>> it's so obvious. those companies need to be together. it's so obvious. except i guess it wasn't obvious in 2006. but it's obvious the synergies. >> you're doing your captain kirk impression. >> well, a decade ago when these two companies split everyone thought viacom would grow faster. >> everyone thought. we don't want viacom, it's growing too slowly. it will hurt cbs. anyway, julia, thank you. make sure you join us tomorrow. "squawk on the street" is next. ♪ good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer skb david faber at the new york stock exchange. big day for financials and economy as wells fargo ceo goes to capitol hill, again. four fed speakers including yellen tonight. europe's following through on our gains from yesterday. final q-2 gdp 1. just above estimates and oil is flat after that opec induced rally

yesterday, the best day since april. road map begins with wells fargo's john stumpf back on the hot seat today as he heads to capitol hill. there were fireworks at last week's grilling. what can we expect today? >> we'll have the latest news on viacom. national amusements is out with that letter saying, hey, cbs and viacom try to get a deal where both of you get together. shares of pepsi getting a boost on earnings this morning. in a few moments we'll talk to the cfo in a cnbc exclusive. but first, wells' john stumpf heading back to capitol hill after being grilled by senators last week on the bank's unauthorized account scandal. in an hour from now he'll appear before the house financial services committee. during q & a yesterday, committee member lynch complained about bank execs getting off the hook. >> i think there's value in just getting after them. just getting out. i don't care if you get a conviction or not. just get after them. and make their life hell. we got to create a disincentive

in this system at some point for these ceos to do the wrong thing. >> all this came along just as regulators were starting to look at new rules for comp, for clawbacks and the narrative is that boards are getting that message and will try to get ahead of it. >> well, it was first cast lynching from congressman lynch. i think it's an easy pile on. i don't think people realize when you're doing mortgage derivatives -- david, remember how difficult it was to try to figure out how much people -- unwind the derivatives. everybody understanding jamming people with accounts they don't want. unfortunately for john stumpf it is a very easy, very easy so-called crime. i say so-called because it isn't like anyone's been arrested for it. but i think that's probably what i would ask today. who can we arrest? that's the way they should do it. if there was fraud, give us names, we want to arrest them. and then we want to bring them in and we want to find out whether they were told. if it's a common crime, which they did not discuss at all,

which obviously it is a common guy, you bring in se we will not give up the names and bring those in and say give us the names. why they're not building a criminal case if everyone's so confident it's a criminal case. the lynching, no, we don't want to just give them hell. if you really think there was crime, okay, prosecute. get the people in, have them give up the uppers. >> right. >> elizabeth warren and at least two of her colleagues reportedly have written to mary jo white, whether that's going to be criminal we don't know. >> that's civil. there's a couple justice department investigations. i'm just saying it's time to put up or shut up. if you really think this guy committed crimes, then go back it up. don't just berate the guy and make him look like an idiot. >> right. well, you know, the bar is a lot higher for criminal and they don't undertake these cases unless they really think they have a good shot of winning. good old beyond a reasonable doubt is sometimes not that easy to prove. >> right. well, that's what i'm saying. >> i understand. >> you can sit there and say he's a total clown, fraud, who

should be kicked out, or you can prove me something. >> let's talk about that a bit though. >> okay. >> he's not going to be facing elizabeth warren today, though his performance in front of the senate certainly has not been viewed as a positive. >> no. but what would you do? would you say i'm sorry? >> whether he is better, whether he does a more effective job in terms of presenting wells' case to a certain extent. and, jim, i have to tell you that many people believe mr. stumpf will not survive as the ceo. if i'm a director on that board, you know, you've got to be thinking about succession. he's got two more years left. he seemed genuinely torn up about it. >> i am torn up about it because i feel that you can do a pinata thing, or you can give me the names and sue them. get them. put them in jail. whoever did it. >> but you think mr. stumpf should remain as the ceo? >> do i think he should remain as ceo? i wanted him to give back everything. and say, look -- >> but it wasn't up to him, he

said. it's up to the board. >> if i were the board i would have said, listen, actual clawback. this is just forfeiture. >> right. this is unjusted equity. >> because the stockholders will end up paying. they've paid the $180 million. i'm tired of that. dick kovosovich built the modern day wells fargo, why don't we listen to dick? bring in those people that john stumpf told me they gave up to the authorities. and ask them point-blank were you told to do this. and let's see the e-mails. otherwise let's move on. >> make an opinion and that's fine. >> nothing stumpf could say in terms of his own tenure or renumeration to put a lid on this it's just about how many handcuffs we can take out? >> well, i think it's they ought to start doing that. everyone's saying there's big fraud here. if there's big fraud, that's a

crime. no one can prove the crime of the mortgage issue. i'm saying, look, everybody says it's a fraud. put up or shut up. let's see some prosecutions. >> right. >> let's go after the people who did it. that's all i'm saying. >> my point is if you're a member of the board you have to think about succession near-term more than two years, and if you're thinking mr. stumpf is not going to be our ceo do we go inside or outside. those are issues that will impact the stock more than we head on this. >> they have to talk to the shareholders. you know there's a very large shareholder i'd like to hear what he had to say, warren buffett. john stumpf said, no, we talk to all shareholders. >> i don't know. >> i think they'd be ridiculous to presume there weren't conversations. >> right. >> i think you're right. i think all that should happen. i'm just saying i watch all these people, these congressmen, the senators. and they just blast him. and i say, look, if you think it's a crime, prove it. prove it. there's nothing wrong with that. i wanted him to prosecute bankers for mortgages and they told me they couldn't.

it was business judgment. well, this is -- if you think it's fraud, if all these guys are saying it's fraud, well, let's bring people in, see who told them what. were they told by carrie tollstead, by hook or by crook. i went to goldman sachs. the other way. >> you would have been good either way. >> i wanted it so bad. and people don't understand guys that go into the justice department or at least during those days, you had to be top ten of your class to get that job. i was not top ten. but to get a prosecution job like paul fishman in new jersey who is so unbelievably good, like pete barra, those guys are top of class. that's why i say build the case.

