over that scandal where weller spago opened up 2 million accounts without customer consent. he was grilled by a senate committee last week. i'm vonnie quinn. you are watching "bloomberg markets." nejra: i'm nejra cehic. fromll bring you remarks john stumpf when they begin. he also says he will more -- forgo $40 million of stock and celery as the board investigates . he is expected to address the development in his opening statement coming up shortly. you can also follow along on the bloomberg using tliv go. julie hyman has some economic data. pending home sales up with the month of august, an unexpected decline of 2.4%. economists are projecting an

unchanged reading. year-over-year it is still a gain of 4%, but that number disappointing, a seven-month low. contract signed to purchase homes. this was the third decline in contract signings in the last four months, so adding to some recent weaker than expected data on the housing recovery. on the flipside, read on gdp this morning for last quarter that came in better than estimated, so a mixed picture on that front. if you look at stocks and where we are trading, we are seeing very little change, as we see a push and pull both in the data and also in one oil has been doing. little changed as well. crude oil prices right now moving up slightly as investors try to figure out what that opec production cut plan really means and how much of a difference it may mean to the market. i was looking at a note from

, and analyst questioned the meaningfulness of this. we will be speaking with him at noon today. take a look at one of our charts on the bloomberg. this looks that opec production as a percentage of capacity. that is the white line. the change in output is the blue bars. close to-- opec is 90%, so that is one of the reasons why even if they cut back, some investors are saying how much of a difference to prices will this mean? a quick check on rates in the wake of that economic data, we have an increase in yield today, not a huge one. coming down after that pending home sales data, but a reversal of the recent action we have seen within the treasury markets. loyal is very much the

focus in europe. 90 minutes to the close of trading here. have a look at where equities are trading right now. i have highlighted two stocks, shell and tullow. they are some of the best performers this morning. total heading for its biggest gain since february. we have seen this in many oil foranies after an agreement a stop on production. stocks very much on performing up 5% at the moment. utility stocks up 1.7%. materials up 1.3%. most industry groups gaining on the stoxx 600 today. up 7% itself, gaining for a third day, heading for its first quarterly gain this year.

if we look at another stock we have been keeping a close eye on, commerce bank, down 1.8%. 9600 jobs andt also suspend dividends. the ceo is looking to shore up profitability. we will be talking more in the show about the challenges facing the german lender. finally, a lot of discussion around oil prices and the prospect of them moving higher feeding into inflation expectations. i just want to show you the u.k. 10-year breakeven rate. it is reaching its highest level since july 2015. of course i'm not saying that this is all down to the prospect of oil prices rising because this has been on a study -- study upward trend all year, but worth keeping an ion as we talk about oil and expectations. vonnie: just a quick headline from jeb hensarling from the

house financial services , where john stumpf will be testifying today. of the committee saying millions of americans have been ripped off by wells fargo. it is just beginning now. you can follow along on tliv go. expecting his remark to be much different to the senate committee. talk aboutted to urgency in the company. shares are down about .7% right now. not to a conversation on innovation in monetary policy. and ago over to tom keene former imf chief. about thisimportant conversation is our kickoff to the international monetary fund meetings. olivier blanchard is a director of economics for christine

lagarde and the imf and is now at the peterson institute. professor blanche art, wonderful to speak to you. i was pleased to see in your recent note you spoke about the mystery of productivity. in your seventh edition of your it,book, you go right at how important productivity is for growth. why are we seeing a lack of productivity and a lack of growth? the honest answer is nobody is sure. we got 10 years of very good productivity from the mid-1990's to the mid to thousands, which we now understand is due to the fact that firms found ways of implementing the innovations that were available at the time. it came as a surprise, it ended as a surprise. it has not been there since. the expectation is we are going

to have low productivity but i would not be surprised if we had another good decade of productivity growth in the future. for the moment, the assumption has to be that productivity growth will be low. it is probably not due to the crisis but something else. tom: you have constructed for the international monetary fund their world economic outlook. within the low productivity growth, within the search for innovation, the real question is how do institutions like the imf, or frankly the fed, adapt to this low productivity? how does this change chair yellen's work? it changes it in two ways. the risk of recession is higher, investment is lower, consumption is lower, which makes for a tougher job for the fed. zero lower, the

