
Wells Fargo CEO John Stumpf Steps Down - smaili
http://www.wsj.com/articles/wells-fargo-ceo-stumpf-to-retire-1476306019
======
Smerity
I highly recommend listening to a recent episode[1] of Planet Money. This was
by no means an accident. As a short summary of one employee's plight:

Ashley, working for them and making only $35k per year in San Francisco, was
continually harassed to sign people up for accounts they didn't want. An old
man comes in, pensioner, $200 in overdraft fees due to being duped into excess
accounts. She dips into her own savings to get him back in the black. She
reports the incident to the internal ethics line. Nothing. Tries again.
Nothing. She refuses to fraudulently push excess accounts onto people. Fired.
Worse, Wells Fargo put her onto a permanent blacklist that others in the
industry pay attention to - she can't get a job anywhere else.

Imagine making $35k per year in San Francisco - insanely low given the region
- and dipping into your own pockets to help fix a situation your own company
created. Then, as thanks, being eventually fired by that company for not
continuing the practice and being blacklisted in your field of work. I'm
desperately hoping Ashley sues Wells Fargo in a defamation suit but I fear the
likelihood of that is low - even if it's not the first time it has happened to
Wells Fargo[2] ...

At best, upper management were willfully negligent of the impact that their
insane sales goals had on the ethics of the company. At worst, upper
management were actively trading any ethical notions they could get hold of
for money, ripping apart the lives of employees and customers on the way.

[1]:
[http://www.npr.org/sections/money/2016/10/07/497084491/episo...](http://www.npr.org/sections/money/2016/10/07/497084491/episode-728-the-
wells-fargo-hustle)

[2]: [http://www.forbes.com/sites/billsinger/2011/12/15/wells-
farg...](http://www.forbes.com/sites/billsinger/2011/12/15/wells-fargo-hit-
with-punitive-damages-in-finra-u5-defamation-case/#225a6d7d7af1)

~~~
nickbauman
Remember WF was one of the banks that failed the stress tests after the 2008
financial crisis. I've been trying to get away from WF for a while now, but no
other bank can fill its shoes in terms of online services and ubiquity. Yet it
has a culture of predatory capitalism where "your loss is our gain".

~~~
bratsche
I never wanted to do business with WF in the first place, but I bought a house
a few years ago and the mortgage company sold my mortgage to WF. Being forced
to be someone's customer against your will sucks.

~~~
mericsson
Perhaps you can refinance? Lots of banks offer no-fee refinances. I used Cash
Call (not that they have an amazing reputation) but they did a good job with
my refi.

~~~
URSpider94
... and then it's very likely that you will end up back with Wells Fargo,
since they are one of the few banks that service mortgages. Most finance
companies sell your loan shortly after originating it.

~~~
Johnny555
Yep, happened to me -- had a mortgage with WF, refinanced through a broker and
had a mortgage at another bank, then 6 weeks later, got a notice saying that
WF bought my mortgage, so I was back with WF.

------
webaholic
Go Elizabeth Warren! Without her prodding, I am sure this would never have
happened. He was very happy with firing the 5k employees and not taking any
blame on himself for what was essentially his push.

~~~
droopybuns
Prodding? What investigating did she do?

~~~
lobster_johnson
[https://www.google.com/amp/s/www.yahoo.com/amphtml/news/how-...](https://www.google.com/amp/s/www.yahoo.com/amphtml/news/how-
elizabeth-warren-used-a-new-congressional-power-to-punish-wells-
fargo-193310805.html)

~~~
loeg
Ugh, Amp mucking with URLs. Real link: [https://www.yahoo.com/news/how-
elizabeth-warren-used-a-new-c...](https://www.yahoo.com/news/how-elizabeth-
warren-used-a-new-congressional-power-to-punish-wells-fargo-193310805.html)

------
rm999
Non-paywalled article with basically the same information:
[https://www.washingtonpost.com/news/business/wp/2016/10/12/w...](https://www.washingtonpost.com/news/business/wp/2016/10/12/wells-
fargo-ceo-to-retire-in-wake-of-sham-accounts-scandal/)

------
jackmott
Why isn't anyone in jail again? We will choke a guy to death for selling
cigarettes incorrectly, and can't put people stealing millions in jail.

~~~
jhou2
Well, apparently in America, it helps to not be black.