unleash, get some subpoenas going. where's the subpoenas? >> nothing yet. >> i don't know. >> what are you like -- >> i'm getting -- >> he just gave me a peter falk imitation. >> i'm like columbo. >> tell me one more thing. >> we're going to bring you live coverage of john stumpf's capitol hill testimony which begins in a little less than an hour 10:00 a.m. eastern time. moving on now to viacom and cbs. we got a letter this morning that was released publicly by national amusements to the boards of both of those companies. of course which it controls national amusements 80% of the voting control, roughly 10% of the economics, both of those companies as expected and as we reported would be the case yesterday. said letter does exactly what was anticipated, namely asking both companies to negotiate a deal because of the benefits that would accrue to the

shareholders of both as a result of their getting together. most importantly, couple of things. our tentative view, says national amusmentes, is that the optimal structure would be an all-stock transaction in which the stockholders of each company would receive shares of combined company the same class as they currently hold. and as importantly at the end of the letter to leave no doubt, they say, to avoid any doubt national amusements is not willing to accept or support any acquisition by a third party of either company or any transaction that result in national amusement's surrendering its controlling position of either company or not controlling the combined company. where does this leave us? well, it leaves us here. you're going to have the formation most likely of special committees of independent directors at both viacom and cbs. and then those independent committees have to make a decision particularly in the case of cbs because it issed larger and most likely though i know a number of hedge funds out there are talking about a reverse deal in which viacom would issue shares to buy cbs.

really? come on, guys, think it through. cbs more likely the buyer there. and the question then becomes does the special committee of the board of directors say this is a good thing? a lot of that may come down to the price. well, at some price certainly it might be a positive for cbs and its chairman and ceo leslie moonves to want to control -- excise me, to run this combined company. not control it of course. national amusements would control it. but that's got to be at a price. one would expect that price is perhaps not a premium if you're independent directors of viacom on their special company, you know because you read it, we're not selling to anybody else. it's not like you can say cbs deal versus this deal or that deal, it's cbs versus nothing. what do you do? >> well, to me it's natural as long as les moonves -- the company with the great leader should be the one in charge. >> i don't think there's any doubt as to who would run the combined company. it's only about structure but really talking about one that's

got 10 billion more than the other -- there's john stumpf by the way walking in through metal detectors to give his testimony. >> why couldn't this deal be done in 60 days? >> it could be. i'm saying negotiations could take place -- >> then why isn't viacom at 40? why? >> what are we listening to? >> mr. stumpf, are you feeling well prepared today? mr. stumpf arriving just been through the metal detector. it's just a week and couple days after his last appearance, an appearance which was widely criticized and since then the bank has tried to improve the image with those forpits of pay. and a lot of questions remain questions he will be having to answer at about 10:00 a.m. eastern time. there he is heading down the hallway towards the committee room now. >> that's wilfred frost talking to us. >> it is. >> he's in d.c. covering the story for us. >> to end our discussion here on this, it's very interesting. it's not something we typically

see. >> no. >> tesla and solarcity may come to mind, of course controlling shareholder on both sides, special committee. how do you actually get a deal done. >> right. shouldn't -- if i were time warner, could i say, listen, i want to keick the tires at viacom? >> no, because there's no chance there will ever be a deal. >> then this is done. >> well, no, it's not done. because, jim, cbs can actually say we don't want to do a deal. and there's no forcing mechanism on the part of national amusements to get a deal done unless you want to go down the road and say they're going to replace the entire board of directors at cbs as well like they did on viacom. >> do that if les moonves doesn't play ball? >> they need to do a deal they feel is in the best interest of their entire shareholder base, not just controlling shareholder. >> people wonder why moonves can't run both like jack runs both. square and twitter. >> because he runs them into the ground. i don't know. >> i think there's an interesting point.

i think there might be conflicts there in terms of their business. they overlap in ways -- it's not clear to me that that could be possible. >> i think it's interesting point you bring up. i think all the takeover talk on twitter is about the idea that jack's not running the company as well and that maybe he's got -- i mean, he's got his hands full there. >> also interesting how both the narrative of iger and moonves, would they bet their legacy on a big new deal like twitter at disney, like viacom and cbs, right? >> need some growth. >> yeah. it's about ten years since they broke them apart. by the way, redstone did that, that's sumner, just because he didn't like where the stock price was and wanted to run the whole thing and didn't want to -- >> took it private, didn't like the valuation 1979. >> bought viacom in a leverage buyout. >> yeah. >> when we come back, pepsi's hugh johnston, company getting a lift from better than expected earnings. good guidance. we'll talk to the cfo in a few moments. of course we'll keep our eye on

stumpf now officially on the hill. and after four straight triple digit moves, we'll watch the futures. back in a minute. the pursuit of healthier. it begins from the second we're born. because, healthier doesn't happen all by itself. it needs to be earned every day. using wellness to keep away illness. and believing a single life can be made better by millions of others. as a health services and innovation company optum powers modern healthcare by connecting every part of it. so while the world keeps searching for healthier

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getting some reports here of

a major train accident in hoboken, new jersey. preliminary reports say there are injuries but no details on how many people might have been hurt. this is a new jersey transit train that apparently crashed into the station causing what looks like severe damage. we're getting some photos from the scene. hoboken is about seven miles outside new york city. we're going to monitor the situation and bring you any details as soon as we get them. in the meantime, pepsico out with third quarter results. our sarah eisen's been covering that all morning and joins us here onset. good morning, sarah. >> good morning, guys. pepsi out with a big beat on the top and bottom line 4.2% organic growth, was a real bright spot. the company also raised its profit outlook. the stock is popping here in the premarket. and joining us exclusively now is hugh johnston, pepsico's vice chairman and chief financial officer. welcome back, hoough. >> good morning, sarah. nice to be with you all on this fine morning. >> we went into the quarter

worried about grocery deflation and perhaps a slowdown in the north american consumer. and then you put out a beat and a raise. what drove the strength? >> yeah. you know, we've seen really broad based strength. our snacks business, beverage business and everyday nutrition business all strengthened in this quarter. actually everyday nutrition strengthened the most. a lot of it comes from the innovation we've been putting out in the marketplace. businesses like our sabra business which used to just be the hummas business, it's almost $1 billion business right now and moving the needle. same with naked juice. terrifically healthy business. we've launched a cold press line of juice. and that's also performing well. maybe most heartening in all of this is the way we're helping our customers grow. we're about 10% of food and beverage sales in north america, and we actually drove about 40% of the growth across the food and beverage space. the fact that in this

deflationary environment we're able to help our customers grow is something we feel terrific about, not just for now but into the future. >> it's a great stat, hugh. what also stood out to me is it appears that the world economy is looking up, at least for you. 8% organic growth in emerging markets. did we just see an inflection point there when it comes to global growth, perhaps a bottom? >> well, i'd certainly be reluctant to predict all of what's happening in the emerging markets, but you're absolutely right. what i would certainly say for us is we saw terrific strength. our china business up 11%. our mexico business up 11%. and maybe perhaps a bit of a surprise to some people, but actually the russia business was up 7%. so as we look at some of our key big markets around the world, we have clearly seen a strengthening. and that's part of what's driving that strong 4% plus revenue growth. >> hugh, jim cramer. when i look at this quarter, i think maybe we should stop thinking of coke versus pepsico.