bound is likely to be binding, so you have a policy that is ready to react to the next possession when it comes, and has the tools to do it. much harder to do in an environment of low interest rates, which we have. over negativebate interest rates, you told us your doubts about helicopter money and here we are with negative interest rates. as kenneth rogoff mentioned, we are learning as we go. give us an update on what you have learned about negative interest rates in the last two months. problem with negative interest rates, as opposed to low interest rates is, with low interest rates, banks can basically keep their margin, just decrease the rate at which they lend or borrow. when you get to negative interest rates, they are very reluctant to actually decrease the rate on deposits.

so that each into profits. that being said, the news from the last year is that the effect on the profits of banks have not been big. so far, it has not led to a major effect on the profits of the bank, but if it is used more, i would start worrying. tom: you have been so good over the years of separating outside, it exaggerates shocks from what is going on inside the model. does this make banks more susceptible to those kinds of shocks? they have to live with economists work. issuer: it is more of an of negative rates. the profits of banks have come down. when you have low profits, any shock and get you to where you don't want to be. banks are, in a way, more risky than they were. we have undone this partly through higher capital ratios,

but in the end, they make very the probability that they make a loss is higher. you had a wonderful article recently on the future of modern academic economics, widely reported and discussed among economic leaders. the argument is traditional m.i.t. economics like blanche art, stanley fischer, the idea of a modern the lips curved orthodox, traditional economics and some people are saying, wait a minute. irving fisherthin of 80 years ago and generate low rates, you generate disinflation and outright deflation. talk about with the zero bound does. does it help us get to inflation

, or does the zero bound and negative rates help us get to disinflation and that ugly thing, deflation? there is a very serious risk about the zero lower bound, you cannot decrease interest rates enough, the economy remains weak which leads to less inflation, which eventually needs to disinflation. this makes real rates adjusted for inflation even higher and you get into this disinflation 30'sl, which we saw in the . fortunately, we have not gone there. ,hat we have now is deflation low inflation. it has not gotten much worse. the reason is partly because the .xpectation is of inflation but we know there is a great danger. when we get to the zero lower bound, these people expect

deflation, interest rate, higher and higher. when you are there, you are in deep trouble. fortunately, that is one trouble we have avoided so far. know that janet yellen is a world-class economist and she is under the bright lights and pressure of coining the phrase of the moment. she did not come up with v-shaped, but then we have data dependency, forward guidance. now the new word is evidence. what does evidence mean to you when central bankers speak about that. what is the evidence? janet and thenk fed are blamed much too much. they do the right thing. they are clear they want to achieve full employment, achieve steady inflation at a relatively low level, and then they look at the economy and try to do the best. this is exactly what they should be doing.

they are clear about the fact that there are some members of the fomc who believe it is time to increase interest rates. the majority do not. that is exactly the way to run policy. markets would like calendar certainty. we want to know exactly what day the interest rate will be increased. , they come back and they say that was not the right day, it is too early, too late. maybe athe fed has communication problem in explaining this, which i think makes sense, but they are doing the right thing. they are looking at the economy, saying we are getting close to full employment. to increasedime rates. some believe they should, some don't. that is exactly what they should be saying, what they should be doing. the markets just tough to swallow and understand that is the way to do things. art, oneessor blanche

final delicate question, and i say so with immense respect for french economics. interview after interview there is a hope that continental europe will find a market clearing courage of the anglo-saxon model, which is little more brutal and more quickly market clearing. how do you respond to the idea of people, when they say the continent should be more like england and the united states economics? are you referring to a need for structural reforms? tom: structural reform and the courage to clear markets. olivier: i don't know what that means to clear the markets. they clear in europe as much as the u.s. i think you are talking about structural reforms. there are structural reforms which would be important in some of the european countries. in my own home country, labor

market reforms are essential, but they went into enormous trouble politically. even though these reforms are good for the economy, it makes losers. one of the characteristics of policy is that losers are very aware that they are losing. there are limits to how much reform you can do, which speed at which you can do it. governments has to try but they have to be deeply conscious of the fx of these reforms. so it will not happen overnight. olivier blanchard, thank you. --y really don't look at delicate question, speaks to the impatience of clearing the markets on the european banks. the professor did not want to go there but that is front and center with what we saw this morning with commerzbank. likely he said they are to decrease rates on depositors. tom: negative rates have not

