Earlier today we reported that as a result of the public (and market) outrage following news that Wells Fargo rewarded Carrie Tolstedt, the head of the group that was recently exposed as creating some 2 million fake credit card and bank accounts so it could churn late fees, and was in charge of what the bank’s employees called “sandbagging”, was leaving the bank with a $125 million package, this morning a panicked Wells Fargo said that it would eliminate all product sales goals in retail banking, starting next year.
That, however, was as far as CEO John Stumpf was willing to go. As the WSJ reported, the CEO of what until today was America’s largest bank by market cap, but is no more after a 4% drop in its stock price that sent JPM to the top position, spoke publicly Tuesday for the first time since the bank was slapped with a $185 million fine last week over its sales practices, defending the firm and the work he said it had already been doing to weed out bad behavior.
Wells Fargo CEO John Stumpf
However, the one question everyone wanted answered – who did the buck stop with at Wells Fargo – remained unanswered as Stumpf “deftly” redirected. In his WSJ interview, Stumpf wouldn’t comment on who was ultimately responsible for the practices and sales-driven culture that led employees to open as many as two million accounts without customers’ knowledge. Mr. Stumpf said that at the bank, “There was no incentive to do bad things.”
Yes, he really said that, clearly unaware that no manager ever “incentivizes his workers to do bad things”, and yet banks have paid over a quarter of a trillion in legal fees and settlements since the financial crisis for doing “bad things”: someone must have been motivated to engage in all the fraud, even if no manager explicitly told lowly employees to “go rig Libor, now.” And speaking of that, there were thousands of Libor manipulators who rigged the world’s most important benchmark for years without anyone knowing (but… but… that is a “conspiracy theory” corpulent pundits will admonish – how can thousands collaborate without information leaking, it’s impossible), and more importantly, without an “ïncentive.” Actually, they did have an incentive: money, and that a CEO of one of the world’s largest banks fails to understand what is most basic motivator behind human behavior – good or bad – should ring many bells.
In any case, since Stumpf’s story was that managers did not “incentivize” employees to engage in criminal activity, the fault lay with the workers themselves. As the WSJ writes, “Mr. Stumpf appeared to lay blame for the problems with the employees involved than with any flaw in Wells Fargo’s systems or culture. He said that some employees won’t “honor” the bank’s culture and that the bank had changed its sales goals to put in more discipline and to take “more risk off the table.”
“I wish it would be zero but if they’re not going to do the thing that we ask them to do—put customers first, honor our vision and values—I don’t want them here,” he said. “I really don’t.”
Of the 5,300 employees who were fired over five years due to improper selling, Mr. Stumpf said these included bankers, managers and managers of those managers. He declined to name the highest-ranking employee let go among that group, perhaps because as some suspect, not any higher-level employee was actually let go.
It is unclear if anyone believed Stumpf’s explanation, although he may have a harder time convincing Congress. After the public and political uproar following allegations involving “massive fraud”at Wells Fargo, the Senate Banking Committee Republican majority on Monday to call a hearing to look into the bank, saying it would invite Mr. Stumpf to testify. Stumpf said Tuesday that he is prepared to “share Wells Fargo’s story” with the Senate at the hearing, scheduled for Sept. 20.
And speaking of “incentives” which CEO Stumpf simply can not grasp, we fast forwarding to the main topic at hand, namely the payment of $125 million to Carrie Tolstedt who as reported before led the community banking group that oversees retail banking operations. Here all Stumpf had to say about her was that she announced earlier this year that she would be departing the bank, and “decided to retire.” That was it: there was no discussion if any of her bonuses would be clawed back, or if she may – or should – face civil or criminal charges for her involvement in the massive fraud.
Best to just move on and ignore anything that spoils the carefully scripted narrative.
Instead, Stumpf said that he believed what he did was enough: “We think to the extent that some team member used a sales goal as a motivation to do something that is inconsistent with our culture is just not worth it,” Mr. Stumpf said. “We’re taking it off the table.”
Finally, Stumpf appealed to WSJ readers, saying “the settlement and allegations made by regulators don’t characterize the bank as a whole.”
“Do I wish that we would have every person do everything perfectly every day? Absolutely,” Mr. Stumpf said. “But the 1% that did it wrong, who we fired, terminated, in no way reflects our culture nor reflects the great work the other vast majority of the people do. That’s a false narrative.”
What is more infuriating than his ridiculous statement, something observed in similar rhetoric by politicians, is that he actually believes the American public is dumb enough to believe him.
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