Warren vs. Stumpf

What did you guys think of this massive takedown by Senator Warren? Telling Wells Fargo’s CEO to resign directly to his face. Here’s a quote from Warren during the congressional hearing:


Other big banks average fewer than three accounts per customer. But you set the target at eight. Every customer of Wells should have eight accounts with the bank. And that's not because you ran the numbers and found that the average customer needed eight banking accounts. It is because, "Eight rhymes with great." This was your rationale right there in your 2010 annual report. Cross-selling isn't about helping customers get what they need. If it was, you wouldn't have to squeeze your employees so hard to make it happen. No. Cross-selling is all about pumping up Wells' stock price. Isn't it?

Seriously?
John Stumpf has referred to cross-selling growth on multiple earning calls, as an incentive for analysts to recommend the stock. But all this time, they were forcing employees to open fake accounts and calling it “cross-selling growth”.

When you have a company that forces its employees to meet an 8 account per customer quota or risk being fired, there are definitely some serious problems with management. Yet thousands of low level retail employees were fired.

Thoughts?

 
Best Response

wrong. 8 means different services wells offers, not accounts. an example:

wells checking wells savings wells investments wells mortgage wells insurance wells credit card wells auto loan wells HSA

8 services.

the fraudulent accounts piece is people opening up checking/savings accounts to meet highly unreasonable sales goals. at wells, bankers have daily sales goals (yes, daily), and once you're out of training you can only go for so long without meeting goals before you get the axe, or if you're close to a bonus but fall one account short, well there's temptation.

you don't need paperwork to open a checking account, so it was easy for people to use existing customers' info, open accounts without them knowing (who reads the mail anyway?!), and then close them down. you can't open up a line of credit/credit cards in someone's name without a bit more consent, and while it's theoretically possible, my understanding is that's not the situation.

cross selling just means wells has greater wallet share, fraudulent accounts (checking/savings) was the byproduct of daily sales goals.

elizabeth warren is a fucking idiot. she grandstands as this wall street robin hood, meanwhile her AGI is nearly 7 figures and her net worth nearly 8. nothing against someone getting financial success, but she yells and points fingers a lot more than she researches.

finally, if you've never watched one of those things, they're a joke. they are mainly for grandstanding, not for actual interrogation/investigation. if you noticed, they didn't let stumpf ask a lot of questions, the senators just had prepared remarks to make themselves look good in front of their constituents. it's a laughable process, but in no way will have a significant impact on banking regulation. it's more soap opera than lawmaking.

 

To think the CEO of Wells would encourage opening false accounts so that he can speak to it in earnings calls to sell the stock is insane. It is much more reasonable to believe that Wells made a mistake in budgeting number of accounts which forced low-level bankers to commit fraud.

There is no reasonable reason to thing that WFC had a grand scheme here; it was poor management that strengthens the argument that large banks are too big to manage, but doesn't suggest much more than that.

As with many (not all) of these banking fiascos, the real issue is the misinformation originated from them, and the misaligned hatred towards all other banks. Senator Joe Donnelly had what I believe was the best point during the hearing (not saying much) about Community Bankers calling him to vent about how WFC's actions will affect them, despite being a thousand-times smaller and managed like a different industry all together. People like Elizabeth Warren worsen this issue for political gain.

 

They did bring up how the CEO himself owned something like 6.5 million shares (not sure of exact number) over this period of time, which comes out to roughly $200 million that Stumpf pocketed. I understand where you're coming from but I can't dismiss this cause he did have a lot to gain from this.

But ultimately I do agree with you on how this whole fiasco is due to poor management. These performance targets that they discussed (if they truly were that absurd) definitely put pressure on these retail employees.

I find it hard to believe though, that these community bankers would pull something like this without pressure from higher ups.

 
TheAvidInvestor:
I understand where you're coming from but I can't dismiss this cause he did have a lot to gain from this.
It is obvious you have no idea what you're talking about. How would opening a checking account that is never used and generates zero revenue help the bank? It doesn't. The company actually loses money on a no activity account because they wasted employee time on it and have to send paper to the client.

I mean this with all sincerity: people like you are exactly what is wrong with politics. You have a bunch of politicians making outlandish and illogical statements like Warren and you just fell for it. The reason they had this meeting was to pull the wool over the eyes of the common man and serve them up a bogeyman so they can feel better about their lot in life. While what Wells Fargo employees did was not good, it's not even remotely as bad as those politicians made it out to be. The reason it wasn't surfaced to senior management earlier is because there was little to no actual damages to clients. You have to remember this company is the size of a mid-sized town with hundreds of thousands of employees. It's not like they were shorting investments they were telling clients they thought were great.

Try thinking critically the next time you hear some politician ranting about something and think about their personal incentives. it just disappoints me that this obvious cry for attention is effective with the vast majority of people.

 

She was very rude towards him. It's just not reasonable to expect the CEO to know every little thing that goes on inside the company. I listened to the entire proceedings, and the vast majority of "interviewers" were rude to the man, wouldn't let him finish his sentences, and completely admonished a CEO of a public company providing jobs for thousands of Americans. Each of them paying taxes, to fund a Congress that can't even pass a budget.

I'd like to see more smaller, regional banks and an end to the "too big to fail" banks, but this was not the appropriate forum to air those grievances, IMO.

 

Cross selling is not about opening multiple accounts. It's about product synergies and providing a portfolio of complimentary services.

Wells has been successful in cross-selling, even if you ignore the fake accounts. This has increased customer retention, profits and satisfaction.