followed through to the depositors. vonnie: he was pretty optimistic on productivity in the immediate term. it will be a good decade of productivity although maybe not straightaway. tom: what he says in his research note which is so is thatt for viewers, economist never know how to get out of the malaise of productivity. essentially, mathematically, it just happens. you don't know when. vonnie: that interview will be available online and as a podcast as well. to give you an update on john stumpf, testifying in the senate. the ranking member maxine waters who said it was a very personal and close to her heart situation because many of those impacted our constituents -- are constituents.

mr. stumpf is testifying right now. i should say, pretty similar, no mention of clawbacks or executive pay. a check on the first word news. courtney collins has more. they commuter train has crashed into a station in hoboken, new jersey. photos show is damaged railcar inside the train station surrounded by debris. there are multiple reports of one dead and up to 100 injured. emergency crews are on the scene . it's unclear what caused the crash. cnn estimates 15,000 people use the service daily. hoboken is seven miles from new york city. peres isof shimon lying in state in the knesset today. leader diedliament yesterday at the age of 83. bill clinton paid his respects earlier today and president obama leaves for israel later in the day.

palestinian president mahmoud abbas will join scores of world leaders to join the cemetery service tomorrow. russia is a signaling it will not halt is offensive against the syrian city of aleppo. the kremlin says it is willing for 48 hoursmbing at a time to allow human aide to be delivered. john kerry has threatened to break up contacts with moscow over syria unless the air attacks end. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i'm courtney collins. this is bloomberg. vonnie: let's go now to capitol hill. john stumpf is testifying before the house financial services committee. .> they use and the value it is not about improper sales practices used to create unwanted accounts. that is not good for our customers and not good for wells fargo.

care of our customers, they will deepen their relationships with us and trust us more with their business. that is good for customers who benefit from lower cost we pass on and that is cross-selling done the right way. in closing, i'd like to talk about my commitment to accountability. when i say i'm accountable, i'm referring to the actions our board took at my recommendation to forget the stock awards that are the largest part of my compensation for the past three years and any bonus this year, as well as my agreement to work salary until the board completed investigation. i respect and accept the board's decision. when i say unaccountable, i also mean accountable or leading wells fargo as the company restores trust of customers, team members, and investors. thank you for the opportunity to testify today. the chair now yield himself

five minutes for questions. mr. stumpf, to the american people, this feels like deja vu all over again. some institution is found engaging in terrible activities, there is a headline, fine, and yet, nobody seems to be held accountable. the fine assessed to you is probably a rounding error in your quarterly earnings report. with as manyn is, as 2 million fraudulent accounts over the course of five years, 5000 dismissed employees, it is beyond credibility that somebody eitherfood chain did not order this, condone it, or turn a blind eye to it. , who isestion to you is the highest ranking official at wells, the highest person in the management team dismissed because of these activities? thank you for the

question. within the 5300, there were managers and managers of managers. >> were these branch managers? mr. stumpf: yes, about 10% or more. >> nobody above the branch management level? mr. stumpf: there were managers of the branch managers, and a manager of those. we are doing a full review of other control functions within the company. that process has already begun. the board will be involved, management will be involved. >> when will this be complete, when will your own internal investigation be complete to hold management accountable? mr. stumpf: i can give you a specific timeframe, mr. chairman, but we are moving on that directly and we will get to the bottom of this. >> anybody at the bank holding company level being held accountable?