~~~
a3n
If Stumpf were black we'd be reading the exact same story.

~~~
MaysonL
cf. the career of Richard Parsons, CEO of Citigroup:
[https://en.wikipedia.org/wiki/Richard_Parsons_(businessman)](https://en.wikipedia.org/wiki/Richard_Parsons_\(businessman\))

------
JumpCrisscross
The New York _Times_ this morning about his supposed successor:

"As chief administrative officer from 2010 to 2011, however, Mr. Sloan’s role
included overseeing Wells Fargo’s human resources and reputation management.
He then became finance chief for three years. And one of his direct reports
when he was promoted to chief operating officer last year was Carrie Tolstedt,
who ran the offending community-banking division until earlier this year.

That makes Mr. Sloan a member of the inner circle that would have known about
the wrongdoing from its early days and tried to deal with it. This group
hardly covered itself in glory: It was still handing out pink slips in 2016,
five years after the first bankers were shown the door. Mr. Stumpf and Ms.
Tolstedt have already ceded compensation for the mess. Investigations by the
board and regulators may yet implicate Mr. Sloan and others."

[http://www.nytimes.com/2016/10/12/business/dealbook/wells-
fa...](http://www.nytimes.com/2016/10/12/business/dealbook/wells-fargos-heir-
apparent-has-ties-to-
scandal.html?em_pos=small&emc=edit_dk_20161011&nl=dealbook&nl_art=9&nlid=65508833&ref=headline&te=1)

------
slantedview
Elizabeth Warren deserves a lot of credit for putting the heat on Stumpf.
Coincidentally, one of the leaked Democratic e-mails from this week features
banking lobbyists complaining to Democratic party officials about Warren:

[https://theintercept.com/2016/10/11/warren-goldman-
dccc/](https://theintercept.com/2016/10/11/warren-goldman-dccc/)

The apparent coziness between the party and the banks is a whole other can of
worms, but that Warren doesn't hesitate to go against the party grain and
attack folks like Stumpf is a nice thing to see. Good on her.

------
hvmonk
Senator Elizabeth Warren's questioning at the hearing is worth watching:
[https://www.youtube.com/watch?v=xJhkX74D10M](https://www.youtube.com/watch?v=xJhkX74D10M)

~~~
prewett
While I agree with her points, it seemed like she really was preaching rather
than investigating (at least for the first five minutes that I watched). Her
questions were leading questions of the yes/no variety where she already knew
the answer. I think Stumpf needs to be held responsible beyond resigning
(canceling his golden parachute would be a good start). But I think Senator
Warren should either give a speech or ask honest questions, but not give a
speech disguised by a veneer of questioning.

Nothing personal against Senator Warren, I assume this is de rigeur for Senate
hearings.

------
ourmandave
A previous article said he could leave with $200M which is not a golden
parachute but built up over 30 years of working there.

This article says they could take back $41M in stock options, another $4M in
bonuses, and probably $20M in 2016 pay. (They paid him $19.3M in 2015.)

$200M - $65M = f*ck me

------
taurath
My understanding is that they created a system of unrealistic expectations as
far as accounts per customer, had managers from the top that pushed this on
people and they got fired.

Then, in the case where employees started reporting that they were forced to
do the activity to keep their jobs, nothing was done. This seems more like a
lever that can be pulled here:

Prevent banks from having ineffective whistleblowing processes by mandating
use of a FINRA whistleblowing program. The person in the top comment being
fired would get protected by Finra for her future employability, and Wells
Fargo and other banks would take whistleblowing far more seriously. I admit it
sounds very simplistic, but is there something crucial I'm missing here? I
can't see how one would file charges at the top executives for "incompetantly
making an internal ethics line" and "setting too difficult sales goals,
causing an unintended fraudulent effect".

