let's listen in. i would not have specifics -- i can try to get back to you. >> you think they did? mr. stumpf: i do not know when that was introduced, but i believe, in the past locations that would have more activity, we needed to have more bankers. >> thank you for the straight answer. did the bonuses associated with those goals vary between the branches ordered wells fargo use a single uniform system? mr. stumpf: that is a level of detail i do not know. i can get back to you on that. >> so far in the investigation of that actors, have you found a correlation of the likelihood of employees committing fraud andy demographic -- and the

demographic or social factors of people being frauded. mr. stumpf: i do not know what the intent of these people were. to answer your question specifically, there was no racial or ethnicity difference other than the communities because we try to have people in our banks that represent the communities. >> we will take that off the table here. as someone who populates a district heavily populated by seniors, i am worried that wells fargo may have preyed on those that were seen as vulnerable. mr. stumpf: because we actually first, there was no disproportionate. in fact, it was younger people, not seniors if there was any

emphasis at all >>. >>ok. to be clear, i do not think sales goals are inherently evil. anyone who is owned a business there is a reason to incentivize. your company forgot the most important part. serve.he people you i am increasingly concerned that this misguided idea of success puts actual customers in the category of least concerns is perpetrated by more than just wells fargo. to the best of your knowledge was this practice of creating fake accounts exclusive to wells fargo? mr. stumpf: again, i do not know and i only know what i know about our company. in your few seconds left, the investment -- reason people buy wells fargo investments is a whole lot more.

it is about our broad product model. me any actionl has taken that would stop something from happening again? >> a brief answer from the witness. mr. stumpf: we worked with the cfpb and we will continue to work for them on this issue. >> any action they have taken that would stop it from happening again? >> the time of the gentleman has expired and the chair recognizes the member from new jersey mr. cleaver. mr. cleaver: thank you for being here. i know this is not one of your better days. hopefully you understand, i have a plane to catch, i may not finish my time. id. i get on a plane and go back -- i dare not go get on a plane

and go back to kansas city and conduct myself in a way that and we wills fine all join hands and sing come by -- and sing and fix the problem. one of the reasons everybody in this place is upset, each of us represent about 840,000 people and probably every one of them is angry, especially those who loans andems getting people who were ripped off andng the crisis from 2008 2009 and so, i think many of them think that they had a preview of this. gordon gecko, greed is good,

greed is right, greed works and the movie "wall street." i think that is one of the problems we have here. warnede already been before i had my opportunity, so i will not warn you, but i do need to ask you a couple of questions and maybe just one. 2.6 million -- 2.6 william dollars in overdraft charges that incurred on late werents on late fees that thousands of consumers on fire, figuratively, and your bank had tubs of water, but the people there decided to drink it and let the people burn, including

the people who had gotten fired. my question is, how far up the chain have you been able to determine that this scheme or this fraud occurred? mr. stumpf: we know that 5300 people broke our trust and were not honest and we know that we are going to do a complete review of anybody who would have been part of this and if they were dishonest and broke our code of ethics they will be held accountable and we have returned that money with interest with an apology. >> yes, i know, but i am trying to figure out how far up the chain have you determined thus far that this game went. , mostumpf: first of all of our people do it right and

this was just the opposite of what we train for, just the opposite of what we talked about. people come i know that is a lot of people given the size of our company and we will do a full review of that. >> what i am trying to find out is how far up the chain. mr. stumpf: we are not going to impede,cheat -- chain the board will do a review of the company and make sure everybody is held accountable. .> ok, i appreciate that now how far up the chain? mr. stumpf: so far, the people we have found, it is range managers, -- branch managers, their managers in some cases, and a manager of a manager and that is the work we had done so far. >> so the manager of a manager would be what, a vice president? mr. stumpf: i do not know the

exact title, but i think it is called an area president. >> have any of those folks been fired? mr. stumpf: yes. >> all the vice presidents? mr. stumpf: i do not know this person was a vice president. i do not know what the title was, i know it was anchor and then branch manager, manager of the branch manager i think they're called district, and then it area manager. far -- howatter how high it goes, they will be fired? mr. stumpf: i do not want to prejudge. >> i understand, but no matter how far up it goes, they will be fired? mr. stumpf: as far up as it goes it -- they will be held accountable, whatever that means. >> everybody is beating you up. >> the chair now recognizes the gentleman from pennsylvania mr. fitzpatrick. representative that's patrick: i

want to follow up on vista cleaver's -- mr. cleaver's questions. i represent a district outside of philadelphia and like most of my colleagues i have received letters from customers, constituents, former employees they have a lot of questions of their own which we have to help them try to answer. first i want to ask a foundational question and a question you have been asked many times already today, last week in the senate about when you first heard of this situation with your customer accounts. you have given us approximate dates which we appreciate, but first and foundationally if you could tell the committee and the american people when you first heard about the problem, where were you and who told you and what did they say to you and what did you do about it at the first moment? mr. stumpf: i will answer your

question and thank you for that. i have always known as i think -- wemericans know that have 100,000 people in this business so we knew and i knew that this had to be managed in the business. 2013 beforeter in story came out and i did not surprise me because i had heard we were seeing an acceleration of this activity in a certain marketplace and i cannot recall if my chief legal counsel told me or if it was in a meeting with the business leader at the time or compliance and that is when i first knew that this was becoming a bigger issue. so resources were brought in to bring corporate resources in, to assist the business line, and

then we spent -- and the corporate group called core spent time working on that issue and we saw the issue come down it was not until 2015 and we should have learned earlier. >> you are not answering the question. when you first heard, where were you and who told you and what did you do about it when you first heard? mr. stumpf: i got -- i do not remember where i was sitting or what i was doing, but i recall hearing it at some time in the summer, fall timeframe of 2013. >> there have been so many people who have been hurt by what we know right now, not just your customers you are going to lose many customers and never get them back. there have been lower level and mid-level employees who the been injured. you mentioned early in your testimony 268,000 people went to work today to do the right thing

and for the most part we all believe that. he also mentioned there were some 5000 employees who lost their positions. as employers, we are responsible when you bring somebody young into an organization, perhaps right out of high school or college with a -- you have a special responsibility to train them and make sure they are being trained in the ways of ethics and banking. how many of those lower-level employees who were part of the 5500 who lost their jobs? mr. stumpf: i do not have exact numbers, but i believe about 7% or so would have been at the teller population and the remainder, the other 93% were someplace and as i understand they were banker, senior banker, branch manager, and so forth and incidentally we do give two weeks of training for all of our team members before they go out