mr. stumpf: people will be reviewed across the board at holding company, activities, corporate activities, anybody involved in promoting or supporting this behavior -- >> holding people accountable, isn't it true, in the agreement that wells fargo entered into, that no individual admits guilt. is that correct, is that part of the settlement agreement? i believe we either did not admit or deny, so the fax are what we agree to. let's go back to 2011, which i think is the first year we know for a fact that these fraudulent activities were taking place. the records that your bank had shared with us show 939 employees were terminated from the retail banking sector for

improper sales practices in the year. does that comport with your memory? mr. stumpf: yes, it does. in 2011, isn't it true that wells fargo entered into a consent order with the federal reserve that required wells to cease and desist from certain practices in the mortgage lending department, and that you paid and $85 million civil penalty, is that true? mr. stumpf: that is true, that was in a different business area but it is true. . >> i will read from the consent order. wells fargo's controls were not adequate to protect when certain sales personnel did not meet sales standards and received incentive conversation, altered or falsified documents and inflated prospective borrowers incomes to qualify those borrowers for loans that they would not otherwise have been qualified to receive. this sounds eerily like the

retail banking division. as i understand it, the fed required wells fargo to submit a plan to investigate and to change policies and procedures. i think you testified on the senate side that you were not personally aware of the problems in the retail banking division until 2013. certainly, you are aware of the problems in the mortgage lending division in 2011, correct? that's correct. mr. chairman, we shut the division down. that was -- mr. hensarling: if you solve the problem in one area of the business, why didn't you thoroughly investigate in the other? mr. stumpf: there is no question we should have done more sooner. mr. hensarling: it just seems, five years later, your bank is being fined for exactly the same transaction, and again, it feels like deja vu all over again. i hope and trust -- but please

tell me -- that these fines are simply not the cost of doing business for wells. mr. hensarling: it is not a cost a costtumpf: it is not of doing business. this is a serious trust issue with our customers. there aret to say 268,000 people who came to work this morning at wells fargo tried to do their best to serve customers, and they do a wonderful every day. i do not want our culture to be defined by these mistakes. we take accountability. mr. hensarling: i understand that, but it appears to be a little late, particularly when you are caught doing it five years ago, and then once again. somebody needs to be held accountable. i now yields to the ranking member. thank you. mr. stumpf, you have said were not aware of

this widespread fraud in your bank until late 2013. it appears that there were activities going on that indicate you may have known much earlier than that. 2007, monthsin after you came -- became ceo, the sales quality manual for the consumer immunity banking division was updated with your executive guidance, as the manual states. that sales guide reminded employees of what should have been obvious, that they needed to obtain a customer's consent for opening an account. so am i to understand that you discovered there was something going on, and there was a need for you to do this? the manual also said sales practices that showed "questionable activity" would be a high priority to bank executives. so it appears that you knew something in 2007, that

unauthorized accounts were a big enough problem, that you had to correct your employee manual. as early as 2008, i have documents from court filings showing your employees were contacting your ethics hotline reporting bank fraud and complaining to managers over unauthorized accounts. so it looks as if you certainly knew in 2008. what is more, i have a consent 2011 with the fed from that puts your company on watch for sales quotas and compensation schemes that pushed employees to break the law. does this sound familiar? member, i: ranking acknowledge that we had a 2011 order from the federal reserve and i think we have always known, any sales organization, you will have to be diligent, because not every team member will do everything right every day. so we have controls built-in, we

have ethics lines, and i knew, and i still know, you put people to work every day and mistakes will happen. it was not until 2013 when i learned that this problem had been growing, had been more prevalent, and in a certain part of the country which happens to be in the wonderful part of california which you live. these are things we have been working on. all of our strategies around training team members, which gets two weeks of classroom training before they go out into a bridge, is about doing things right, about ethics. i also vermont -- want to remind the committee that there are a vast majority of our people who had the same opportunities, the same training, the same goals, who did it right every day for our customers. nowcustomer loyalty scores are the highest they have ever

been in our company's history. let me just point thatome other activities should sound familiar to you. while you are under the consent order for the mortgage arm of wells fargo, this fraud was surging in the retail arm of wells fargo, but you did not connect the dots on these high-level trends across the bank. in 2011, did you know, that your sales incentives were driving this fraud? congresswoman, -- at least i know today that we should have done more sooner. some of our people -- and again -- it is 1%, but that is a big number for a big organization. anytime we have 100,000 people in our branch network, and it's