------
carsongross
Until the headline reads "Wells Fargo CEO John Stumpf Goes To Jail", nothing
changes.

~~~
lazaroclapp
I would be fine with "Wells Fargo CEO John Stumpf Ordered to Pay Back
Fraudulent Fees to Wells Fargo Clients, Out of Own Pocket" (possibly _down_ to
some wealth limit, say, he can keep the $35K he apparently pays to his
employees if his fortune is not enough to restore the damage). I am not a big
believer in jail as punishment (as opposed to "place we keep people who are
dangerous to others, for the good of society at large"). The remedy to fraud
should be a fine, but it should be a fine commensurate with the level of fraud
rather than a slap on the wrist and it should affect the people involved, not
just get passed down to corporate stockholders (which includes pension funds
and the like). I would also be fine with a court injunction banning him from
working on banking, again, not as punishment but as "this man can't be trusted
by society to handle other people's money". All of this after proper trial, of
course.

That said, bank CEOs are a Least Concern species when it comes to overuse of
punishment in the justice system, so if someone wants to jail them until we
decide not to jail many other types of non-violent offenders, well... I am not
fighting that one too strongly. I just think that in one way it would be a
step in the wrong direction.

~~~
carsongross
Punishments need to be out of proportion to the financial damages they do when
they erode public trust, which is a good held in common (and the key to
prosperity in the west).

This is why someone who runs a charity scam should be punished more than
someone who simply mugs people.

~~~
will_pseudonym
Punishments should always be greater than the financial damages, because
otherwise the expected value of fraud will always be positive.

~~~
lazaroclapp
It depends. Do you consider loss of reputation part of the punishment, or just
an additional natural consequence of the fraud? If you want to think like an
economist about fraud, in terms of pure monetary cost/benefit (which is not
how people, even CEOs, think), then the game is something like this: Every
year you can get $X by being honest, or $(X+Y) by committing fraud, you have
probability p of being caught every year (assume: independent) and will have
to pay $Z if caught, per year you stole $Y. Additionally, because of loss of
reputation, you will only be able to earn at most $W honestly afterwards,
instead of $X (assume: it won't be possible/reasonable for you to get away
with fraud a second time). Thus, so long as i _(X+Y-Z) + W_ (years_of_career -
i) < X _years_of_career any time (1-p)^i > 0.5, fraud is disincentivized.
Sure, you can make the model more complex by adding the extra interest of
earning an additional $Y early in your career whether or not you can leverage
fraud to be promoted, but you still end up with an equation in which being
finned _and* removed from your position is rarely worth it if: a) the
probability of being caught is high, b) the fine is in the ballpark of the
damages (Y+\epsilon due to moral damages and legal fees) and c) being found
out comes with an extra-legal reputation cost.

Also, at the levels we are talking about here, is money anything more than a
proxy for ego/reputation? Would you rather have $10 million and be well
regarded or $40 million and infamous?

~~~
crdoconnor
>If you want to think like an economist about fraud

You don't.

Thinking like an economist about control fraud is the exact mistake Alan
Greenspan made when he denied that fraud could exist because an efficient
market wouldn't allow it:

[http://www.dailykos.com/story/2010/11/7/918589/-](http://www.dailykos.com/story/2010/11/7/918589/-)

His fatal assumption was also that reputational risk was enough to prevent it
from ever happening.

------
bogomipz
I Couldn't read the article because of paywall. Is there any news on Carrie
Tolstedt the woman who oversaw the unit that created all the fraudulent
accounts and gets to retire in July at age 56 with a $124 million pay package?
This in addition to the $9 million dollar she took home last year.

[http://money.cnn.com/2016/09/12/investing/wells-fargo-
fake-a...](http://money.cnn.com/2016/09/12/investing/wells-fargo-fake-
accounts-exec-payday/)

------
st3v3r
He's still not actually being punished. He lost his job. Big deal; he's got a
golden parachute. He's not going to go through any of the stress that any of
the people he fired for this went through when they lost their jobs. He's not
getting fined, he's not going to jail. The worst thing that happened to him is
he got a tongue lashing from Warren.

------
honkhonkpants
Honestly I still don't understand why this organization continues to exist.
Banks are chartered by the government for the purpose of safeguarding
deposits. This bank was engaged in fraud on a huge scale. Their charter should
be terminated.