because you are right, we have a special sponsor ability to help them understand our culture and they sign a code of ethics. >> they are being told in employee trainings about the so-called goals? mr. stumpf: they are told about all the responsibilities of have doneincluding, i town halls every quarter, did one in philadelphia couple of months ago and i have been talking and every one of those i talk about doing the right thing and putting customers first. >> there have been reports from multiple whistleblowers from the provided they information of command and were ignored and as a matter of fact to some of them were fired. are you familiar with those cases? mr. stumpf: i have heard about those and those are regrettable. we have a non-retaliation policy for whistleblowers. fired as a

whistleblower is a serious matter. mr. stumpf: we take it very seriously and we have a non-retaliation policy. >> the chair recommends the gentlelady from wisconsin mrs. moore. i haventative moore: learned so much here and i know when you go to wells fargo -- the wells fargo website there your picture is, john g. stumpf, the vision and values of wells fargo and it features you. you say you started with wells fargo in 1981. mr. stumpf: 1982. oore: ok, myve m math is not that good. you were trained and you

knew what the culture of this norwest company, i guess there was a merger of wells fargo and norwest and so, did you receive training or do you know if the employees received training on this going for great program that we have talked about here today where most of your customers only had five accounts in your bank and that there was an effort to get at least 8 accounts for customers, was that part of the culture? mr. stumpf: that was an aspirational goal and most of our customers totals had 14. and so, as your predecessor noted, there is this abundant growth potential in the wells that onetomer base and of the sayings around the place

.as we expect what we expect so, whether constant monitoring's to see if people were meeting these goals? we expect what we expect, what does that statement mean? mr. stumpf: it means we expect our people to live according to our values and their ethics. i am sotative moore: happy, i will congratulate you the swamp of these 5500 lower-level employees because they almost brought down one of the greatest companies that our country has ever known. i remember wells fargo's old wagon wheel days so i am happy you got rid of those employees and i am sorry for your loss of $41 million and the loss of the investors whose stock dropped, but i am wondering what the relief is for one of my

constituents. i have her letter and i want to enter it in the record. >> without objection. >> she started making $13 an hour and ended at $50 an hour and she was one of the whistleblowers who complained to the manager and then they changed her performance numbers and pushed her out and so she is a person that kind of lost her job and other stuff that happens to you when you make $13 an hour -- 15 dollars an hour, sorry and you are pushed out by people -- you you do not want do not fit in with the expectations and the culture. what is the remedy. is there a fund for these employees, the good ones, not -- $12 an hour or $13 an hour employees. what is the remedy for my constituent at wells fargo?

mr. stumpf: we want to know about every one and we really view -- review the files for anyone who had anything to do. representative moore: she has a case with the council of equal rights division, how come -- she couldn't just come to you? the people she talked to fire her. mr. stumpf: we have corporate resources and if you give me that name. representative moore: i was very disturbed to hear that the numbers were not large enough to raise to the money of being material for security purposes. i do not understand that. would you come as an investor, invest in the bernie made off type -- would you make this kind of investment yourself? mr. stumpf: this is a quality

,ompany who made some mistakes but our investment thesis is all about our capital and our growth. representative moore: you have stated previously that you think the dodd frank over regulates. mr. stumpf: i never said that. i do not recall saying that. stutzman: mr. stone's -- mr. i got my first loan for a motorcycle when i was 20 years old and i have been a happy customer for over 20 years and i have been frustrated with wells fargo because of the new website and i voiced that and i think part of this come i think you need to do something about it because the transparency in the website right now, i cannot find

some of my accounts. i think at this point, there needs to be a time when you can give customers confidence through the website to make sure that every account can be seen because i have notices all the sudden of accounts i did not recognize because i did not see them on a daily basis. i found them after i called wells fargo and talk to them. -- your story you is remarkable. you came from a dairy farm in minnesota. i grew up on a dairy farm still part of our family farming operation and i am curious to know what you would do today if you had taken a different path and be a dairy farmer in minnesota and you have been trying to buy land and you are trying to buy more cows and you realized your credit score, something is wrong with it and you have not been able to get your credit score up and maybe

you find out your credit was dinged because your bank was opening accounts. when accounts are open it dings your credit score, correct? mr. stumpf: that is correct. stutzman: so 2 million people had their score dings because people were opening their accounts -- mr. stumpf: we have contacted 20,000 of them and less than 25% saying -- i do not want to minimize the numbers, even one is too many, but mayan traction is to make it right for everyone of those customers. mr. stutzman: when mr. cleaver was asking you what is the highest level officer at wells fargo to be fired and you did not really know, you kind of said area manager. mr. stumpf: excuse me. i know the functional title, i do not know if that person is a vice president, senior vice

president. i just do not know that. i do know that it is a branch manager's manager manager and we're not done with the investigation. broke foran: but this the public within the last month and you apparently knew about it 2012, 2013? mr. stumpf: we knew that not everyone does it right and it was sometime in 2015 when we did our pwc study of the results came in early in 2016. mr. stutzman: but you are the ceo. is stand up to do in front of the company and say, this is going to stop and it should be stopping. i am curious to hear from employees who were fired with their experience was and i hope we do a hearing with some of those. wells fargo is a huge company.

is it too big to manage? mr. stumpf: it is not. this was a focus problem and we do a lot of areas really well like model risk and market risk and capital liquidity. we know we have work to do in operational and compliance risk and we should have invested more . today i told our folks know stone unturned or no dollar unspent come we are getting rid of sales goals. mr. stutzman: i know you said that today, but where was the outrage from you when you first heard about it? there is outrage on this committee, but i do not sense the same outrage from you when tolstedteing walking away with millions of dollars. the american people and your customers will be upset when they see what is happening here.