800 people for whatever reason misunderstood or used this as a way to be dishonest and break our code of ethics and do something wrong for a customer and something wrong for us, that is why we are removing sales goals. thinkt, we don't even they are an important requirement for us to continue to grow. mrs. waters: mr. stumpf, some people assume that you changed your customer agreement to add forced arbitration causes, for checking account, and that these clauses proved to be helpful when using them to dismiss multiple customer lawsuits. is that true? not true.: that is arbitration makes sense, but in this case, for any customer that may have been harmed in the situation, we are also paying for mediation process. thank you.: my time is up.

i will get to this later on, if i can. i yield back. mr. hensarling: the chair now recognizes the gentleman from texas, the chairman of our financial institutions subcommittee. >> thank you, mr. chairman. you serve as both the chairman and the ceo of the wells fargo. mr. stumpf: that is correct. >> 972 of dodd-frank requires an issue of securities to disclose the security statement. this year, wells states that your role is the result of your extensive experience and knowledge regarding the company and provides the most efficient leadership of the board and the company. mr. stumpf, do you think it is a good idea for the chairman and -- to be the chairman of the board and ceo? mr. stumpf: thank you for the

question. in our company, we have 14 outside directors, we have a lead director. all directors are new york stock exchange independent by their standards. i'm not a member of any standing committee of the board. the independent directors, the lead director set the agenda for the boards. they always have meetings that are in executive session without me. whatu probably read about happened this weekend, because yesterday about actions that they took as an independent board, and i was not a part of that. the board acts independently. mr. neugebauer: the current situation is you are accused -- you recuse herself from the board decisions on the situation. mr. stumpf: congressman, you are

right. i have either recused or i have not been invited. i'm not a part of that and i serve at the pleasure of the board. mr. neugebauer: give me a good idea of how the board is structured. do you think that is a good idea for the ceo to also be the chairman? with the board and shareholders be better served if there was separation in that area? mr. stumpf: for our company i believe we have the right structure. i serve at the will of the board and the board can make a decision on that. mr. neugebauer: you testify that you learn about these violations sometime in 2013. when did you inform the board that this was an issue? the board had , comments,ethics

questions, or high-level activities around people who left the company, involuntary terminations, through the 2011-2013 timeframe -- you send ther: board was having some discussions as early as 2011? mr. stumpf: the board, from 2011 to 2013, would get reports at a committee level, high level of ethics lines, requests, information, at not a granular level, but maybe at the company level. mr. neugebauer: you did not find out about it until 2013? thereumpf: i became aware was an issue in the southwestern part of the country. , we started to provide

more information to more committees of the board. had a5, the board had complete report on that issue. as chairman of the board, ceo, when did you tell the board, we have a problem? mr. stumpf: 2015 that we had a full report. as i said in my testimony to the senate and here today, 2014 we were starting to get more granular information that this was a risk area for the company to focus on. mr. neugebauer: did you ever disclose this issue on a 10k filing? mr. stumpf: all of our k or q andngs are facts circumstances, what we knew at the time. as recently as our second quarter q this year, when we use

our disclosure teams and compliance teams to look at this issue, the facts and circumstances, we believe were not material. mr. neugebauer: i am not for congress setting the corporate structure, but i do think there is some question here whether in this situation the company would be better served with those roles being separated. mr. hensarling: the gentleman's time has expired. the chair now recognizes the gentleman from new york. mr. stumpf, we now know that whistleblowers first contacted the consumer financial control board about the product wells fargo in mid-2013. you said in your senate hearings last week that you first found out about the fake accounts in late 2013. scandalrticle about the

, published in december, 2013. filing,our form for which i would like to submit to the record. on october 30, 2013, you sold $13 million worth of wells fargo stock on the open market. that is by far the largest open market sale of wells fargo stock that you made in your nine years as ceo. so my question is, did you don't $13 million of wells fargo stock, through your family trust, right after you found out that your bank had been fraudulently opening hundreds of thousands of scam accounts, ripping off your customers? mr. stumpf: thank you for the

question. the vast majority of our people go to work every day -- rep. maloney: excuse me, that was on my question. my question was, did you dump the stock after you found out about the fraudulent accounts? because it seems that the timing is very, very suspicious, and it raises serious questions. mr. stumpf: i did not sell shares at the time because anything related to -- rep. maloney: your form says that you sold the shares. mr. stumpf: i hold four times as many shares as i required. rep. maloney: did you sell these shares or not? mr. stumpf: i sold the shares with proper approval, with no view about anything going on with sales practices or anything else. well, it seems very suspicious that your largest sale was right after your $1.8 trillion bank was

