Lloyd Blankfein had his Abacus. Jamie Dimon had his Whale. Now John Stumpf, the Mr. Clean of American banking, is getting a scandal of his own.
In a remarkable turnabout for Stumpf, Wells Fargo & Co., the bank he’s run to the envy of peers and the delight of top shareholder Warren Buffett, has been swept up in one of the industry’s most embarrassing episodes since the financial crisis. Last week, the San Francisco-based lender agreed to pay $185 million to settle allegations that it opened 2 million credit-card and other accounts for customers without their knowledge.
While the penalty is a pittance for Wells Fargo, the brouhaha has left Stumpf, 62, struggling to contain the damage to the bank’s reputation and his own legacy. The pressure isn’t about to let up: Stumpf is set to testify next week in Washington, handing lawmakers an opportunity to swing at Wells Fargo during a campaign season in which Wall Street has taken hits from the presidential nominees of both major parties.
“I’m prepared to go there and share our side, and how seriously we take this,” Stumpf told Bloomberg on Tuesday. In a subsequent interview with CNBC’s Jim Cramer, who asked the CEO to respond to calls that he resign, Stumpf said “the best thing I can do right now is lead this company, and lead this company forward.”
He might ask Blankfein and Dimon for advice when he appears before the Senate Banking Committee on Sept. 20.
Six years ago, senators peppered Blankfein after the U.S. Securities and Exchange Commission sued his Goldman Sachs Group Inc. over the sale of the Abacus collateralized debt obligation. While Blankfein repeatedly said the firm had done nothing wrong, it paid a $550 million fine to settle with the SEC.
In 2012, Dimon testified before a Senate committee about the “poorly conceived and vetted” bets made by his traders at JPMorgan Chase & Co. that resulted in more than $6.2 billion in losses. The firm paid more than $900 million in regulatory sanctions because of the so-called London Whale debacle, and Dimon’s pay for that year was cut in half.
Wells Fargo today is the biggest U.S. home lender and a marquee investment for billionaire Buffett, whose Berkshire Hathaway Inc. owns 10 percent of the bank. Stumpf eschewed the toxic dangers that lurked within Wall Street trading desks and instead pursued a strategy concentrated around Main Street mortgages and checking accounts. He’s the driver of the Wells Fargo stagecoach -- what the company calls an "enduring symbol" that shows its "heritage of service, stability and innovation."