~~~
sverige
Too big to fail. 2008 wasn't that long ago, remember? If the big banks go
down, a lot of politicians lose a lot of money.

~~~
honkhonkpants
It doesn't have to fail. Its administration can be taken over by a purpose-
built entity (or the army corps of engineers, who cares really) and all sales
and marketing can be halted while everything is liquidated in an orderly
fashion.

------
Bud
Whatever. Will he get a nine-figure golden parachute like the other senior
exec who just left? If not, this does not impress me. Will any of his earnings
and bonuses be clawed back? If not, this does not impress me. What about the
other execs responsible?

~~~
howlin
> Will any of his earnings and bonuses be clawed back?

They already have clawed back a lot of his bonus

[http://money.cnn.com/2016/09/27/investing/wells-fargo-ceo-
cl...](http://money.cnn.com/2016/09/27/investing/wells-fargo-ceo-clawback-
john-stumpf-tolstedt/)

~~~
Bud
I did notice that story, but that's only impressive if they don't entirely
cancel out the effect by giving him a gigantic golden parachute, which,
tragically, would be the expected behavior here.

~~~
a3n
This situation is exactly what the gold in golden parachutes are for.

------
erickhill
I'm surprised no individuals at the executive level have been charged with
crimes, to be honest. Or perhaps it's simply too soon and that's the next shoe
to drop.

~~~
Kalium
It takes time, effort, and care to build a strong case against a senior
executive. Not something that can be done overnight.

~~~
ethanbond
Definitely. That's why we're going on, what, almost ten years since the
collapse with barely any real repercussions for any senior financiers in the
county!

We've just gotta be more patient... It'll happen.

~~~
Kalium
And sometimes there are no senior executives who did anything clearly
identifiable as criminal under the laws at the time. Just because something
terrible happened doesn't mean it's provably criminal and the fault of
particular people.

------
pessimizer
The USA Today headline is better: "Wells Fargo CEO Stumpf retires with $134M"

------
evanpw
Let me just link to Matt Levine's take:
[https://www.bloomberg.com/view/articles/2016-09-09/wells-
far...](https://www.bloomberg.com/view/articles/2016-09-09/wells-fargo-opened-
a-couple-million-fake-accounts).

TL/DR: The bank probably didn't benefit on net from the fraud, even before the
fines. This is more a case of management setting unreasonable sales goals and
creating a terrible work environment than a conspiracy to commit fraud against
bank customers.

~~~
Neeek
I thought the point was that it benefited Strumpf's pocket by falsely
inflating share value, not necessarily the bank.

------
suprgeek
What is not mentioned in the very thin article is that this scumbag who ruined
many people's lives gets to walk-away with $134 Million [1].

[1]
[http://www.usatoday.com/story/money/markets/2016/10/12/wells...](http://www.usatoday.com/story/money/markets/2016/10/12/wells-
fargo-ceo-retires-under-fire/91964778/)

Yet if a common man had committed any of the fraud - they would be very likely
in jail.

------
Rapzid
I worked at Wells Fargo back in 2003. The emphasis on product bundling
predates Stumpf and was attributed to Kovacevich when I worked there, and they
were very proud of its effectiveness on the bank's bottom line. The unwanted
accounts shenanigans were well in play when I started. I recall having to call
branches to report this stuff and have accounts closed(phone bankers had some
status back then at least, though I'm sure the branch managers ignored my
whistle blowing).