will you get the number to this pb regulatorscs that were embedded at wells fargo bank? mr. stumpf: i will talk to my team and we will be as cooperative as we can. i do not know if that is covered under confidential supervising. mr. stutzman: i think not only have you and wells fargo let the customers down but so has cspb and you have let -- and you both have let the people down. >> i ask for consent to enter into the record a report entitled banking on the hard sell: low widget -- wages and aggressive sales put customers and workers at risk and i would -ed ilike to enter an op wrote the other day entitled

john stumpf's wells fargo racket shows why bank workers need a union and i would also like to note for my colleagues a junesive -- held briefing were left -- listening we hear about today, on june 10 we had workers come in and testify to the very thing that we've been talking about today which is the high-pressure sales techniques. if you are a worker at wells fargo and you are expected to seek out sales goals, you mentioned that. mr. stumpf: we had sales goals. >> yes or no because i do not have a lot of time. i'm am not trying to be unkind but i will not let you lays -- waste my time. yes or no. mr. stumpf: yes we have sales goals. >> du have something called as

prospecting calls that were expected for bankers to make? mr. stumpf: i do not know that level of detail. >> do you deny there were prospecting calls? mr. stumpf: i do not know that level of detail. >> are you aware each banker was expected to make at least 8 -- 100 prospecting calls a day? are you aware of that? mr. stumpf: that is the first time i have ever heard that. chairman, are you aware that there were weekly meetings held by -- morning huddles to talk about these sales goals? mr. stumpf: i realize -- >> you have to answer yes or no, sir. mr. stumpf: it is yes with an explanation. >> morning huddles, yes or no, did they occur? mr. stumpf: yes with the next one nation. asked --here customers

questions asked, how many creditors were they going to given goals? there mr. stumpf: i do not know that every branch held the morning huddle. i know the team works together. >> for their publishing's of charts on who sold how many products in your bank? mr. stumpf: that is a level i do not know. >> were they publishing charts on who did not make their sales goals? workers say that there were. if a worker did not reach their ones goals, where they put initial written warnings? mr. stumpf: i do not know the process. meet workers did not second sales goals again, were they given a second warning? mr. stumpf: i do not know the level of detail. >> if they did not reach second

goals, were they written up and admonished for not making sales goals? you are the ceo and you do not know this? and were they given performance improvement plans if they did not make sales goals? how did you generate lists for workers to have to make calls. mr. stumpf: i do not even know if there were lists. >> you are the ceo and you do not know if they were prospecting list that each worker was made to make cold calls on. mr. stumpf: i do not know that level of detail. >> if sales were not important, why were workers given credit card and home equity loan goals to meet. mr. stumpf: i do not know what the goals were. >> why were workers encouraged to open numerous accounts for customers? mr. stumpf: our team masters -- members are taught to provide

the right product and service. >> if a worker got a person to open up an account, is it true that that account, let's say a debit account, that there has to be a minimum balance in the account and there is a fee to hold that account if there is not a minimum balance met? mr. stumpf: i do not believe you are right it up -- about that. >> if there is an account does there have to be a number of uses on the debit account per month? and if that is not met is there a fee associated with that? mr. stumpf: i believe there is a minimum balance. i do not know what the numbers are. >> time for the gentleman has expired. the chair recognizes the gentleman from south carolina. cannot tell you how disappointed i am to even have to be here today as one of the many members of this committee who every single day defends the

banking system, defend capitalism and free markets, to sit here and have to watch you essentially validate everything the other side has said about you and your business and your industry for the last three or four generations is extraordinarily disappointing to me and the damage you have done to the market, to your industry far exceed the damage you have done tear a business. there is nothing i can do about that. i want to ask you one question. i know a little bit about this this and what little i did know i did not learn from college or business school, i learned from my dad who was raised similar to you. he was born in minnesota to a lower-class family. i remember him telling me at one can learn a lot about an organization or an enterprise by looking at the leader and

that the organization will take on the personality of the leader or the owner, or the person in charge and if you walk into a lobby and you are received nicely by the young man answering phones, it is probably a good indication that the lady that owns the place is a good person. if you walk in and you are treated like crack or disdain it probably says a lot about the people at the top of the chain. i like to thank the people who work for me at my office reflect that. you will get treated well. we have heard stories today that everybody has heard about and i am looking at the story from 2009 about the lawsuit that was "saw that says wells fargo -- loank community

officers in an affidavit stated employees referred people"s as "mud i can't tell you how hard it is to even read that, you all targeted black churches. does this organization reflect you? sorryumpf: i am deeply and i read that article you just said and that has no place in our culture, no place in what we have done and we are, today, the to low moderate income people and housing and we make more loans to african-americans, latinos, persons of color and we are proud of that. >> we have been listening to

wells fargo ceo john stumpf answering questions about fraudulent charges at the bank. he has gotten tough questioning from many members of the house financial services committee before which he is testifying today and we continue to monitor it and bring you headlines. the stock is not much changed today. one stock that changed is deutsche bank. shares in new york are declining after a bloomberg world headline that about ten hedge funds cut their deutsche bank explosion. these funds cleared derivative trades have withdrawn excess cash positions held at the bank and it could be a sign of counterparty concern. i do know what to say counterparty risk because that feels like 2008. we are getting to the point where clients do not feel quite as comfortable doing business with deutsche bank as they were as the concerns about capital

came up in the wake of the settlement with the doj. quickly get a question out of the way about deutsche bank. there has been so much back and forth in recent days about the bank. it doesn't seem to be bleeding over as much to u.s. markets? is there not a concern about the broader banking industry? >> i think the general sense is the u.s. banks paid the bulk of the fines they will have to pay for the mortgage system and wells fargo may have a few more pat -- finds to pay after this and deutsche bank haven't another u.s. -- european banks haven't. this indicates a lot of concern among trading partners and it is a little bit reminiscent of 2008 when banks began to get nervous about their counterparties and it can have a snowballing effect and be an

interesting thing to watch and see what happens. >> we do not know exactly who the hedge funds are. ceos of other banks made clear they are not doing anything like that with deutsche bank. >> turning out to wells fargo and we have been hearing from john stumpf really getting hammered. elizabeth warren made headlines the other day by being very critical and saying that he should be fired from his job as ceo and he is given up $41 million clawed back, is that enough to satisfy congress? >> i think the biggest problem for mr. stumpf is that this makes good theater. politicians like to have time on a camera and there is almost competition to see who could be the most outraged and angry and i think senator meeks one that

competition. they are calling for more hearings. they have talked to have the fire employees to come in and hearings of other bank executives to explain if they do similar cross-selling approaches . it is clear the issue is not going anywhere and they will keep hammering on him and even putting pressure on the board "the board hasn't fired you yet, maybe the whole board has to go." that will raise eyebrows along board members and board members of angst across the country will take notice of the anger represented here. >> i wonder to what extent he has changed his tune or position since the senate hearings. they said something about the clawback of $41 million. beyond that he has not given up any ground of rote -- giving up his role as ceo or chairman of the board. >> t is kind of saying, that is up to the board and i serve at their pleasure. >> he is also director of the board. >> exactly.