i do think when i put together all these new super brands, the sustainability brands is what i look at them as, whether it be tea or sabra, you guys are at less than 15% carbonated soft drink where coca-cola is above 80%. >> yeah, jim, i think you're exactly right. clearly in the spaces where we compete directly with coke obviously there's an analogy there. but the pepsi business is only about 12% of pepsico revenue and about 12% of profit, certainly for coca-cola that's a much, much bigger number. but it gets to the fact that we've invested in a set of noncarbonated brands. we've invested in a snack business. we've invested in a nutrition business. and what you see now is the consumer is migrating to those spaces. we're there in those spaces with great brands. and then all of the money that we've put into r & d to create genuinely new differentiated products is causing consumers to choose us. so we do feel like we're a unique company, not one to just be compared to to any company much less the coca-cola company.

>> let's talk about one of these growth brands. actually, two of them. cold press juice, and then tea. somehow finally i've been waiting for the lipton tea to become pure leaf tea. looks like that's happened. are these now just growth categories after years where people just said cold press is too niche and tea is to prosaic? >> yeah, no, i think they are growth categories. the consumer is looking at products like naked a little differently than perhaps they've looked at traditional juice products. they often look at them times as a minimeal. so something like a cold press juice or naked protein juice, that actually sort of serves as a meal between say 8:00 and noon or between noon and 5:00 in the afternoon where you're looking for a couple of hundred calories of a really sustained healthy type of food. the same certainly goes with tea. our lipton pure leaf tea business is absolutely on fire. i mean, we're basically selling out of capacity on lipton right now. and in fact we're launching a

tea collection product that really takes us from premium up to super premium. so the tea category is doing terrifically well. and we're gaining share and really doing well. i think we've got the best tea business frankly in the globe. >> as we go through the portfolio, hugh, quaker not so hot. that's the one weak spot in the report. negative 2% organic sales, worse than the street was expecting. what's happening there? how are you going to turn that around? >> yeah, quaker was a challenge in the quarter without a doubt. i would remind you we actually had some good solid growth in the second quarter and we expect the fourth quarter to be better. some of that was basically deal timing in the quarter. the bigger challenge in quaker is while we're gaining share, and gaining big chunks of share, over a point of share in the oatmeal business, the center of the store in grocery is challenged right now. what we need to do in the face of that, and we are doing, is innovating outside of core oatmeal. you see that with products like quaker breakfast flats which are really on fire right now. and we need to do more in the food service space.

as people eat more out of home, we need to migrate more of our quaker business out of home and in food service. i think you're going to see a lot more to come in that in the next couple years. >> so are you an outlier in an industry that has struggled and continues to struggle with top line growth, or is this going to be an inflection point for that industry? >> it's a great question. certainly one we'll know much more on in about a month. as i mentioned, the fact that we were able to capture about 40% of the growth despite being about 10% of the overall sales of the category, certainly suggests we're going to outperform the rest. but remains to be seen. i guess we'll find out over the next 30 days or so. >> it sure must be an interesting time to -- few months for you to join the board of twitter. can you share at all what it's been like and what's going on there? >> you know, i'm really just a board member of twitter. i'll let the management of that company speak for twitter. i'm really more here to talk about pepsico. >> two issues that i think were

interesting. china looks like you mentioned emerging markets, i think china really just saying it is plain out better. and this concept of guilt free. we've changed good, good for you, better for you, but this guilt free looks like higher percentage than anyone thought. >> you're exactly right, jim. certainly china, our business is getting better and hopefully that means good things for the overall chinese consumer as well. regarding guilt free and nutrition, maybe the best way to think about that is nutrition we think of as things that have lots of positive nutrients in them. so that's fruit and vegetables, that's protein, that's dairy and things in that space. and that's grains. that's about 27% of our portfolio. something that i do think is underappreciated. then take out uncarbonated soft drinks, low calorie or diet

products, look at enhanced bottle water, that takes it from 27% up to 45% of our portfolio. and that's what we call guilt free. those products consumers very much like and are very much on trend. so i expect to see continued strong growth in that space. >> hugh, it was definitely a solid quarter. thank you so much for joining us as always here on "squawk on the street." that is an exclusive with hugh johnston, the cfo and vice chairman of pepsi. of course on the twitter board, no dice on that. >> yeah. >> just a board member, sarah. never forget. >> yes. up to management. >> sarah eisen, we'll get cramer's mad dash and count down to the opening bell in a moment, take a look at the premarket. get that opening bell in about four and a half minutes.

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about two minutes to the opening bell hence we're going to do the mad dash unseated. >> david, everyone buzzing about a mine expo credit suisse put out. moved the market the most and about how mining equipment is bottoming. equipment in 2018, david, this is how caterpillar broke out yesterday. caterpillar according to credit suisse, you ought to own it. and 85 was the breakout technically. i know you always care about the technicals. >> you know i do. i hadn't realized caterpillar is up almost 35% this year. >> david, this is the most loved short other than twilio. >> apparently deutsche bank's a much loved short as well. >> deutsche bank, we haven't gone into deutsche bank.