You might think sales doesn't have much to do with customer service(phone
bankers) right? Wrong. Every customer contact was considered a sales
opportunity. The primary goal of every call was not helping the customer, it
was refering a product and getting them on the line with a sales rep for "more
information"(cause who doesn't want more information?!). From memory our major
KPI's were close rate, referrals, and call time. You pretty much needed to
refer a product on most calls to hit your numbers, regardless of whether the
customer actually needed/would benefit from it. That covers referral rate, but
they tighten the close rate and referral rate screws separately on you.

The goals they set were hard and getting harder at the time, but obtainable
without gaming if you had no shame. Oh, gaming. Gaming was manipulating the
system in any way. Opening accounts without proper customer consent was
gaming. Other forms of gaming did not amount to fraud. Gaming was rife.

My best friend at the time, and still long time friend to this day, worked in
the phone bank as customer service for about a year before making it to the
sales team down stairs. Sales was a bit better from what I understand; we both
had nightmares about customer service. After he graduated from college he was
promoted to Sales Manager. He informs me that, depressingly, some of the same
managers are there to this day. While he was there a few of the managers
including himself were on the lookout for gaming, the rest I hear were
actively for whatever was necessary to meet team numbers. I doubt even the
highest person at the center gave a shit; whatever it took to appear to be
hitting the numbers C-Levels set to get those bonuses.

My friend tells me he probably would have put a bullet in his head if he had
not gotten out of there.

P.S. I'm still a Wells Fargo customer and recent events will not change that.

~~~
whitepoplar
Just curious--why do you still remain a customer of Wells Fargo?

~~~
Rapzid
Better the devil you know.

------
maxerickson
I just got a robocall painting the CFPB as anti-consumer and a waste of tax
dollars.

------
imh
Just Four Months Ago, New Wells Fargo Chief Said No Changes in Sales Strategy
[1]. Meet the new boss, just like the old boss.

[1] [https://theintercept.com/2016/10/12/just-four-months-ago-
new...](https://theintercept.com/2016/10/12/just-four-months-ago-new-wells-
fargo-head-said-no-changes-in-sales-strategy/)

------
GCA10
Bravo to the directors for waking up. Any time there's a long-serving CEO of a
big public company, it's as if the directors have been chloroformed. They
generally show no ability to question the boss, let along hold him/her
accountable for anything.

Most of the other boards that should be waking up ... probably won't. But at
least they've got a reminder that it's possible.

~~~
infinite8s
He's also chairman of the board. Not sure if he's relinquishing that role.

~~~
dredmorbius
I'm pretty sure he is. Though NYT doesn't quite say so directly.

[http://www.nytimes.com/2016/10/13/business/dealbook/wells-
fa...](http://www.nytimes.com/2016/10/13/business/dealbook/wells-fargo-
ceo.html?ref=business)

------
ArkyBeagle
I watched a lot of his testimony before the Financial Services Committee on
CSPAN. So I am unsurprised. He took a fairly savage beating.

For some reason, the fact that Wells Fargo is a really big enterprise cut no
ice with the various Congresscritters.

FWIW, I am not a "break up the banks" guy[1] mainly because of things written
and said in podcasts by Charles Calomiris, author of "Fragile By Design" along
with Stephen H. Haber. It is all more nuanced and complicated than that, and
the small bank lobby in the US really is a thing and a thing that has caused
problems.

[1] Canada has very close to only one bank and has had no financial crises to
speak of.

~~~
st3v3r
" He took a fairly savage beating."

He got a tongue lashing. He still has not faced any real consequences for what
he did.

"For some reason, the fact that Wells Fargo is a really big enterprise cut no
ice with the various Congresscritters."

Why would that excuse any of it? He's paid ungodly sums of money to be in
charge of the company, and be responsible for it. If he can't handle it, then
he does not deserve that money.

~~~
ArkyBeagle
It's far more than a tongue lashing. Look, this is how these folks assemble
footage to run on and such. One New York pol ( Meeks? ) called WF a criminal
enterprise.

