In the continuing aftermath of the recently discovered scandal at Wells Fargo, California’s state treasurer is suspending some of the major parts of the state’s business with one of America’s most recognized bank brands. John Chiang told Wells Fargo in a letter that you have shown little regard for the millions of California citizens who have placed their well being your care. According to CNBC, Chaing announced sanctions that will suspend the state’s relationship with the bank for 12 months, on Wednesday, September 28, 2016. The sanctions also mean that Wells will not underwrite state negotiated bond sales. A spokesperson for Wells expressed empathy and acknowledges company responsibility, however, members of the House Panel are not satisfied.
Other Fallout from The Wells Fargo Scandal
The CNN Money video depicts Wells Fargo CEO John Stumpf, on the hot seat in front of the financial services committee on Thursday, September 28, 2016. During the several hours of questioning, it became obvious that many House members are angry, calling for Stumpf’ resignation, and not content with Wells’ reaction to the scandal. The CEO opened with a sincere apology and outlined steps the organization is taking to rectify the situation. Thus far he has forfeited $41 million of pay, and vows to end the sales incentive plan - which is blamed for prompting over 5000 employees to set up fake accounts - that caused the scandal by the end of the week, instead of waiting until January. However, angry lawmakers say more needs to be done, as reported by the New York Times. Committee chair and Texas representative, Jeb Hensarling said, “The cost is big,” during his opening remarks and noted that customers were ripped off and let down by the government.
Perhaps the most contentious exchange between Stumpf and a member of the panel took place when Rep. Patrick McHenry (R-N.C.) noted the long history of Charlotte and the banking industry. Furthermore, McHenry is concerned about how the scandal will impact Wells’ employees in his state and told Stumpf that he failed to uphold the very internal ethical standards the institution is built upon. The USA Today report includes a detailed account of the hearing and highlights several shocking responses. Including Stumpf saying that people cannot be fired for missing sales goals, however, it could have happened. These comments he made responding to a question posed by Rep. Lydia Velazquez of New York.
As if earning millions of dollars on fees levied against customers with fake accounts was not enough, the Justice Department will oversee the $4.1 million the bank has agreed to pay for illegally repossessing vehicles. CNN Money indicates the vehicles were taken without a court order and it is a violation of federal law. The shameful aspect of this story is that the vehicles belonged to service members of the military. The illegal repossession took place even while some were deployed. The bank will also pay at least $10,000 to the service members impacted, along with the lost equity in the cars plus interest.
According to CDA News, there is some indication that the executives knew of the fake accounts as early as 2013, and it’s possible the illegal activity started some years prior to then. Senator Elizabeth Warren (D-MA) referred to Stumpf as a gutless leader and denounced the sales culture at Wells Fargo during the Senate hearing on September 20, 2016.
By Jireh Gibson