turned into a school for scoundrels. using knowledge or bank fired over 5300 people who got caught willfully defrauding your customers. a recent lawsuit alleges that you fired even more people because they refused to willfully defraud customers. the low-level people, you fire them, you make profits, then you don't the stock. i just have to say, it seems that when you found out about the fake accounts, instead of helping your customers, you first help yourself. so moving along to the next question, mr. stumpf, you have said wells fargo is conducting a review of all accounts going back to 2009 in order to .dentify any scam accounts last week in the senate hearings

, you are asked if you would extend the review period two before 2009. you refused to commit to extending the review period back to even earlier. presented with hard-core evidence that wells was engaged in some of these practices, these illegal scams, prior to 2009, would you change your mind about extending the review? mr. stumpf: thank you for the question. we have agreed with our regulators to go back to 2011. we voluntarily said last week that we would go back to 2010 and 2009. i told our team to leave no stone unturned. if we find a situation where a customer is harmed that goes back prior to that, we will make it right for that customer. rep. maloney: thank you.

i have the evidence right here. i would like to submit to the record a court case in montana in which six wells fargo employees were fired, among other things, ordering debit for customers without their permission, which is clearly illegal, and according to the court documents, these illegal sales go back to 2007. now we have evidence of illegal sales practices going back to 2007. will you agree to extend the review period back to 2007 to cover this evidence that we are submitting today? mr. stumpf: again, we will go back to 2009 and we will contact every customer -- rep. maloney: this is evident that it went back to 2007. thank you for going back to 2009. my question is, we have clear

evidence it goes back to 2007. will you live up to your commitment of helping your customers that were defrauded with clear evidence that two 2007? will go back and if we find any evidence of any customer harmed from 2007 2 hour review two 2009, we will take care of each customer. mr. hensarling: the gentlelady's time has expired. the chair now recognizes the gentleman from north carolina. >> i have the honor of representing suburbs of charlotte, north carolina. north carolina had an incredible banking culture over decades. yet, in charlotte, first union, homegrown bank, great reputation, went through challenging times, economic crisis, as you will know. before that time, 18. with the bank based in winston-salem, walk over you -- wachovia.

wascquiring that, the pitch that your culture from california was there similar to the north carolina culture, banking culture. know, john grimes midland, a great chairman of interviewed a coulter that a banker is a civil servant as well. there is an obligation to society they have in their community. you eulogized him. pay tribute to the culture. i want you to think about that culture. what is so sad to me is that pitch of culture does not conform with my experience with my constituents in north carolina. it does not conform with what i know about first union, what i know about wachovia me is that

pitch of culture does not , and this cultural pitch that you had in acquiring them in the financial crisis. i know you have a huge headcount in north carolina, we are grateful for it. but what is said to me is the impact of this on them and those employees you have in north carolina. i wanted to look at your code of conduct. let's look at your code of ethics and business conduct. you say in your message as ceo, we are all responsible for maintaining the highest possible ethical standards in how we conduct our business and serve our customers. in fact saysthics our code applies to all team members including officers, directors of wells fargo and company, and its subsidiaries. it also says we are all accountable for complying with the code as well as all company policies and applicable laws. finally, critical that all team members have a solid

understanding of our company's code of ethics and business conduct in understanding that noncompliance with the policy may result in disciplinary action up to and including termination of employer. you clearly failed. you clearly failed in your own ethical standards internally. you have broken, your company has broken long-standing laws. you have broken long-standing ethical standards you have in your company. thishas nothing to do with debate about dodd-frank or anything else. you have broken a long-standing law, and you have defrauding your customers. how can you rebuild trust? how can you rebuild trust and get through this thing? what standards are you holding yourself to that sends the message to the rest of these folks in your organization that look to you for leadership and guidance? what are you doing to restore the? mr. stumpf: thank you.

