Wells Fargo & Co. Chief Executive Officer John Stumpf gave up $41 million to buy a reprieve from the bank’s widening scandal. Then it got worse.
The company was battered anew by regulators and politicians throughout Wednesday, less than 24 hours after Stumpf agreed to forgo years of stock awards to quell public uproar over the bank’s unauthorized creation of customer accounts. Lawmakers called the CEO’s payment a first step. Federal Reserve Chair Janet Yellen vowed to probe a “disturbing” pattern of misconduct at big banks. California barred the firm from handling bond deals for the state.
“Wells Fargo’s venal abuse of its customers by secretly opening unauthorized, illegal accounts illegally extracted millions of dollars,” California Treasurer John Chiang said in a news conference in San Francisco. “This behavior cannot be tolerated and must be denounced publicly in the strongest terms.”
The worsening backlash raises the stakes for Stumpf as he prepares to testify Thursday before the House Financial Services Committee. His decision to return compensation won’t affect the panel’s scrutiny of the bank, said a spokesman for the committee’s chairman, Texas Republican Jeb Hensarling. Senators already thrashed the CEO at a hearing last week, with Elizabeth Warren calling him a “gutless” leader and demanding he resign.
“I don’t know that giving back the money saves his job,” said Ralph Cole, a money manager at Portland, Oregon-based Ferguson Wellman Capital Management Inc., which sold most of its Wells Fargo stake earlier this year and now owns about 100,000 shares. “Maybe they won’t be satisfied until they have his head.”
Chiang, a Democrat who’s running for governor in 2018, urged other states to follow suit as he banned Wells Fargo from underwriting state debt and handling its banking transactions for 12 months. Chiang, 54, also threatened a “complete and permanent severance” of business with the firm if it doesn’t change practices.
Yellen, appearing before the House committee, declined to respond to the most heated questions about Wells Fargo -- such as whether it’s too large to manage -- but promised “a comprehensive look at the biggest banks.”
“There are still dozens of unanswered questions,” Senator Sherrod Brown, an Ohio Democrat, said in a statement after Stumpf’s forfeiture was announced. “We still don’t know how many customers were harmed and how long this fraud continued.”