank board and demanded “radical transformation.” Buffett told CNBC that’s “dead wrong,” that he has only talked to Stumpf.
Moreover, Stumpf has been coy about his conversations with Buffett in both congressional hearings, saying he talks with lots of the bank’s constituents. But Buffet can’t be happy. Stumpf is tarnishing the Sage of Omaha’s hallowed reputation.
- Finally, on Monday, John Oliver spent four minutes skewering Stumpf on “Last Week Tonight.” When you’ve made your financial institution the butt of a very long joke that has people laughing all the way out of the bank, it’s time to go.
The headline on this article has been updated to correct the spelling of Stumpf.