I didn't say it would excuse anything. He's responsible. There were bad actors
within WF. Some people ( presumably there's correlation between that and who
was a bad actor ) were fired. I don't mean the people who were fired under the
compensation structure.

This might take a while. They have 265,000 employees. If it's O(n) and each
case takes thirty man-minutes, that's 66.25 man-years.

I don't know any other context than the congressional hearings. But this
appears to be a sacrificial resignation.

"Ungodly sums of money" is quite the (non) standard. I hold that the cultural
failings and biases that cause us to cause the existence of these behemoths
are still with us.

Why are we still talking about compensation policy? Can't we figure out how to
pay people? This is clearly a case of gamification of a variable compensation
policy.

What's _behind_ that "Can't we figure out how to pay people?" Isn't that
what's at issue in general? Isn't that what drives the debate over inequality?
There's Something Wrong. With us.

~~~
st3v3r
"It's far more than a tongue lashing."

Until he has the shit kicked out of him in a jail cell, it isn't. As I said
before, Stumpf is not facing any real consequences for his actions.

------
tomrod
I would expect no less. Given the size of the issue, it's virtually impossible
that he didn't know about it. I'm assuming competency here, as he was leading
one of the largest banks in the world.

------
mixmastamyk
My perception is that WF took a big turn for the worse ethics-wise when they
merged with Norwest in Minneapolis. Never heard a negative word about them
until that time.

~~~
rsync
nitpick: Norwest actually purchased WF outright, but then adopted their name
and branding.

~~~
mixmastamyk
Did it include a "brain transplant?" I thought that was the case but went to
look it up and couldn't find any details.

------
trhway
he directed and benefited from massively organized criminal activity - it
looks like a RICO case, isn't it?

~~~
refurb
Do you know what RICO stands for? It doesn't fit here.

~~~
trhway
why it is so hard for people to use Google? I mean it is right there
[https://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corru...](https://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corrupt_Organizations_Act#RICO_predicate_offenses)
:

" Under the law, the meaning of racketeering activity is set out at 18 U.S.C.
§ 1961. As currently amended it includes:

...

Any act of ... theft, embezzlement, fraud, ...

..."

Or do you really wanna argue that there wasn't a criminal "enterprise" as
defined by RICO? I hope you aren't seriously considering to argue absence of
the "pattern of the racketeering activity" here - that would be laughable.

>Do you know what RICO stands for? It doesn't fit here.

So, why would you say that RICO doesn't fit here? Or may be you just didn't
know what RICO stands for?

------
partycoder
The apology didn't work and clients started demanding accountability. I am
glad this happened.

------
vadym909
That's a win? No Jail?

------
tlogan
The title should be: "Stumpf gets with $134M"

------
Frogolocalypse
Paywall.

------
RKoutnik
Meta: Looks like WSJ is smart enough now to detect the `web` links. I went
directly to the site, hit paywall, backed out. Then went via the `web` link,
same paywall. Went to `web` link in incognito, was able to read the (fairly
anemic) article.

~~~
mjevans
I would prefer an HN 'rule' that denies the listing of any articles that
originate from paywall sites.

~~~
the_watcher
So a rule that denies listing articles from publications that regularly
produce interesting stuff? That's the definition of cutting off your nose to
spite your face.

~~~
brianwawok
This same article is on 20 sites. No reason to pay wall it.

~~~
the_watcher
In this case, fair point. Not all pay walled articles meet this criteria. Many
do not.

------
gjolund
Is he being prosecuted?

Nothing will change until we show that white collar crime is still crime.

------
Bud
#downvotedwhiletrue

~~~
azernik
Being downvoted is usually temporary (random noise, until the upvoters a
arrive). Comments complaining about being downvoted - which, note, are against
site guidelines usually last longer. Don't write them.

> Please resist commenting about being downvoted. It never does any good, and
> it makes boring reading.

~~~
Bud
You're right. I apologize.

------
dbg31415
Headline tomorrow, "John Stumpf Steps appointed chairman of the board of Wells
Fargo."

------
miguelrochefort
Shit's about to go down.