and he agreed, it was not exactly a clawback, it was a voluntary forfeiture. nearly that was something they wanted to offer to the house today and say, we are taking this seriously and i am being held accountable. it will definitely not be enough to stop the rhetoric. one thing that struck me is how many members of congress are customers of wells fargo and how angry they are and that is the big risk here. when you see people like the california treasurer yesterday and the subway operator here in new york and the state of connecticut is revealing their business with wells fargo. investment banking and bond underwriting and serving as a broker-dealer for the state is a different part of the business and not a huge part, but i think the symbolism is pretty heavy and my question is how much does all of this anger from public congressike members of

and the treasurer of california -- how much will that rub off on core retail mom-and-pop credit card holders, bank account holders. it is a lot easier in the digital age to switch bank accounts. out -- how angry do you have to be to cancel your wells fargo credit card or switch your banks and not go to them for a mortgage the next time or for a refinance. that is the biggest risk to them, how much does this anger trickle down to the retail customers and caused them to turn their back. wells wasny is that viewed as one of the more stayed of the banks, it was consumer facing and big business is in mortgages as you point out. the other thing is it is not exactly consumer sentiment surrounding the banks is positive generally. i am curious if it is going to

make that much of a difference. if people are choosing between wells and one of the other banks that is in criticizing one of the other many scandals we have seen during the financial crisis and since. --it is sort of like >> i think the issue with this of the mortgage and financial crisis issues were a distraction. this is an easy to use scandal is american's biggest fears identity theft and you are hoping they will protect you from that. and maybe identity theft is too strong of a word, but when that is happening within the bank it really hits home and it is easy to understand and it hits home

to a broader group of people that i think the mortgage issues did. >> deutsche bank shares have extended their losses midday and if you come inside the bloomberg you can see the leg lower in deutsche bank's u.s. shares off by four by 5%. 4.5%. some customers are reducing exposure at the bank and julie and i were looking at the etf that tracks u.s. financials and that has turned negative. , but big move, down .2% that decline pretty much mirrors what we see in deutsche bank. >> within the xlf i just called up an mrr which looks at returns at various stocks and the worst performer is wells fargo, did -- declined at about 1.2% and you etf in real estate,

nasdaq, xl group's, number of insurers that are down in the session today perhaps concerns -- if it is deutsche bank effect, perhaps concerns about their exposure to deutsche bank as a counterparty. that is potentially what could be affecting it here. >> i think it is just so reminiscent of the type of things we saw in the financial ,risis that the ripple effect will more counterparties pull collateral? it is an alarming subject for wall street to digest. >> we will wait to hear if we get a response from deutsche bank itself. according to people familiar with the matter some deutsche bank clients have reduced their position with the bank and are said to reduce collateral on trade and we will continue to monitor this and bring in more expertise as we get it. >> in the meantime thank you for

your expertise. you can continue watching wells fargo ceo's john stumpf testimony on bloomberg at live go and at 2:00 p.m. brad sherman us aftero will join the testimony in washington and it will be interesting to get hers -- his perspective on what has transpired today. >> i wonder if it will end at 2:00 p.m. >> he was one of the gentlemen harshly questioning john stumpf today. this is bloomberg. ♪

♪ >> this is bloomberg, i am julie hyman along with scarlet fu.

we have been watching market take a leg lower as we head into the afternoon. all three major averages down now. i have taking a look at the groups that are on the move at the moment and it looks like utilities are taking at the worst today, down 1.7% and health care 1.2% and real estate taking a hit. the decline in some of the interest rate sensitive groups yields are down today. these are groups that would benefit winning yields are trending lower. scarlet: we know they have been doing well because they have been looking for the yield. one thing we want to mention is that financials are in the middle of the pack on the imap, but it does not capture the movement we saw in the last half hour or so. thatreported by bloomberg a number of funds that clear delivered -- derivative trades with deutsche bank have

withdrawn from their cash and positions held at the bank and that could be a sign of counterparty concern. whether they need to raise capital, sell shares as they try to pay off some of that out loan settlement request by the doj. your looking at deutsche bank's u.s. shares. 5%, and nowby about falling to the lows of the session. shares trading here in the west are being affected and there seems to be something of a ripple effect among u.s. financials of a have taken a leg lower as well. they are trading in terms of corresponding with european banks has been off and on. scarlet: although we have seen recent days with deutsche bank coming a record low and

under pressure whether it was european or asian banks, people scoured on the section completely. julie: we have been talking about one of the other things affecting financials is yields moving lower as well. we saw treasury yields higher on the day. treasury yields have turned negative and that has been a trend recently. six of the last eight sessions saw lower yields. scarlet: remember when people were talking about the new rate regime come i think we answer that question for now. julie: it doesn't seem to be. scarlet: wells fargo ceo john stumpf is still testifying and that is putting a cap on that stock and here he is at the house financial committee meeting hearing. >> are intangible things like wells fargo's reputation and brand important? mr. stumpf: i believe it is.