the culture of the company is strong. it is really hard to say that when you're before congress for the second time, and behind you was all the settlements you had for problematic relationships you have had with your customers, by taking their money. counter to the law, counter to your ethical standards. it's great that you say we have a strong culture, but why are we here today, how are you addressing that? mr. stumpf: with respect to culture, we have 268,000 people that have made their life's work and careers out of helping customers. there are people today -- rep. mchenry: that is why i raise this in the way that i do with severe disappoint, severe disappointment. that is all. you broke the law. we make the law in congress. this is not new stuff that all of a sudden congress change the rules and you cannot have your employees create fake accounts

and take fees from customers unknowingly, unwittingly. history has that been an ethical ok. ok,ou to say the culture is it seems to me that you are just tone deaf to this. the final thing you need to think about, and your board of directors needs to think about, is this. the impact you have is not simply on your institution but the water conversation on how my consumers can access credit and the implications on what you have done in your leadership has done as a broader societal impact that is very negative. mr. hensarling: the time of the gentleman has expired. the chair recognizes the gentlelady from new york. stumpf, now that you were on the senate side and you testified, and the senators thed you whether or not

5300 wells fargo employees that ,ere fired for their misconduct how many were fired the gun they fail to meet sales quotas? at the time you said you did not know. now that a week has passed and you have had a chance to consult your records and speak to your staff, are you prepared to tell us how many employees were fired for failing to meet their sales goals? mr. stumpf: thank you, congresswoman. of the 5300, which is about 1000 people per year out of our team -- and i don't want to minimize it. people, through our investigation, were terminated because of their unethical

behavior. we decided we cannot have them here. they are not consistent with our culture and ethics. >> out of those 5300 employees, were there any employees fired because they did not meet their sales quota? i am not talking about the 5300. .utside of that my understanding is that people should not be terminated for missing sales goals. i am not saying it didn't happen -- >> how should i trust that is not the case? mr. stumpf: we are doing a review -- >> if your review shows that there were employees that were fired because they did not meet

their sales quota, would you be rehiring those individuals? mr. stumpf: first of all, we don't have sales quotas, we have goals. there are other goals that other people also have as their performance management. we are reviewing that and will try to make it right for every team member. rep. velazquez: mr. stumpf, i'm sure you are aware that wells 7ago is the most active sba lender in the country. as raking member of the house small business committee, i'm very concerned that illegal practices uncovered by the cfpb on the consumer side may have spread to the small business , where your front-line employees were under similar pressure to cross sell products through the clients. thank you.

we are the nations largest small-business lender. i am very proud that we do a lot of work helping men and women across this country start businesses and so forth. that is a very different business and i don't know of any product sales goals, which again we have eliminated in our retail bank in that business. it's a very different business. the programez: so is just a fraction of your overall small-business lending portfolio. can you provide us today with assurances that this illegal practice did not affect any of your small business clients that wells fargo? mr. stumpf: i do not have the information in front of me. i'm happy to work with my team and get back to your staff and cooperate on that as best i can. factvelazquez: given the that you lacked the leadership to give us assurances that this was not the case, i will be

writing to the sba administrator so that they can review all of the 7a portfolio, to make sure we protect it, small businesses, as well as taxpayers. , nowxt question to you is that you have decided to end product sales goals and financial reward, have you considered raising the salaries of your retail banking employees in order to make up for this loss in compensation? mr. stumpf: yes, we are working on a new incentive program that will be out by the first of the year. we want to make sure our team members are totally aligned with our customers. we want to make sure compensation for our team, who for the vast majority do it right, are not hurt in the process. rep. velazquez: i know you are not aware but it's very difficult for anyone in this country to live with a $2500 salary.

the chair lady's time has expired. the chair now recognizes mr. garrett. >> thank you, mr. chairman. by stumpf, let me start making a few observations and then i will end with a few questions. first and foremost, i find it, as we all do, extraordinarily troubling that as i look through the history, timeline of the scandal, that stretches over , as has already been testified to, 5000 employees dismissed for their involvement in opening unauthorized accounts . it was also troubling, firing did not happen at one time. my understanding is that roughly 1000 employees per year. extraordinary how wells fargo

management did not actively and decisively move to stop those activities after the first 100 or 500. the fact that it was allowed to go on and on for years is apparently a failure of corporate governance and a failure candidly, of your management. your management to do what is foremost, protect customers, who have trust in you. what concerned me even more is that it appears most of the 5000 employees fired for low-level or mid-level employees. the highest level was a branch manager. it does not even include those that resigned due to the culture at wells fargo. meanwhile, to the best of my knowledge, no senior executive has been held accountable in the same manner that the lower-level employees were. i would not be surprised to see if a number of those people end up losing their homes, going into massive debt after they were dismissed.

