(In 4th paragraph, corrects to Senator Jeff Merkley of Oregon,
not Sherrod Brown of Ohio.)
By Patrick Rucker and Dan Freed
Sept 20 Wells Fargo & Co's chief
executive officer told a Senate panel on Tuesday that customers
who had bogus accounts opened in their name will be made whole
and compensated for any damage to their credit rating, but some
Democratic senators called for his resignation.
Under fire, CEO John Stumpf told the Senate Banking
Committee he has told his managers to do "whatever it takes" to
make customers whole, refunding fees or compensating them for
damage to their credit ratings.
Asked if he would set aside mandatory arbitration agreements
that prohibit clients from suing Wells Fargo, he declined to
commit to that. The Consumer Finance Protection Bureau has
proposed a ban on mandatory arbitration clauses that prohibit
Democratic Senators Jeff Merkley of Oregon and Elizabeth
Warren of Massachusetts called for Stumpf to resign, with Warren
saying Stumpf should give back his salary and be criminally
The bank's board of directors is examining what action it
should take against company executives, Stumpf told the
"I accept full responsibility for all unethical sales
practices," Stumpf said, adding later, "I apologize to all of
the American people and our customers, and I will make it
Earlier this month, the lender agreed to pay $190 million in
penalties and customer payouts to settle a case in which bank
employees created credit, savings and other accounts without
The revelations are a severe hit to Wells Fargo's
reputation. During the financial crisis, the bank trumpeted
being a conservative bank in contrast with its rivals.
Of the $190 million in the settlement, only $5 million will
directly compensate customers, many of whom might have only paid
a small fee on unwanted accounts.
But lawmakers said phony bank accounts might have hurt
customer credit ratings, potentially increasing the cost of a
mortgage or car loan. New credit card applications and consumer
borrowing trends can weight on an individual's credit report.
Thomas Curry, the Comptroller of the Currency, said in
prepared testimony for the committee that his agency is
considering action against individual Wells Fargo executives who
may have violated laws or regulations or engaged in "unsafe or
unsound practices, or breach(ed) fiduciary duty."
Brown, the senior Democrat on the Senate panel, criticized
the bank for exploiting customers and for its slow response in
controlling the abuse.
"I was stunned when I learned about the breadth and duration
of this fraud," he said in his opening remarks.
Wells Fargo has acknowledged bank employees "inappropriately
opened" the customer accounts over five years, and that about
5,300 employees were fired in that time.
Former bank employees have said they were under intense
pressure to add accounts for each bank customer.
Abuses were found as early as 2011, Stumpf said, but bank
executives only realized the scale of the problem early last
At that time, Stumpf said, bank executives came to recognize
how a pattern of creating phony accounts could be used to boost
"It never dawned on us that there could be a cycle," the CEO
"It just sort of begs the issue of where was management,"
Brown said employees were caught "forging signatures, and
stealing identities, Social Security numbers, and customers'
hard-earned cash, so as to hang on to their low-paying jobs and
make money for the high-paying executives at Wells Fargo."
Wells Fargo shares rose 1 percent in early-afternoon trading
Senator Jeff Merkley, an Oregon Democrat, has asked the
Securities and Exchange Commission to investigate whether Wells
Fargo violated internal controls required under the
Sarbanes-Oxley Act for financial disclosures and corporate
The U.S. Attorney's Offices in Manhattan and in San
Francisco are investigating Wells Fargo, a person familiar with
the matter said last week.
"TOO BIG TO MANAGE?"
While Democratic lawmakers like Warren were the most
outspoken in their attacks, Republicans also grilled Stumpf.
Louisiana Senator David Vitter pressed the CEO on how
customer fraud could persist for years and thousands of
employees could be fired before the head of the bank got
"Why isn't this crystal clear proof that an entity as big as
Wells is not only too big to fail but it's too big to manage and
too big to regulate?" Vitter asked.
Stumpf said he had considered the question, adding that the
widespread abuse was "a problem of focus and not of size."
Stumpf appeared before the congressional panel with a
bandaged right hand. He suffered an injury playing with his
grandchildren, according to the bank.
Democratic presidential candidate Hillary Clinton, in a
letter to bank customers released on Tuesday, said Stumpf "owes
all of you a clear explanation as to how this happened under his
(Reporting by Patrick Rucker in Washington and Dan Freed in New
York; Writing by Nick Zieminski; Editing by Jeffrey Benkoe)