>> the answer is yes. mr. stumpf: with an explanation though. i believe what is in the hearts and minds of our people is by far the most important thing because they make the rest happen. >> do you think that wells fargo's reputation has been damaged in a material way by this? mr. stumpf: i think there has been damaged, yes. >> what i worry about is the fact the system comes apart if people do not have trust. can you see what i am holding up right here? it is a one dollar bill, the almighty dollar. a piece of people with green ink on it. does this have any intrinsic value? can i.e. it if i am hungry or use it to cut would. mr. stumpf: it represents a promise. >> it is a promise, so it relies on the faith and belief of the american people that this holds a value otherwise it is a piece

of paper with green ink on it. can i not expand that to the banking system. if people get anxious that you do not have money in your bank's to cover their deposits we have a problem. mr. stumpf: there is no question. >> and the only thing that stands between this meeting standingningless and between the banking system is trust and faith. mr. stumpf: trust is the absolute critical element here and we have a lot of work to do to work on that. >> so your investors are equity investors and they accept risk including the possibility that something like this could happen. if you do not want this risk you buy bonds or treasuries or whatever it is. i would implore you as someone i think understands that the market economy is important and that the financial services industry is important. stopld implore you to

focusing on the idea that this is not material. i think we agree it is material and praise work with your colleagues to prepare the damage that has been done to the faith and trust we both have acknowledged is the only underpinning of the system that has done so well by you. mr. stumpf: thank you for your comments and i could not agree more. this is bigger than the 185 and i do not even thinks in those terms of regaining trust. recognizes thew gentlelady from missouri, ms. wagner. wagner: you have come before the committee today to answer for the appalling actions taken by your company wells fargo. i have a number of questions, i want to start by expressing my outrage. outrage that your company was taking advantage of your customers, our constituents, for years and years and years.

i do not understand how your millions could create of unauthorized accounts without someone raising a red flag and if that happened how you failed to act on that knowledge. responsibility to your customers and you failed big-time. your money and wealth in the custody of an organization like wells fargo is one of the biggest displays of -- what are we talking about? public trust. and you and your company have betrayed that trust and taken advantage of consumers in order to meet sales performance goals improvedulently earnings and share prices. this is wrong. this is immoral and this may even be criminal.

bucks you stated, the stops with you. not only did wells fargo and your employees fail customers, but our regulators failed as well. they neither identified or prevented this malpractice from occurring. it was not the occ or cfpb that uncovered these sales practices taking place, but it was in fact the la times, the media that brought the shameful practices to write and wallet is the regulators job to prosecute the banking institutions that break the law, it is our job as members of congress to prosecute the regulators who were in fact asleep at the wheel. and what we know, there is a lot we do not know, is this widespread abuse was occurring as long ago as 2011 and some have said may be as far back as 2007 with 1000 employees being terminated every year for

creating fraudulent accounts, yet this behavior persisted for years without management intervening and even when regulators began to investigate wells fargo did nothing to notify customers and shareholders. your company abused its customers while you have apologized, that apology carries no weight with me. you still have a lot to explain to this committee and to my constituents. how many of your customers have been impacted by your fraudulent activities? i know what the pwc numbers showed. there were 2 million accounts they could not rule out a we are going back and contrasting those customers. within our credit card business we already talked to 20,000 of them. >> how many in missouri? mr. stumpf: i can get you that. >> as quickly as you can,

please. how many customers have been abused in my home state of missouri. ? mr. stumpf: 1191 accounts. >> what portion of these customers were the fraud it after you became aware of the fraudulent activities? mr. stumpf: i do not have a timeline on that. i just know it broken up by credit card. over 2 million customers and you will go back and you can find out if there are more and you do not have a timeline. you have a timeline for the employees that you fired year after year after year, but no timeline of the number of fraudulent accounts? mr. stumpf: i can work on that and get that to you. >> you keep saying that you are going to make it right, those are your words, your going to make it right. i would like to know when. when will these customers be made whole, when will we know

and when will they knew whether their credit scores have been affected? mr. stumpf: we are starting to work on that right now and we have are ready talked to 20,000 of our customers and we are hearing that less than 25% either didn't want the card or knew they had the card. >> 20,000 out of 2 million plus customers, just getting started now. it took five years to identify and rectify the problem and they only just announced their sales incentives will illuminate in october. will customers have to wait five years or longer to get relief? mr. stumpf: 20,000 we talked to so far -- the other ones did not have the bureau involved. we will talk to all of them. >> the chair now recognizes the gentleman from delaware. >> i represent the whole state

of delaware, one of the biggest districts here in the congress and we are a banking center as you may know. we do not have a huge wells fargo presence the could you look in your book and find out how many fraudulent accounts were attributed to people who live in the state of delaware so i know what we are talking about? mr. stumpf: i can tell you how many counts the pwc analysis could not rule out. >> your commitment is to make right each of these accounts in some way or another. mr. stumpf: that is exactly right and let me make sure i have this number right. 4255 accounts. >> my responsibility and your commitment is to make sure each of those accounts -- you will make right by those people. mr. stumpf: we will contact every deposit account and every credit card customer that we can

make contact with. 5065ll try to contact all in your district. many of thew how credit cards will be wanted versus not wanted. >> part of our responsibility in this hearing is to figure out what went wrong, whether people are being held accountable, and what we should be doing going forward. the thing i am struggling with is how long this went on before you were able to stop it and you heard that question on and on stutzman for me as mr. asked -- and i agree with the other congressmen where it is very rare for any -- both sides of the aisle to be on the same page. you know something really is going on here.

aboutbout that question whether this is an institution that is too big to manage? mr. stumpf: as i mentioned to another -- >> mr. stutzman asked the question. mr. stumpf: i think this is a focus problem. >> how can you manage such a large organization and not be able to answer the questions that mr. ellison posed to you about things happening on the front line? how do you control that activity which was really what was going on here? mr. stumpf: we have leaders in those businesses who could answer those questions. i do not have that level of detail. >> i will not be here after the next election and one of the things i worked here since coming is on mortgage finance reform and entered into the record by mr. meeks was a list of wells fargo settlements for

state and federal regulators and there is a whole list of $5 billion plus related to mortgage fraud. could you explain to me how your chain in control got out of hand with respect to these violations? the more impactful on economy than these fraudulent accounts although the accounts are really important. mr. stumpf: i dot -- do not want to minimize our mortgage settlements that we are by far the largest mortgage regulator. >> which is why i asked the question. mr. stumpf: we have made settlements with a number of agencies as other companies in our industry have an hour settlements -- we have had far fewer issues even though we are the largest mortgage regulator. >> the settlements were over representations made which indicated that the mortgages were what they said you were. mr. stumpf: i believe what you

are referring to is an fha issue that we settled in the last six months. >> that was $1.2 million. the franny and freddie settlements to any may. as i understand these settlements, they are over information that was misrepresented to the gse's. >> i don't have that level of the tell right now but i know that since 2009, we've made 11 million mortgages to help people get lower rates and buy homes. and it's been very important to our customers. >> with an institution that large and difficult to manage, how do you make sure these things don't happen on the mortgage side as well? towe have done a lot of work improve their and we have great leaders in those businesses. we are trying every day to get better. >> i would like additional information if you can provided

on the basis of these settlements. >> i will do whatever i can with the team and get back to you. >> the general from kentucky is recognized for five minutes. >> outraged over the unethical and illegal sales practices that opened up over 1.5 million fake bank services. potentially hurting their credit scores through no fault of their own. a major retail presence, but it is likely. they have defrauded them. number of my constituents.