don't need a bailout, $65 billion bailout, i love that. but caterpillar, david, this thing bottoms. china is getting better. fantastic she said that, but i believe that this mining business had been the -- that was the black hole for caterpillar. and you can't be short cat. it makes no sense. >> unbelievable. cat up for the year 27%, the next closest stock is merck on the dow. and that's 19%. >> no one's talking about that. look, disney and nike, consumer products. >> yes. >> caterpillar, industrial. caterpillar is so back. and the shorts -- you say something bad about cat, every short seller immediately hits you on twitter. everyone. >> some e-mail you directly. >> yeah. >> you know who i'm talking about. >> i do. i tell them to go play eli manning against the vikings. that's what i'd tell them to do. let's get to the opening bell here on this thursday morning. down here at the big board

ringing the opening bell it's medical device company raising stroke awareness. and tabularasa ringing in. oil, yesterday gdp in q-2, claims 2.54 is the 82nd week below 300. >> "happy days" is supposed to be here again, but people are not going out, not going to restaurants, that group is particularly bad. i have to tell you i will say point-blank that the oil news is just an attempt to keep it above 40. because if you look at the actual math of what was coming on between here and year end between nigeria, libya and iran, which by the way we're giving a free pass to whoever they want, you're going to add a million barrels by year end. and what this does is say we're going to try to balance that off. there's no way. there's no way. if saudi arabia wanted to balance this off, they would be

going back so much. the united states peaked in 2015, it troughed earlier this year, u.s. is coming back in terms of early production because of how cheap it is. >> in the permian. >> in the permian. that's where 50% of the new rigs are. so what i'm saying is i think this was a desperate act to keep oil from going to 40. i don't think the saudis will give back all the share. i don't think the iraqis are going to cut back. i think the iranians are going to go through with 4 million barrels a day. i added it up and you cannot get the math that's why they say until november cannot get the math get to 33 million. it cannot happen. it would require saudis to cut back so much that it's chi mer k kal. >> any time there's been a rise in some sort of production cuts, it's not proved to be the case. >> that's right. >> yesterday's rally another sucker's bet? >> they had to do it because this was the inflection quarter for the u.s. in terms of coming

back. it's the inflection quarter, libya producing 470,000 barrels per day two years ago. they fell to 292, they're back to go to 4,000 -- 470,000. nigeria producing 1.9 million two years ago and then the insurgents struck, they are back 1.4, they're about to add 500,000 barrels. iranians about to add 400,000 barrels. so what you're talking about if there was literally going to be an inclusion up to 34.2, they want it back to 33, there's no way. they can't do it. no one is going to take that freeze. and if they do, then russia and the united states is going to take it back. it just doesn't work. i think it's an attempt to try to get it between 45 and 50 again knowing that if you get above 50 the u.s. comes in. that's when -- that is when the whitings come back and the continental resources come bag anything north of 50. so they're trying to keep it in the 40s. that was a desperate act to keep it in the 40s because of how much iran, nigeria and libya are about to start bumping. that's what it is. take it with you.

they got the shorts again. as of friday looked like it was going back below 40 and they managed to resurrect it again. if it was real, they need two things. first, it would start tomorrow, and the saudis would just cease pumping instead of doing 10.6 a day. that's not going to happen. >> no. >> or if we saw actual demand increase, demand fell in the u.s. pretty hard in the last -- demand fell. oil demand fell. these are incredible stats how the demand has gone down for oil. >> what is that attributed to? >> well, there was frankly there's not as much gasoline being used, not as much oil being used, natural gas switching from natural gas liquids. i'm saying we're in a moment where people have to understand oil growth is nonexistent. we're going to be using as much oil next year as we are this year. and that's the missing ingredient for all this. they need more demand. there's no -- there's not an increase in demand. talking about 1% increase in demand. our cars don't use as much gasoline, the chinese cars don't

use as much gasoline. >> "the wall street journal" writing today a long piece about the rise of the electric car. it's not just about tesla anymore, that's for sure. >> no. no. this is a fundamental switch against fossil fuels. these guys are fighting history. they are fighting history, opec, and they just don't have the horses. so you can believe that they can get it to 48, but they need real demand. and they don't have it. real change. secular change. >> fascinating story. especially yesterday in terms of movers today, the two big ones are the earnings we got. not just opec but sent ra. >> those guys are the go-to guy when you can't figure out how to get on the cloud. when you try to go on the cloud you can't say we're going to go to the cloud. you say let's bring in acs

accenture, it's about how to figure out how to have a cloud strategy. they missed the previous quarter by the way. i did a piece on "mad money" saying these guys would never miss twice. everybody retweeted saying they're all excited we are going to come back. this is like a winning football team that happened to lose a given sunday, they lost to the browns last time. and they had to put that behind. that ain't going to happen again. no, they're playing the patriots and they beat them. >> we do have some research as well today. barclays takes apple off of their top pick list. >> yeah, yeah. >> they see this recovery in smartphones being pushed out. >> they like western digital. hey, we take tesla off and put bam-bam's car on. bam-bam being a reference to "the flintstones". >> yes, i remember that show. >> western digital is a storage play for all the video that these video -- all the cameras we have everywhere, you need western digital to store the fi film. people don't just throw it away.

police videos, they have to be stored. >> right. everything else i would imagine. >> look, these guys who love apple, believe me, they still love it the way like you love your sister. okay, you get that? you get that? >> yes. yes, i think so. i mean, i'm trying to read something here. i apologize. >> do you have to have your lineup for the game tonight? >> i'm reading a court order involving -- i was trying to make some sense of it, but i don't think i will be able to enough to at least tell people exactly what it means though it may be a positive for aleer. i'm trying to do that and listen to you. it's not easy to do. >> do you know what in the now means? >> yes, i do. >> what does it mean? >> being here focused. >> be present, be in the present, be mindful. >> i am also trying to process this proposed order. >> why don't you meditate while we're out here. >> sorry. >> don't confuse meditation with mindfulness.

that's another important term. >> he's poking me, carl. >> yeah, he is. >> how much you pay me if i hit you in the face? oh, no, that's another guy. >> how about fitbit's downgrade over -- >> yeah, that was just -- >> to underweight. there's an inventory problem for the charge 2. that was brutal piece. james spark has to respond to that piece, the ceo of -- can i see what you got there? >> you want to read it? you're a lawyer, once -- >> you're not allowed to say you're a lawyer. what is that a proposed order? >> a proposed order from glas dock involving aleer and abbott. >> he's got stuff here. >> he's not playing mine craft. >> no, i'm not. >> you're not trying to bring back zynga. >> is it too early still? >> no, zynga may be coming back. >> i'm not doing any of it. >> listen to me i know you watch the show. >> it's going to require phone calls though, so now i'm completely here listening to you yet again. >> you're in the present. >> is there anything else you would like to do?

