The Scandal That Envelops Wells Fargo Keeps Growing
RENEE MONTAGNE, HOST:
One of the country's biggest banks, Wells Fargo, is in the midst of a scandal that just keeps on growing. At the heart of it is the revelation that in an effort to boost profits, the bank opened up more than 2 million bank and credit card accounts for clients without telling them. Among those clients was Tracy Kilgore (ph) of Albuquerque, N.M.
STEVE INSKEEP, HOST:
She didn't even bank at Wells Fargo. But when she became treasurer for an organization that did, she went to a branch to sign her name, and a few days later she received a letter saying her credit card application had been denied which she found strange because she'd never applied for a credit card.
TRACY KILGORE: It sounded like fraud and identity theft, and I didn't give them permission to turn my name in for a credit card.
MONTAGNE: Tracy Kilgore is now part of a class action lawsuit against the bank. Lower-level employees fired by the bank over the scandal are also suing as are investors angered over the bank's tumbling stock price. Last week, the bank's CEO John Stumpf was grilled by Democrats and Republicans on the Senate Banking Committee. Today, he faces angry House lawmakers including New Jersey Republican Scott Garrett.
SCOTT GARRETT: The fact that it affected so many people, the fact that it went on for so long, the fact that it wasn't exposed and the fact that the regulators did not let us know about it or maybe didn't even know about it themself, I think I just rattled off five things there to say - the most egregious, but they are all issues that we have to get to the bottom of.
MONTAGNE: And let's go now to NPR's Chris Arnold who covers economics and is following this story. Good morning.
CHRIS ARNOLD, BYLINE: Good morning, Renee.
MONTAGNE: Chris it sounds like lawmakers did not get all the answers they wanted the last time they grilled the CEO of Wells Fargo. What do we still have to get to the bottom of here?
ARNOLD: One big question that is definitely still hanging in the air is this - so, OK, we know that Wells Fargo fired 5,300 most lower level workers, like you said, and they were opening accounts deceptively. It's also worth noting that they weren't doing this to, like, steal people's money, you know, steal customers' money. We're hearing now there was tremendous sales pressure on them to open these accounts to meet quotas.
So the ongoing question is if the same wrongdoing was happening with thousands of workers it branches all across the country, how was there not some connection to upper management? And senators last time said, look, it just defies common sense to say this is just lower level workers. You're scapegoating them, they were saying to the CEO, and there was a lot of outrage that the senior executive team had not been disciplined or had any of their multimillion dollar pay packages clawed back.
MONTAGNE: Which now has changed. Senators last week were telling Wells Fargo's CEO he should give back some of that money, and it's happening.
ARNOLD: Right. And then a pretty sharp rebuke to the CEO. The board has clawed back $41 million. And that's a significant amount of money, even for the head of a major bank. That's about two years' worth of compensation for him. Also $19 million is being clawed back from Carrie Tolstedt. She's the head of consumer banking at Wells Fargo. She'll also be leaving the bank sooner than was previously announced. So we'll see if that's enough to appease lawmakers. At the same time, though, there's still a slew of investigations and the board of the bank could do more here as well.
MONTAGNE: Can Wells Fargo's CEO John Stumpf - can he survive this?
ARNOLD: Renee, I think this is going to come back down to this age-old question of what did he know and when did he know it? OK. You've got thousands of employees getting fired. Regulators call it fraud. Top management at big companies like this - if there is a material event - is what it's called - at your company, you need to notify shareholders, the FCC, regulators. Stumpf said in testimony last week, well, this was not a material events. But many lawmakers clearly were not buying that.
MONTAGNE: This scandal really has snowballed for Wells Fargo. It managed to even unite Republicans and Democrats in their contempt for what the bank has done. What is it about this particular banking scandal that has gotten people so mad?
ARNOLD: I think it's a couple of things, Renee. I mean, on the one hand, there's just something kind of sacred about your checking account. It's your little simple account, and you put money in. And it just seems outrageous that the people at the bank would be opening accounts without your knowledge and moving that money around, even if they weren't stealing it. But it resulted in fees and the scale of the deception is just shocking. The number of employees - it could be millions of people this happened to.
And also this gets back to this question coming out of the financial crisis. No major executives went to jail. There was a lot of wrongdoing by major banks, and this seemed like, well, yet again here we've got a case where the lower level workers get fired. And the top executives were keeping their big paychecks and facing no consequences. It looks like maybe that's starting to change.
MONTAGNE: Chris, thanks very much.
ARNOLD: Thanks, Renee.
MONTAGNE: That's NPR's Chris Arnold.
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