no, i'm not defending their actions, just making the point that we have a problem in this country where it would seem, as we have seen, that the well-connected on wall street, or here in washington, the elite, if you will in washington and wall street, seemingly played by a different set of rules while everyone else has to play by another. i know you just lost reportedly $41 million of your salary. if i understand it correctly, that is only a quarter of your pay over the last decade or so, so you will forgive all of us if we don't feel sorry. the second point i'd like to make, under dodd-frank, wells fargo remains eligible for taxpayer bailout going forward under title ii of the law should you run into trouble going forward. taxpayers have always been a lot of money bailing out poorly run wall street firms over the last decade. mr. stumpf, i've hope you are aware that anger now directed at

you from my constituents and around the country is not just because of the actions of the employees, but the fact that they seem forever on the hook to underwrite whatever kind of risky or in this case fraudulent activities wells or other large banks engage in. fortunately earlier this month, we passed a bill out of the committee which ensures that if wells fargo does run into trouble again, it's shareholders and management would pay the consequences, and the taxpayers would no longer be on the hook. third and final point i would make, i know they are not here, but the financial regulators apparently were completely asleep at the wheel, as this massive fraud was occurring. if you look at one of those, the , only one jobjob in our regulatory framework. they completely blew it. it took a reporter from the l.a. times to uncover what was going on at wells fargo.

i hope my friends on the other side of the aisle will keep that in mind as they may cut the cfpb on the back for a job all done. in the time remaining, let's get to the securities question. the skiers exchange act required companies to keep its disclosure in place, required the ceo to a test financial statements. thoseu saying that all of quarterly reports you are filing, the information you had, none of that material, none of that information was material? the facts: through and circumstances at the time, we found accurate reports and we did not believe it was material. rep. garrett: when you got the price waterhouse cooper analysis, one was that? earlyumpf: late 2015, 2016. rep. garrett: as soon as you had that, was that filed as material statement? mr. stumpf: we consider the facts and circumstances and we consider it not to be material. rep. garrett: not material.

why not? materialf: the pwc looked at 93 million accounts that we opened over four years. they could not rule out through a large data analytics about 1.5% of those accounts. that is still a lot because of the size of the organization. rep. garrett: if that is not material, occurring over a five-your period of time as a systemic problem in organization, i don't know what is. the chair now: recognizes the derailment from california, mr. sherman. >> the american people need an insurance that this cross-selling mania that has afflicted wells fargo is not to be found at the other behemoth banks. i would urge you to have hearings where we hear from the others,bfa, city, the

and until then, i hope that you would join with me in a letter what newy to ask account opening quote as they had for their bank tellers, how many people they fired for not meeting their quotas, or how many people they fired for opening phony accounts. we have wells fargo before me, but i don't believe, mr. stumpf, that you should be alone in this choice experience. your colleagues should at least come forward with some assurance . we are now engaged in an important national ritual, where the ceo comes before the representatives of the american people to apologize, to take full responsibility, to do so humbly. mr. stumpf, welcome to washington. what airline did you fly in on? mr. stumpf: virgin american. rep. sherman: when you came to the senate? mr. stumpf: united, one of two.

it shows wall street is learning something, thank you. these forced arbitration clauses in your agreement with your customers. you have said they can have mediation, too. some of them want their day in court. are you going to hold onto these forced arbitration clauses and screw them again out of their day in court, or are you willing to waive those clauses and say if you are caught up in this, you get your choice whether you have arbitration or not? mr. stumpf: thank you, mr. congressman. i believe in arbitration, i think it's a fair way -- customers mayyour want something else. are you going to deprive them of that? mr. stumpf: no, we will pay for a mediator -- rep. sherman: if they want their