WFC Wells Fargo and Company

   By WSJ STAFF 
 

Wells Fargo & Co. Chief Executive John Stumpf took quite a beating when he appeared last week before a Senate committee. Now, it's time for Round 2: He goes before the House Financial Services Committee to talk about his bank's allegedly "widespread illegal" sales practices Thursday.

We're chronciling the hearing as it unfolds, offering a blow-by-blow account and some real-time analysis of the proceedings.

10:39: Question on separating chairman and CEO roles

Mr. Stumpf is asked about whether Wells should separate the chairman and CEO roles. He holds both positions.

"I believe we have the right structure," he says, but adds that he serves "at the will of the board."

A follow-up question elicits the news that some members of the board heard "high-level" reports of potential sales issues in 2011. In 2013, Mr. Stumpf said he realized there was a real "issue" in the Southwestern U.S.

And in 2014, "we started to provide more information to more committees of the board."

10:36: Fed found flaws in Wells Fargo's incentive pay and sales quotas in 2011

Here's the Federal Reserve press release announcing the 2011 consent order and $85 million fine that is getting so much attention this morning.

Some of the problems alleged by the Fed do indeed sound familiar:

"The order also addresses separate allegations that Wells Fargo Financial sales personnel falsified information about borrowers' incomes to make it appear that the borrowers qualified for loans when they would not have qualified based on their actual incomes.

These practices were allegedly fostered by Wells Fargo Financial's incentive compensation and sales quota programs and the lack of adequate controls to manage the risks resulting from these programs."

10:33: Aware earlier than 2013

Chairman Hensarling and Ranking Member Maxine Waters both suggested Mr. Stumpf was aware of issues in the bank's sales business earlier than late 2013, the period in which he said he was made aware of such issues. Ms. Waters pointed out Mr. Stumpf instructed an update in an employee manual for the community banking division, reminding employees they needed to obtain customer's consent before opening an account.

10:30: Warnings from 2008?

Ms. Waters is on the clock. She says that there's evidence that employees called the company's ethics hotline as early as 2008 to report "fraud." She's hitting the same point that Mr. Stumpf and top executives should have understood the scope of the problem faster, and acted to stop it.

"Mistakes are going to happen," Mr. Stumpf says, and it wasn't until 2013 that he became aware that the problem had been "growing."

10:27: 'Someone needs to be held accountable'

Rep. Hensarling says that "no one seems to be held accountable" for the sales scandal at the bank. This echoes what many other lawmakers have said in the wake of the large clawback of Mr. Stumpf's pay: that the move was a step in the right direction but more needs to be done.

"Someone needs to be held accountable," he concludes.

10:24: Specifics about fired managers

Under questioning from Mr. Hensarling, Mr. Stumpf said that "10% or more" of the 5,300 employees fired over five years were branch managers, the first time the bank has given more specifics about the number of managers fired. He added that the bank is doing a full review of "other control functions" in the company. That could include people working in risk, compliance or legal, for example.

10:16: Hensarling: I wish I didn't have a mortgage with Wells Fargo

In concluding his opening remarks, chairman Jeb Hensarling delivered perhaps his harshest condemnation of the bank so far.

"Mr. Stumpf, I regrettably have a mortgage with your bank. I wish I didn't," Mr. Hensarling said. "If I was in the position to pay it off I would because you have broken my trust and you have broken the trust of millions of others. And it will be a long, long time to earn that back."

This raises the possibility that the fall out from Wells Fargo's troubles could extend further than trouble with regulators and lawmakers to include customer exits. Yesterday, California's Treasurer said the state was suspending some of the business it does with the San Francisco based bank.

10:16: Stumpf is sworn in

Stumpf has been sworn in. He will read a version of his written remarks. He starts by repeating that he is "deeply sorry" and "fully accountable" for the sales practices. "We should have done more sooner," he says.

He appears to be wearing a different, darker brace on his right hand than the bandage he worse last week. The bank said he hurt his hand playing with his grandchildren.

(END) Dow Jones Newswires

September 29, 2016 10:59 ET (14:59 GMT)

Wells Fargo (NYSE:WFC)
Historical Stock Chart
From Mar 2024 to Apr 2024

Wells Fargo (NYSE:WFC)
Historical Stock Chart
From Apr 2023 to Apr 2024