>> i would like to make it clear that the deposit accounts, very few if any had an effect on the .redit -- let me potentially, the accounts in kentucky. there were six and 29 accounts that could not be ruled out. for 600 of my potential constituents, you testified that what happened was not consistent with your culture and ethics. but i have to think about those 600 kentuckians. the constituents that may have had an account opened without their knowledge, the middle income and hard-working kentuckians. it may have resulted in overdraft fees, and committee fees, and it could very well damage their credit score. and again, no fault of theirs. you have said you want to make this right.

i would say that my constituents that have been damaged would say that that alter that allowed that to happen, that is a rotten culture. >> we have been watching the house services committee questioning wells fargo ceo john stumpf about recent fraud that occurred at the banks. the firing of more than 5000 employees linked to that. you can watch the testimony at the bloomberg at live go or bloomberg.com/live. converse and brad sherman that participated in that hearing will join us after the testimony in washington. it is be sure to tune in for that. let's look at what's going on in stocks because we have seen them push toward session lows. definitely pretty dramatic moves. it had been a pretty tight range for the session.

1.55% now for the 10 year. as we and, investors try to figure out what to make of the plan to cut production. you can see the two day increase and energy shares as a group are at little change. higher them still remain , but that's not true. i wanted to check on wells fargo shares. they have taken a leg lower. comes back to what appears to be a single catalyst. deutsche bank. a number of funds that cleared derivatives trades have

withdrawn excess cash. it's a sign of counterparties mounting concerns. the shares in the u.s. down 7%. the selling we are seeing elsewhere, even if it's not directly linked, it seems to have been some sort of trigger. >> we wanted to get more on that breaking news. have said tolients cut their collateral on trades. market their closed a while ago. they cover the european finance industry for us. as we look at the headline that some funds have withdrawn excess cash, what does that mean? doesn't mean they are not

trading with deutsche bank or they are not looking to do as much business? >> the vast majority has maintained positions. maintaining a signal of confidence, there has been a lot of chatter this week about if the bank needs capital. should it need capital? and all those create a certain degree of concern. it doesn't mean they'll maintain other trading businesses with deutsche bank but on the particular business, we look into the excess cash positions. >> what does this signal? there had been a little bit every assurance earlier in the week when deutsche bank succeeded in selling off some of its assets. if you look at the shares, concerns about the capital position has returned.

move, why a limited is it causing so much concern? is it reach recurring fears about deutsche bank? >> it is an indication of what going on. such as the share price, what insurance pays. this is something that tells us about what is going on inside and what the clients are thinking about. it is an indication of what clients have. should make it clear that deutsche bank has responded to these reports that some of their clients have withdrawn positions. a spokesman says they are among the world's most sophisticated investors. macro progress.

when is deutsche bank's strategy right now to get through this low growth and low rate environment? quite analked on extensive restructuring program just under a year ago. we have certain investment banking businesses. to sell the bank in germany. the restructuring plan in progress. that isde much tougher sort of the strategy. they had been sent internally and had brief clients.

they are not an accurate reflection. a signal from the bank internally. >> there is a backdrop coming from the german government. indications that it is not going to step in to help deutsche bank if, indeed, it is needed. it seems the investment community does not believe that rhetoric. has that back-and-forth changed at all? likes the bondholders need to be bailed in before taxpayer money comes. there would have to be some consensus.

i think it needs to be seen. there has been a lot of talk from the investment community that these need to be put aside to inject capital make them fit for lending and growing again. >> how much have the albums come on their own as opposed to something symptomatic of the broader european bank sector? theimf back in june said deutsche bank may be the biggest contributor to risk among systemically important banks. that we are starting to see now. a shortage of capital and a very difficult environment for generating profit and has

bolstered that capital. it involves a measure of the derivatives portfolio which remains among the biggest cost of global firms. the size of the balance sheet is larger than the german economy. all of that obviously, potentially, under strain in the current environment. >> as we watch the shares fall, stay with us. u.s. shares decline. the volume about 25 million shares. the average about 8 million shares. not only do you have that tumble, you have it on heavy trading volume. we will bring you much more on it and the broader market selloff in the united eight. this is bloomberg. ♪

scarlet: this is bloomberg markets. julie: we have been watching the decline of shares and deutsche bank. and also a decline in u.s. financial shares. it's weighing heavily. they pull back i about 1%. some of the individual stocks and goldman sachs. you see all of them down by 1% now. been hearing from the ceo of wells fargo testifying once again before congress today before the house financial services committee. the decline has accelerated. i should mention when we look at the selloff. if you take a look at the

bloomberg, this is s&p 500 had heavilyov which weighted declines today. on the left side of the screen, it was removed. it is a pretty broad-based selloff. >> that the catalyst comes from deutsche bank. ouring us from london is reporter that covers the finance industry for us. remind us how we learned that funds are cutting collateral.

>> this is happening. it has been the last few days. >> my question is the ceo of morgan stanley today said that he had great respect for deutsche bank. hasn't the relationship changed as of yesterday. he reiterated this. as the headline comes out, it drags rotter markets down with it. exit becausefund they see that they have other people that of made the first move. exits? us the gets more

>> we will have to do the and there is a sort of crisis in the firm. not just what investors have been doing. it is what is most directly affected. >> are there any bank that could be benefiting? >> the positions have moved. it is deemed to be most stable.

the very low interest rate environment. >> this was a key term. there is a lack of trust between bank that did business with lehman brothers. it may not be the same as counterparty risk. >> it is a very specific heart of the market. the area we are seeing the counterparties remove.