>> we're doing some yoga after this and we're going to spin and wear lululemon, abc pants and anti-stink pants and i'm going to get him to where he has to be. he is going to be focused. >> i know what abc means by the way. >> dow's down eight. we continue to wait for more reports out of this train crash in hoboken. we'll get to that in a few moments, but first get to bob pisani on the floor. good morning, bob. >> good morning, carl. mixed market unlike yesterday, today. we did have continuing to deal with the ripple effects of the opec announcements, all the european markets are generally on the upside. some are not necessarily, although you see the oil names here, total, eni, repsol to the upside, they're having a good morning. deutsche bank continuing a modest rebound after record lows this week. commerzbank you see that announced reduction of 7,300 jobs and stop paying dividends. they're down about 1.4%. sectors today we're not getting the big movement in energy that we got yesterday and that's part

of the problem. there's not a lot of movement in energy stocks. up fractionally as you can see here, consumer, discretionary and financials also the lead here. part of the reason is the big names that moved a lot yesterday, exxon up 4%, chevron up almost 4%, you look at the energy names right now, those are not moving much. so exxon, chevron were fractionally on the upside and are now moving as you can see to the downside. there's occidental and petrobras also down. not a lot of reaction for the second day in a row because there's a lot of skepticism out there. you can see what the analysts had to say. gold man skeptical, they're not changing their oil target price. macqueri said sell. latin also with goldman at 43, they're not changing it. macquarie had an interesting point, the change is only going to marginally rebalance things. so they think group production

will stay close to 33 million barrels per day. right now there are 33.2 million barrels per day. so it's not an enormous change if they stay towards the high end of the range that they indicated. there are some very interesting positives here that a number of people mentioned that's important overall. opec is trying to re-establish their market relevance right now. that's certainly a positive. it may and jim referenced this, it may put a floor on the price of oil. i think that's a very good point. and that could be a big help because it could set a target industry for cost cutting. okay, we're going to -- look, the floor is $40, we have to make sure we keep costs at no higher than -- no lower than $40 here. who knows this could help if they had believed that the floor is $40 this could help a drilling recovery in north america. there are definitely wells there that can work at $40 overall. so let's move on. the ipo business continuing to heat up. we have an ipo down here on the new york stock exchange right now. we're waiting for this to open here. and that is med equities realty

trust. this is a real estate investment firm. 21 health care facilities, 19 million shares at $12. that's the low end of the price talk, $12 to $14. we don't have any indications yet. we are waiting for the big one this week to price. that's nutanix, $2 billion valuation. they do computer storage technology 14 million shares at $13 to $15. that's a big bump up from the prior price talk of $11 to $13. remember, this company during its prior round of private fund raising priced at $13.40 a couple years ago. that's private. but still, bumping it up to $13, $15, that's a big nod to all the unicorns out there right now. the dow down 13 points. back to you. >> bob, thank you very much. bob pisani. let's get to the bond pits to check in with rick santelli at the cme. good morning, rick. >> good morning, carl. you know, let's keep this real simple. if you look at 10-year note

yields the entire month of august settle in the 1.50s except one session. the entire month of september as it gets ready to close every day settle in the 1.60s or 1.50s except for two in the 1.70s. this week everything settled in the 1.50s and today we're hovering right at the boundary at 1.59. listen, we aren't going anywhere quickly, but we know what the definition is for support and resistance, low 1.50s, maybe that important bottom in the mid 1.40s on top one and three quarters, that seems to be it. look at the one week you can see, yes, maybe yesterday opec kind of quasi we'll know in november deal did have an effect on stocks, did have an effect on fixed income to some extent. but remember, opec very centralized. u.s. fraccers decentralized. they're going to ramp up. let's see how all that works out, shall we? a one week of bund yelields, th

had a bit of a selloff. the breadth in percentages is different and the selloff worth about two or three basis points. if we look at a spread between the two, this is so critical, we are pushing the limits here of the difference between the yields. and it's very important because everybody's linked at the hip gives us some insight into various aspects of central bank policies. this 1.70 area is crucial. really the high is on that chart right under 1.75. you have to go back to 1988, '89. listen, we have breaking news very quickly here. bund yields have followed all these other yields. let's go to breaking news desk. all right. rick, thank you very much for that. a developing situation at a train station in hoboken, new jersey, this morning. a new jersey transit train crashed into the platform. there are reports of many injuries, but it's unclear how many. service at the station has been suspended while an investigation is underway. ntsb is telling nbc news they're

in the process of gathering information on exactly what happened. nbc news reports that preliminary indications are that it was in fact an accident with no signs that it was done deliberately. our jon fortt was actually on the train behind the one that crashed. and jon joins us on the phone this morning. jon, what have you seen? >> good morning, carl. well, just a lot of confusion, of course, added to the morning commute. i was on the train that was scheduled to come into hoboken right behind the one that crashed. there's an interim stop before hoboken where often some new jersey transit employees will get onto or come off of a train just as part of their shift. and we were at that stop just about four minutes from hoboken when the train did not start moving again. and eventually people on the train were the first to mention that on twitter the word was that there had been a train that

crashed into the terminal. pretty soon people were pulling up pictures on their phones of what appeared to be the train that had plowed through spot at hoboken terminal in between where the trains come in and where the pass station is. you know, from those pick chatu circulating online looks to be a lot of damage. after about 15 or 20 minutes this was right before 9:00 that reports started coming out. after about 15 or 20 minutes they announced -- the conductor announced the train would be reversing direction and going back from that spot where we were close to hoboken back to newark broad street, which is a transit hub where trains come in from a lot of different locations. and at this time of morning a lot of folks are heading to either hoboken or penn station in new york to make their commutes into manhattan. and of course when we got there there wasn't a lot of word of exactly what's happening with the trains, people trying to figure out how to get where they need to get to either by light

rail, get to a pass station or get to penn station, which is what i would like to do. people talking through all sorts of options. but right now not a lot of clarity on, as you mentioned, the exact causes of the accident. many other transit authorities are accepting new jersey transit ticketholders because of the accident as does tend to happen when there are these sorts of delays, carl. >> jon, two questions. one, is there any indication at all how fast the train was going upon impact? and two, is the scene there, can you just describe it at this moment? is it chaos? are there victims in sight? what do you see? >> well, carl, i never actually got to hoboken terminal. so i wasn't in range of actually seeing the accident or certainly any of the victims. all of the information that was being passed around was secondhand at best based on what others were posting on twitter.

