On Tuesday, Massachusetts Senator Elizabeth Warren interrogated Wells Fargo CEO John Stumpf before the U.S. Senate Committee on Banking, Housing & Urban Affairs. She didn’t mince words, and it was nice to see a prominent CEO called to task, even if his answers were largely unsatisfactory.
Warren noted that during the “cross-selling” scam, Stumph had seen his shares in Wells Fargo increase in value by more than $200 million and that he’d repeatedly touted the cross-selling prowess of Wells Fargo’s bankers in calls with investors. She suggested that he give back the money he earned during that time, that he resign and be prosecuted.
1. Why was Elizabeth Warren the only senator courageous enough to say this to CEO of Wells Fargo, John Stumph? Could it possibly be because 20 of the 22 senators on the Senate Banking Committee take campaign contributions from Wells Fargo? See OpenSecrets.org for all the details on Wells Fargo’s political spending.
Here are the names of all the senators on the Banking Committee, with an asterisk beside the members who’ve received funds from Wells Fargo or Wells Fargo PACs. Dollar amounts, when present, are contributions for the 2016 election cycle only. Note that Elizabeth Warren has not previously been a recipient of Wells Fargo contributions, but currently shows a $2 contribution in the 2016 cycle—possibly a joke or cynical attempt to cast her as a hypocrite:
U.S. Senate Committee on Banking, Housing, & Urban Affairs
Richard Shelby Chairman (R-AL) * $15,800
Mike Crapo (R-ID) * $25,050
Bob Corker (R-TN) * $2,500
David Vitter (R-LA) Owns WF Shares
Patrick J. Toomey (R-PA) * $29,050
Mark Kirk (R-IL) * $13,700
Dean Heller (R-NV) * $2,500
Tim Scott (R-SC) * $10,500
Ben Sasse (R-NE) * $3,500
Tom Cotton (R-AR) * $5,000
Mike Rounds (R-SD) *
Jerry Moran (R-KS) *$9,000
Sherrod Brown Ranking Member (D-OH) * $2,100
Jack Reed (D-RI) *
Charles E. Schumer (D-NY) * $42,900
Robert Menendez (D-NJ) *
Jon Tester (D-MT) * $4,000
Mark R. Warner (D-VA) *
Jeff Merkley (D-OR) * $43
Elizabeth Warren (D-MA) $2
Heidi Heitkamp (D-ND) * $3,000
Joe Donnelly (D-IN) *
2. Where have the reporters been? How come they didn’t tell us in advance that so many of the senators other than Elizabeth Warren were receiving funds from Wells Fargo? Why has no one suggested that these senators recuse themselves from the discussion? Has anyone looked into how close the major media are to the big banks? What are the advertising dollars? What are the board relationships?
3. The money: John Stumpf made $80 to $100 million over the 5 years. The head of the Community Banking department, Carrie Tolstedt, just exited with $125 million. If she’s interviewed by the Senate with $125 million in her pocket from Wells Fargo, is there any question who’s side she’s on? Does anyone seriously believe that this money is for past service, rather than for all the times over the next few years she will have to face legal or political forces?
4. The Financial Times had an article over the weekend that discussed one woman’s time spent fighting fines that were imposed by Wells Fargo on accounts that she’d never opened.
Wells Fargo aggressively sought to collect fees from Linda Edwards's teenage daughter over a credit card Edwards insisted they'd never requested. Eventually, after more than a thousand hours spent fighting the charges, she paid the bill to end the harassment. But she maintains that the card was not opened by the family and that Wells Fargo employees must have forged signatures on the application.
Linda Edwards spent more than 1000 hours, and there are over 2 million customers who were fraudulently taken advantage of while John Stumpf and Carrie Tolstedt made their hundred million or so. How many hours were spent by ordinary customers fighting this fraud?
5. How come no one’s talking about the board’s responsibility? Great leaders inspire us to be better people than we otherwise are. Whatever this board thinks it was doing, either it’s action or its inaction inspired more than 5000 Wells Fargo employees to be crooks. Justice would take the money away (“claw back” it is called) from Stumpf and others all the way down the chain of command and include the board itself. For the next few decades they would all be on customer service lines 60-hours/week helping us ordinary citizens navigate bureaucracy, until all the hours wasted by Wells Fargo’s customers had been repaid
Whether Wells Fargo now, or the $200 billion in fines and settlements big banks and financial services companies have paid since the banking crisis—or Volkswagen, Mylan Pharmaceuticals (EpiPen price hike), Turing Pharmaceuticals (CEO Martin Shkreli’s 5000% price hike on an HIV drug), there is an endless list of companies that have taken advantage of their customers. And with the collusion of our political class, returning favors to these guys for the never ending spigot of political contributions, corruption at the top is undermining both democracy and capitalism. For civilization, this behavior is unstainable.
As I argue in my new book on the future of civilization, the underlying goal of every institution must be to model integrity and deliver freedom. When they don’t, they need to be shut down.
In the midst of all this, I am optimistic for the future of civilization. My new book is planned for release in 2017