for the positions that there are assets. >> think you so much for talking us to this story. they are being talked to semiconductors. they say that the deal could be struck in the next two to three months and could value xpi at more than $30 billion. they are up by about 15% and

there has been a lot of activity in the semiconductor business. will bring you further developments. this is bloomberg. ♪

julie: this is bloomberg markets. scarlet: u.s. stocks are declining after session lows. treasury bonds are rising so yields are walling as investors sort through tons of economic data. the open deal to cut output or the announcement to do so, some collateral cutting on trades with the german investment bank. joining us to discuss all of this is head of u.s. equities where he manages $2.6 billion in assets. a lot to sift through here.

as you look at the selling we are seeing right now, a pretty tight trading range up until this point. we saw the bottom fallout a little bit. when you heard about clients pulling their funds? >> they haven't hit the tipping point. the tipping point is when it's spiraling and everyone is moving out. it is just collateral. i'm focused on u.s. stocks so i can't get the real insight into deutsche bank specifically. it makes sense. if one bank has troubles, how does this affect the other banks? inc. you will have a stopgap in the mechanism. the central banks, globally, have been pretty clear. this would be one that impacts the financial system. >> she gives a litany of all

things, economic data in the form of gdp. you have opec in the mix as well. got a challenge right now, weighing all of these things. is anything that is more important in the others. whether to be more bullish or bearish by at? >> those big macro things that do matter are the focus right now with the market. correlations go up and stocks move in sync. the fundamentals are not as highly correlated. risk field to the markets.

the view that it equals safety or low risk is all dependent on what price you're willing to pay. now is the time to be aggressive. it is not as cheap as it was three or four months ago. if i am looking within health care, the more volatile names. the concerns over pricing mechanisms put in place by the government are probably attractive. the underpriced stocks, the mid-cap pne. >> some of the sectors here, this is the rg function and the it seemsector here is to be in the weakening or

lagging phase. too much it getting and leadership are getting expensive? >> people are starved for growth and that is where there is growth. especially on the tech hardware side. dram, 16had in competitors to three when you get margins and tremendous opportunities. tom, thank you so much. we have leave it there. ubs asset management. thank you for your time. we will have much more after the break. this is bloomberg. ♪

scarlet: this is bloomberg markets. we want to go back to the breaking news we brought you

want deutsche bank. for reporting a number of funds that clear derivatives trades have withdrawn some excess cash and positions held there. it's a sign of the counterparty concern doing business with deutsche bank. joining us is erik schatzker who has been covering the banks for us for years. fundswhen we talk about and cutting collateral on trades, what does that not mean? it doesn't mean they are abandoning deutsche bank. some excesstaking cash out, taking positions out. it is a risk management move. they don't want to find themselves in a position. the worst-case scenario when assets got trapped, we are not able to get their money back. that is the worst-case scenario.

they are reminiscent of the way that lehman brothers went. to use the hackneyed phrase, it was the perfect storm. clients withdrew cash and collateral. at the same time, lenders shut off short-term funding. agenthman's own clearing demanded additional powers to seize collateral and cash that lehman had put up at jpmorgan. the financial system has changed since then. the repo market is a fraction of what it used to be. deutsche bank, there's much more collateral.

>> obviously, a lehman event is an uncommon event. how common is it for hedge >> that is ultimately the problem for deutsche bank. in order to maintain a balance sheet that is levered 10 to one or again, equity to assets, 100 clients and your regulators have to have confidence in you. is it a massive loss of confidence? we talking about a small number of hedge funds. a small number of institutions that don't participate. clearing house for

derivatives, the clearinghouse structure for derivatives didn't exist in nearly the same degree. so we had a much larger percentage of clients that might have been used as a clearing agent for example. >> let's bring in dan davies from england on frontline analyst research advisor. i will pose the question now is going to ask erik schatzker, what does deutsche bank need to do if we are talking about a confidence issue? what else does it need to do to regain the confidence? >> it is not so much liquidity stress, which is highly unlikely.

it is effectively funding itself. franchise.ery much a they are losing customer business. they will not be getting the 50-50. they need to put the whole story to bed. components to that story at the moment. the market doesn't think they have enough capital. worriedthe market is about the litigation risks. they just need to raise it and they just need to accept that although it is expensive, at a very low multiple value, it is

necessary. , theeal problem overhanging candidate litigation problems. it is hard to rush that. you will completely capitulate and get results quickly that way. and the price of doing that is 40 billion u.s. dollars, we can't afford it. erik: if this loss of confidence begins to snowball, how would we see that play out? and secondly, let's tackle that first. i will come back to the other question. units that you is global looking at transacting banking.

businesshe corporate of deutsche bank. and that is a very significant part of the funding of the deutsche bank group. i would say that this is something to be taken very seriously. one of the issues the lehman brothers confronted was that collateral that lehman had posted with other institutions began to be haircut. they effectively had to overcome lateral eyes -- over collateralize. my understanding is that most of the collateral that gets posted treasuriesis either

or a low risk instrument. if that is the case, it would seem to me that those instruments are unlikely to be haircut. >> it ishere? securities. those are gone. the other collateral. the answer is the deutsche bank, credit suisse, and other banks gaining huge market share. in 2009-2010. the reason they gained that market share is that they had the banking licenses.

they are not getting banking licenses for that reason. the difference to my mind is that lehman brothers in september 2008 was not a bank. deutsche bank is a bank. they have access to all of the central banks. >> is the government came out and said it would not let deutsche bank fail. what would they have?

feeling is that we would get tested. i almost think a statement like that would actually do as much harm as good at the moment. it was suggest to people the german government believed there was a genuine problem. in fact, it is worth remembering that deutsche bank has a measure for regulatory capital requirement, a 1.2% equity ratio. this is a very long way from breaching the earliest capital ratios. being anong way from actual situation. before we got to a point where any german government aid would kick in. it would have to convert

something like securities. it is probablysomething the gern -- keeping them in reserve. they start raising all sorts of questions about european law. which kind of adds to the atmosphere. at a time when you want to be resolving it. erik: we know that it can be a brutal darwinian theater of pain. justor that matter, not what we've heard from bear stearns but lehman and in some -- if financial actors wanted to conspire against drive thatnk and

further toward failure, what would they need to do? >> it is hard to do that, really. you can drive the share price down and you can put the company in a position where if it needs to raise capital, it can't. you need to put them in a place where they absolutely have to capital and, in order to do that, i've not got a theory. from a capital point of view, it seems to be very hard to capitao do achieve. from a liquidity point of view, these thingsned, don't even need a conspiracy. they have a horrible habit of being self-fulfilling. the question is, to get deutsche bank to a situation where it was

seriously wounded. and then rely on the assumption that they were prepared to be 100 percent of the short-term funding. even then, it would be quite hard to get rid of it. unlike deutsche bank, bear stearns, or lehman brothers, deutsche bank is opening the door. it does lots of things in europe and germany which people would miss if they weren't there. although i can construct situations in which -- [indiscernible] i can't construct many situations where they would carry on doing the same things they are doing today.