now, there were some people on the train who knew people who said they were on that train, and so they probably had a better sense of the veracity of the reports of that train. so really it's just a lot of confusion and folks in new jersey and new york as we know around here tend to sort of band together at moments like this and try to help each other out. a lot of people thankful that they weren't on that exact train that had the incident but trying to figure out where to get to. calm, not chaos at newark broad or on the train that i was on. just people trying to figure out how to get redirected and where they need to go. >> jon, we are thinking of all the travelers and we hope you get to us safely. jon fortt, thank you for joining us on the phone. one thing, guys, it's a quarter to 10:00 on the east coast. if this had happened around 7:30 or 8:00, it could have been a lot worse even though we know nothing about these final injury

figures. >> so our old friend on twitter talking about it from the scene. terrible. >> yeah. we'll just be watching and hoping for the best certainly. as we look at those disturbing pictures. >> right. more details on that. we'll fill you in. when we come back, wells fargo ceo john stumpf is in fact bracing for another grilling from capitol hill lawmakers. he's on the hill. we'll bring you coverage of his testimony and the q & a session. dow relatively flat down 3.5 points. back after a break.

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wells far kboe ceo john stumpf set to for a hearing wilfred frost is joining us with more. >> we saw mr. stumpf arrive here about half an hour ago, he looked calm, made his way to a

waiting room before the hearing begins. this comes just nine days after his last appearance on the capitol. an appearance that attracted a lot of criticism, the main criticism they tried to come out in front of tuesday night. some big numbers in there, $41 million given back by the ceo mr. stumpf. and yet yesterday still turned out to be a bad day for them. we had the state treasurer of california ceasing business with wells for at least a year. also some very tough comments around wells fargo in the committee room that we're going to be heading to in a moment during janet yellen's testimony. and there's a sense even though no criminal wrongdoing has been proven, this could get worse for the company and stumpf until they put a stop to the snowballing negativity around the company. and of course today that all comes down to mr. stumpf and his performance here if he performs well could he draw a line under this? possibly. if he performs badly, will he add fuel to the fire? absolutely definitely. and with that in mind this is possibly the biggest couple of

hours of his career to date starting in a couple minutes, guys. >> we will see. we'll be learning a lot more in a couple minutes, wilfred, thank you for that. jim, before we let you go, what's on mad tonight? >> we've got chuck robbins, cisco, that stock has been fabulous performer of late. a lot is yield but a lot of things chuck's done. i want to point out something you tweeted that's so right, the stock we should have been talking about over and over again, it's not apple. it's amazon. as we used to say on the trading desk, we want to get where it has to go. >> 833 today. >> unbelievable. >> amazing. jim, see you tonight "mad money" 6:00 p.m. when we come back stumpf on the hill. don't go away. because, healthier doesn't happen all by itself. it needs to be earned every day. using wellness to keep away illness. and believing a single life can be made better by millions of others. as a health services and innovation company optum powers modern healthcare by connecting every part of it. so while the world keeps searching for healthier

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good thursday morning. welcome back to "squawk on the street." i'm carl quintanilla with sarah eisen and david faber at the new york stock exchange. waiting on the wells fargo hearing to begin on capitol hill as john stumpf makes a return appearance, this time in front of the house financial services committee. meanwhile, the market's not doing a whole lot. s&p is down about a point, watching this train crash in hoboken, new jersey, regarding a new jersey transit train. and waiting for details about

injuries. our jon fortt is on his way to cover that. meanwhile, we got the fed speak today, gdp finally coming in, the final go-round on q-2. pepsi earnings, a lot of other stuff to watch, guys. this wells fargo hearing though about to begin. chairman and ceo john stumpf testifying before, as we said, the house financial services committee. wilfred frost is there having covered this story from the beginning and can help us raise the curtain. good morning, wilfred. >> good morning, carl. yes, indeed about to start just down the corridor from me. and what kind of questions do we think mr. stumpf is going to face? earlier on "squawk box" the chairman of the committee said that overall the bottom line he wants to know how has this happened, why has it taken place and who is accountable? so big sweeping questions that will be posed to mr. stumpf. and i suppose the reason we still have such broad questions is because last week in the senate hearing he didn't manage to answer them, or answer them sufficiently at least in the eyes of lawmakers. this time we think he'll go further. we've seen already in his prepared remarks a specific

timeline of events, when things were discovered, who was notified, what short term and long term actions were taken in response to it. and of course he will hope, mr. stumpf, that will go some way to answering some of the key questions lawmakers have. the other key question of course from last week was on the topic of clawback from executive pay. we're not expecting quite so much focus on that this week, not least of course forfeits of pay already announced on tuesday night some big numbers we mentioned already $41 million for mr. stumpf himself. but also because earlier, again on "squawk box," mr. hensarling said that was an issue for the board, mr. stumpf's position in the company and his pay was an issue. he's focused on whether laws were broken and those are questions the committee will be focusing on today. >> wilfred, one of the big question marks after the last hearing was when exactly did john stumpf find out about that. do you expect him to be more specific with that regard? and why is that question so important for him to answer? >> yeah, absolutely i do.

and there's a timeline already in the prepared remarks that will answer that question. so i think we will get a specific answer to when he found out. but there still remains a question of oversight at this bank because he only found out two years after somebody at the bank found out. and the issue was still going on two years after he found out totalling somewhere like 1,000 people needing to be fired two years after he discovered this issue. so even if he is more specific on the actions that were taken and when he discovered that wrongdoing was taking place, there's still a question of whether that was sufficient and why changes needed to be made both at the board and at the management level. you know, will the board take responsibility too? we've seen no clawback of their pay. and that's definitely a question on shareholders' minds. >> also questions we brought up the narrative sort of changed over the last few days maybe because janet yellen was on capitol hill yesterday taking questions about the regulator's role if any, why weren't they

there, why in such a heavily regulated industry, whether it was the fed or s.e.c. or in this case this was the consumer financial protection bureau, were they asleep at the switch? >> absolutely right. and as i've said throughout, you know, everyone is united across the political aisle that wells fargo is in the wrong. they are not united about whether the regulator did a great job by finding it or a terrible job by taking so long and extracting such a small fine. that's shotgun where the lawmakers are divided. of course they're not grilling lawmakers this week. the only person in this hearing is mr. stumpf. so that's where we come up today, but it is a question that needs to be answered. and on that note, republican chairman of the committee mr. hensarling of course criticized those regulators this morning on "squawk box," guys. >> here is the chairman starting now. thanks, wilfred. >> -- seemingly let down by their government. fraud is fraud, theft is theft, and what happened at wells fargo over the course of many years cannot be described in any other