This increases the share value for all stakeholders, not just the CEO. Wells' strategy has created value across the board.

The fraud was committed by low-level employees looking to save their asses and/or hit a bonus target. These individuals have been fired and the incentives that were stimulating this activity have been withdrawn. This is not indicative of any systemic problem in anything.

Warren is a fucking clown. A demagogue in the truest sense of the word. Appeals to the lowest common denominator.

“Elections are a futures market for stolen property”
 

TheAvidInvestor calm your tits on DickFuld he knows his shit.

at the risk of outing myself, I'm going to attempt to put a nail in this coffin. I used to work at wells (when we still had the Wachovia name but were owned by wells) as a retail banker, so I would've been a potential culprit in this. I knew the computer systems, the compliance, the sales goals, compensation, the whole shabang. it's the same company wide, and while different geographies may have different sales goals (fargo ND doesn't have as high goals as Charlotte NC), it's pretty much the same countrywide. also, for what it's worth never did I open up a single account someone didn't authorize, but I could see how easily this could've been done. part of the reason I left was because of the sales culture.

first, let's talk about the CEO making a good amount of money during the time this scandal went on. here's the performance of WFC versus the S&P

3y 5.85% versus SPY 10.06% 5y 16.38% vs 14.67% 10y 4.52% vs 7.18%

so to say he made $200mm chiefly off of unscrupulous salesmen is just asinine. we have had an incredible bull market since the depths in March 2009, executives must maintain a large amount of stock both from a PR perspective as well as because of the way equity compensation works. this point is just wrong, you're confusing correlation with causation. John Stumpf has incentive to make his stock price go up, but Wells was (and still is, imo) one of the best functioning banks in the country, they didn't need incremental overdraft fees to beat earnings estimates.

as an aside: elizabeth warren made similar returns on her TIAA CREF mutual funds...if she'd stated it in percentage terms though it wouldn't be as sexy...

onto the credit scores being impacted thing, also false. your credit goes through what's called a "soft" check when you open a checking account, it does not show up as an inquiry (as it would if you were applying for a loan), and therefore does NOT impact your credit score. wherever you read otherwise is wrong. if someone opened up a credit card for a customer without their consent, that was fraud at best, identity theft at worst. my experience was that the daily sales goals did not usually include credit cards, moreso checking & savings accounts, and since the impact to the customer was negligible, the risk of getting caught was small, so it was allowed to go on. people generally notice when a credit card is opened in their name, and I have a funny feeling that some of the people taking to twitter may feel swindled because they now realize they didn't want that credit card, when in fact they agreed to it because of a banker's sales pitch. not to say there weren't abuses, but this was likely the exception not the rule.

here's the thing, at Wells Fargo you had a high pressure sales environment combined with a lackadaisical compliance system. the reason for the lax compliance was for customer convenience. could you imagine having to make a trip to your local bank to go through a bunch of paperwork if you wanted to open a checking account (say yours was hacked and you wanted to switch everything over)? pain in the ass. wells allows employees to simply enter confirmation that they received permission from a customer, perhaps change the address to their home address on the new account or something else so that the customer doesn't get the mail, and just have the account open long enough to trick the systems that keep track of new accounts in order to meet their sales goals. once that's done, you close the account and move onto the next month, wash rinse repeat.

onto fees, this is a tough one because it's impossible to say what actually happened, but speaking from experience, bankers used to have all kinds of power to reverse fees, and if they didn't want to get caught, they'd ensure that these unauthorized accounts didn't get charged fees. reversed fees don't affect sales bonuses, new accounts do. but at the same time, there were a lot of idiots when I worked at wells, so it's very feasible for me to see somebody opening up accounts and then forgetting about them, and the accounts eventually getting charged fees. this is small potatoes though, and if the accounts were unauthorized, there would be very little if any activity (if they didn't mail you a checkbook or debit card, how would you overdraft?), so I'm betting this was sensationalized by congress.

tldr: I was on the inside, don't believe the media, and fuck elizabeth warren.

godspeed kid.

edit, subtitle of opinion piece in the oft-liberal WSJ: "Employees, not the bank, benefited from creating fake customer accounts."

http://www.wsj.com/articles/wells-fargos-incentives-go-awry-1474413032?…

 

Clearly, not a good thing for WF to do for sure. They did a naughty thing.

However, Warren should STFU about asking him to resign. WF paid the fine to government and gave a congressional grilling as a bonus. Warren doesn't care about Stumpf resigning. She knew Stumpf can't say shit to defend himself. All she cares about is her liberal base watching the grilling so that she continues to be idolized as the pocahontas who supposedly cares for the little people and perpetuate the idea that banks are bad.

 

I wonder why anyone believes her claims that banks are bad? Might it be (just for instance) the massive amount of foreclosure fraud they committed in 2009-2013, the industry wide rigging of LIBOR rates, or 'ripping the face off' their supposed clients by selling them piece of shit MBS? Or would it be the stack of deferred prosecution agreements higher than the eye can see? Gee, I cant imagine why anyone would think anything but the best of the financial industry....

 

Get real. The ugly side of human nature works itself the same insidious way in a lot of other industries but with some far more destructive long term consequences. You should complain at energy and automotive for global warming, the military industrial complex for a series of unnecessary foreign wars, pharma for the opiate epidemic, consumer goods for the obesity epidemic and fructose addiction, and probably the dirtiest culprit of all, our politicians of today and of past for allowing these problems to become structural and seemingly impossible to rid ourselves of. Comparatively speaking, bank fraud is benign.

 

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