>> if you had to advise deutsche bank or expect them to come out with some kind of response, what does it need to do before asian markets open for trading tonight ? extending concerns to stem the confidence lead. >> i think i would give the same ifice that john would give he was still an investment banker. which is that the earlier you raise capital and the more capital you raise, the less pain there is going to be. i would tell him that market, it is 2.5 billion euros. it would be paid in issued stock. to get some large investor. another 2.5 billion.

the market that deutsche bank has 5 million euros. we could see some interesting things in the share price. and you could see some surprising behavior. includes either stories in 2009-2010. some have been looking at of the other financial stocks lower today and the entire u.s. market has taken a leg lower following this. we are painting a lot of really worst-case scenarios here. and yet, there has been a pretty negative market reaction. what is the real exposure here from deutsche bank? >> if we talking about genuine

worst-case scenarios, it is a generalized liquidity crunch. liquidityralized crunch, the exposure is that funding is everything. it is back in 2008. refusing to face each other. there is nothing that safe. erik: our colleague alix steel spoke with the ceo of morgan stanley and deutsche bank was in a slightly better positioned than it was yesterday. but only slightly so. i'm what you do here would james gorman told alex when she asked if morgan stanley had made

any changes to the way it was dealing with deutsche bank. again, this conversation happened yesterday. >> a relationship hasn't changed and we will support them as best as we can. the whole financial ecosystem trading honorably and helping them through this difficult time. k: james referenced morgan stanley's own troubles with counterparties back in the 2008 timeframe. he has lived through this and he understands with going on so long as the other major financial institutions are supportive of deutsche bank the -- the way they say morgan stanley is. is the bank fine? >> it depends on if you are a customer, shareholder, or employee. absolutely, it is fine.

but yes, you can get it and know how these things work. a lot of people in the banking industry and european industry would say a big difference between the position is that they have consequences of its own balance sheet. largely, things are in the hands of regulators. and certainly in europe, it seems to be quite a bit of sentiment that the u.s. department of justice is being particularly harsh on deutsche bank. to what extent do you think deutsche bank is trying to resolve this settlement request from the department of justice? he say they can't rush it

because the only way would be to capitulate. they are under pressure to do something. does this give the u.s. government more leverage? deutsche bank game leverage here? the global financial system is a little bit safer. at least the perception of that is there. >> it is hard to see that for deutsche bank at the moment. >> the global financial system gives me a better answer than the one i gave. and what the german government could do would be to reverse the previous statement on whether it was making representations. the german government could ,ertainly help deutsche bank the american banks have already

settled. dan davies, thank you for your time and helping us understand and get perspective on these headlines. very helpfultzker, as well. check on theet a broader averages as well because we are seeing, a broader settle -- selloff. it's not just bank stocks or financials, but deutsche bank seems to be the trigger. taking a leg lower. 1% it is lower by more than and the s&p 500 has been following suit as well. all of this triggered by the selloff that some of the counterparties have been pulling some of their collateral. we will bring you much more details on this. there is deutsche bank falling by nearly 7% in u.s. trading. this is bloomberg.

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julie: this is bloomberg markets. scarlet: opec may have surprised markets by announcing a plan to cut production yesterday. willa cap on output really matter for oil prices? i took the issue up with the head of global research at citigroup. he noted that if we look deeper, the deal becomes less and less meaningful and more and more rhetorical. i asked him what he meant by that. >> there is nothing gripping in the agreement. it is a target for reduction and it's not clear who has to produce what. a couple of countries have more production than the market can bear. together,d libya nothing tight about them doing anything.

the rhetorical part of it is having an impact on prices, probably. that is firming up the bottom of the range of trading. julie: was that there and -- scarlet: was that their intention gekko >> i don't know. to where wepproach are producing and where the rest of the oil is producing might need to between to little bit. means in thection summer. downction is going to come no matter what. short-termford for purposes to produce less. it is more about framing. what do you mean by that? geopolitical issues? where saudie area arabia and iraq interact with one another.

maybe there was an agreement between the two of them having to do with syria or something else. that's the case that there is a little bit of an irritation in the kingdom during a time where this non-agreement or targeted approach came out yesterday. and maybe they were not happy about that. displeasure, without really doing anything significant. historically speaking, is there any reason to doubt this would be put into action? what kind of example has saudi arabia given us in the past? the saudi's usually do what they say they are going to do. the others don't usually do what they say they are going to do unless they are under threat. traditionally, they had a bigger hold on the countries.

they wanted to control saudi arabia and hard for them to do that. saudis used a threat to increase production to get others to rein it in. wherere in a position they say, we can produce and everyone else's at their production limit. agreement, wean don't have to worry about where everyone else is going. but we have and iraq something down to their current production levels. it's not a threat. scarlet: i like what you said about there is saudi arabia and opec and so often people complete -- conflate the two. shale has disrupted the old regime. right? opec has given up the role as the central bank. is everyone in agreement? >> the problem when people grow

up and get new assumptions is that the analytical community finds a hard thing to do to change it. when the cold war was over, those that lived by the cold war refused to believe it was over. people analyzing the market says the saudi's were doing what they were doing for tactical reasons. i think that's wrong. coming up on bloomberg television, later today, we stick with the oil theme. , this isrman bloomberg. ♪

>> it is 2:00 in new york, and 7:00 in london. i am all of her redneck. -- oliver renick.

vonnie: i am vonnie quinn. welcome to bloomberg. we are live at bloomberg world headquarters in new york. covering stories from san francisco, mexico, and saudi arabia. breaking news. some bank plan set to cut collateral on trade. ceo returns to capitol hill for questioning by a house committee. still looking for answers and berated the banking chief over how he responded. oil prices surging after oil said they have agreed to curb output. is becoming evident. we will examine what it all means for prices. more reaction for doing k