way. in fact, a whole host of federal laws were potentially violated including the truth in savings act, the fair credit reporting act, the truth in lending act, the electronic funds transfer act, the securities and exchange act of 1933, the securities exchange act of 1934, and the sar banes oxly act of 2002. all charges must be thoroughly investigated and all culpable individuals must be held accountable. and while the fine wells fargo will pay, roughly 3% of the bank's second quarterly profits, is tiny by wall street standards, the harm caused to consumers and employees is not. to the factory worker who just had her credit score dinged because of the fraud wells fargo perpetrated, the cost is big. to the waiter at the local diner living paycheck to paycheck who had to pay fees associated with fraudulent account, the cost is

big. to the wells fargo employee with kids to support who lost her job because she refused to participate in the scheme, the cost is big. we will make sure those who are betrayed by wells fargo are not forgotten. it is on their behalf that our committee has launched an in depth investigation of, mr. stumpf, of your bank's activities. and let me be clear, today's hearing is just the beginning of our investigation. it is not the end. and as i speak, our committee is gathering thousands of pages of records and documents from both wells fargo and the relevant federal regulators. in the coming weeks we will be questioning wells fargo executives, if necessary i will not hesitate to issue subpoenas because we will do what is necessary to get to the bottom of the matter. mr. stumpf, we don't yet know what you knew, when you knew it and what -- and what you chose to do about it, but we know it happened on your watch. and we hold you accountable for

the answers to why this happened. at last week's senate hearing, you were uncertain of many matters. in the intervening days, we trust that you have had a chance to refresh your recollection, to review your records, therefore we hope and expect you will provide more complete answers today. we need to know exactly when and how you and other executives at wells fargo found out about t s this endemic fraud. we need to know the day who in management is being held accountable. we already know that as far back as 2009 former wells fargo employees started filing wrongful termination lawsuits alleging fraudulent accounts and improper sales tactics were taking place. approximately 5,300 wells fargo

employees were fired over the five-year period for these practices and perhaps as many as 2 million unauthorized accounts were fraudulently opened. based on these facts we will also be asking serious questions of our regulators in the course of this investigation. if occ had examiners on site at wells fargo during a time when these fraudulent accounts were open and the cfpb were conducting examinations, why did it seemingly take the "los angeles times" to expose the fraud? and once exposed why did it take almost 18 months for the cfpb to initiate a supervisory review? today i don't know the answers to the questions. perhaps our federal regulators deserve a pat on the back, but perhaps they deserve a swift kick on the backside. we will find out which. but we launched this investigation ultimately because it is our job to hold both wall street and washington accountable and to protect consumers from the excesses of both.

true consumer protection is the preservation of competitive, innovative, free markets that are vigorously policed for force, fraud and deception. mr. stumpf, i know that wells fargo represents an iconic brand. i know that your bank has a very rich and proud heritage. i also know that you have hundreds of thousands of good employees who had nothing to do with this sorted affair, who do good work in building their communities. but this sorted affair does remind me why i trust markets and i do not trust individual companies. and, mr. stumpf, i regrettably have a mortgage with your bank. i wish i didn't. if i was in the position to pay it off, i would because you have broken my trust and you have broken the trust of millions of others. and it will be a long, long time to earn that trust back. i now recognize the ranking member for five minutes.

>> thank you very much, mr. chairman. and i thank you for agreeing to hold this hearing so that we can examine the fraudulent activity that occurred at wells fargo. mr. stumpf, the word game stop today. borrowing a customer's money without permission is not a sales practice violation. it's stealing. using customers' social security numbers to open credit cards without their consent is not wrongful sales behavior. it is identity theft. so let's call it what it really is. some of the most egregious fraud we have seen since the foreclosure crisis. for at least five years wells fargo pushed aggressive sales goals for low wage employees that were so unrealistic and so unattainable that some felt pressured to commit crimes just to keep their jobs. it may have happened over 2 million times, 2 million times.

in fact, we have two former wells fargo workers, julie miller and ruth ladrenverde today in the audience who have born the brunt of your choices. meanwhile, your senior management, the board of directors encouraged even bragged about behavior amounting to widespread fraud. today, i hope you came prepared to explain both how and why. why you personally told me you were prepared to take full responsibility, we're seeing your testimony in front of the senate banking committee, and there are still answers that need to be given. the testimony that we have witnessed in the senate trying to explain what happened is not satisfactory. and we still do not have all of the information we need to understand how this happened, when the sales culture turned

toxic and who knew about it and when. despite your statements to the contrary, any legitimate investigation shows that executives at wells fargo knew -- either knew or should have known much earlier than 2013 that these practices were taking place. i think that executive -- >> is nbc -- maxine waters talks to john stumpf of wells fargo getting some details on this new jersey crash in hoboken, new jersey, regarding a new jersey transit train. the new jersey transit is now saying more than 100 injured, many of them critical. and one confirmed death. the ntsb is en route. and we expect to get a lot more information over the next couple of hours, as well as i would imagine, sarah, some surveillance video, camera footage of what exactly happened to this train, how fast it was

going upon impact, how many people were inside at the time. but the headline for this moment is the one confirmed death. we're thinking back to the 2013 crash in the bronx which did kill four, not the first for this metropolitan area in recent history. >> we're already starting to see some of the pictures and videos on social media as you point out. not the peak time in terms of rush hour, but certainly toward the morning still people on their commute into what is usually a very busy, busy station. of course we'll wait to hear any details. i can already hear, carl, the political rallying cry of needing more infrastructure spending, our broken trains and roads and infrastructure. but of course we stay glued to this shot in hoboken. >> official word one dead, although our nbc affiliate in new york wnbc now saying three dead, having spoken i think to medical examiners. so that number we hope will not

climb. but our affiliate saying three deaths, new jersey transit confirming one. we'll keep our eye on that and look for more information over the next several hours. again, this happened -- the crash reportedly came in to the -- the train came into the station around 9:00 a.m. eastern on the later side of rush hour. but still early enough in the morning where you had large swaths of people making their way to work. >> and we do know that they are still trying to determine the cause of the hoboken train accident. no initial signs that it was terror related according to nbc news, our local affiliate there citing two law enforcement officials. >> we will get you more information on that as soon as we can. in the meantime, we'll keep our eye on the house financial services committee. john stumpf on the hill. -- i've communicated with you, at times you've been very helpful to my constituents. so i'm very disappointed and we must get to the bottom of this. and i want to be able to receive the documents and information

that we requested from you. i'm told that they have been refused. i think it is to your best interest to come forward with those documents. mr. chairman, i yield back the balance of my time. >> gentle lady yields back. today, we will receive the testimony of mr. john stumpf who is the chairman and ceo of wells fargo and company. mr. stumpf has held a number of senior management positions at wells and its predecessors where he has worked for 34 years. mr. stumpf, would you please rise and raise your right hand? do you solemnly swear or affirm that the testimony you're about to give will be the truth, whole truth and nothing but the truth? thank you. please be seated. let the record reflect that the witness has answered in the affirmative. without objection the witness's written statement will be made part of the record. mr. stumpf, you are now recognized for five minutes to give an oral presentation of your testimony. >> chairman hensarling, ranking member waters and members of the

committee, thank you for inviting me to be with you today. i'm the chairman and chief executive officer of wells fargo, where i have worked for nearly 35 years. it is my privilege to lead this company, which was founded over 164 years ago and played a vital role in the financial history and development of our country. i am deeply sorry that we failed to fulfill our responsibility to our customers, to our team members and to the american public. i am fully accountable for all unethical sales practices in the retail banking business, and i'm fully committed to fixing this issue, strengthening our culture and taking the necessary steps and actions to restore our customers' trust. we should have done more sooner. but we will not stop working until we get this right.

this morning i will update you on a number of steps taken to address our retail bank sales practices problem and make things right for customers who may have been harmed. at wells fargo we have new leadership in our retail banking business focused on ensuring that all team members in our retail bank provide the best service to our customers. secondly, we recently announced the elimination of product sales goals for everyone in retail banking effective january 1. today, i'm announcing that we are accelerating this process and extending all product sales goals effective at the end of this week. we want to make sure nothing gets in the way of doing what is right for our customers. also, we now send out to all customers a confirmation e-mail approximately one hour after opening a savings or checking account, and an acknowledgment letter after a customer applies

for a credit card. we're also making it right for customers. we have begun contacting the customers with open credit cards identified by price, waterhouse coopers to determine whether they wanted these credit cards. it's early in the process, but so far we have reached more than 20,000 of these customers and talked to them about their credit card accounts. fewer than 25% have told us they either did not apply for the card or they cannot recall whether they applied or not for the card. for those customers who want the card, the card will remain open. for any customer who does not want their card, we are closing the account and informing the credit bureaus. any fees these customers may have paid already has been refunded. and we are developing a process to deal with any other forms of

harm. for deposit customers, we have refunded fees and are contacting every single one of them across the country to ensure that we've a full understanding of every customer affected by this problem. in addition, we are voluntarily expanding the scope of the reviews we have done to go back in time to 2010 and 2009. while these issues we will discuss today are deeply disappointing and will take time to repair, they do not represent the true culture and nature of wells fargo. some have suggested the problem was cross selling, but that is not the case. at its core cross selling is all about deepening customer household relationships with products they want, they use and they value. it is not about improper sales practices used to create

unwanted accounts. that's not good for our customers and not good for wells fargo. if we take 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 costs 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 am accountable, i'm referring to the actions our board took at my recommendation to forfeit 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 without salary until the board completes its investigation. i respect and accept the board's decision. and when i say i'm accountable, i also mean accountable for leading wells fargo as a company restores the trust of customers, team members and investors. thank you for this opportunity to testify today. >> chair now yields himself five

minutes for questions. mr. stumpf, to the american people this kind of feels like deja vu all over again. some institution is found engaging in terrible activities. there's a headline, fine and yet no one seems to be held accountable. i mean, let's face it. the fine that's been assessed to you is probably a rounding error again in your quarterly earnings report. so my question is, you know, with almost perhaps as many as 2 million fraudulent accounts over the course of five years, 5,000 dismissed employees. it's just beyond credibility that somebody up the food chain didn't either order this, condone it or turn a blind eye to it. so my question to you is, who is the highest ranking official at wells -- who's the highest ranking person in the management team who's been dismissed

because of these activities? >> well, thank you, mr. chairman, for that question. as you know, within -- or maybe you don't know, within the 5,300 there were managers and managers and managers of a manager, we are doing a full review -- >> were these branch managers? >> yes. about 10% or more were. >> nobody above the branch manager level. >> there was managers of the branch managers and a manager of those within the line of business. but we're doing a full review of other control functions within the company that process has already begun. the board is going to be involved. management will be involved. as i mentioned -- >> when will this be complete? when will your own internal investigation be complete to hold management accountable? >> i can't give you a specific timefra timeframe, mr. chairman, but i will tell you we're moving in that directly. and we're going to get to the bottom of this. >> okay. well, anybody at the bank

holding company level being held accountable? >> people will be reviewed across the board at holding company activities, corporate activities, anybody who is involved in promoting or supporting this behavior will be held accountable. >> but holding people accountable, isn't it true, mr. stumpf, in the settlement agreement that wells entered into the into with the occ, cfpb and l.a. city attorney's office, no individual admits guilt. is that part of that settlement agreement? >> i believe we either did not admit or deny. so the facts there are the facts we agreed to. >> mr. stumpf, 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 i believe your bank has shared with us show that 939 employees were terminated from the retail

banking sector for improper sales practice in that year. does that comport with your memory? >> yes, it does, mr. chairman. >> okay. so 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 an $85 million civil penalty? is that true? >> mr. chairman, that's true. that was in a different business area, but that is a true statement. >> it was in a different business area, but i will read from the consent order, quote, wells fargo's internal controls were not adequate to detect and prevent instances when certain of its salespers personnel in o to -- receive incentive compensation altered income documents inflated perspective 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. so also as i understand it, the fed required wells fargo to submit a plan to investigate and to change policies and procedures. so i think you testified on the senate side that you were not personally aware of the problems in the retail banking division until 2013. surely you are aware of the problems in the mortgage lending division in 2011, correct? >> that is correct. and, chairman -- mr. chairman, we shut that division down. that was even shut down -- >> but if you saw the problem in one area of the business, why didn't you thoroughly investigate in the other? >> there's no question, mr. chairman, we should have done more sooner. >> it just seems, mr. stumpf, that five years later your bank is being fined for exactly the same transaction. and again, it just feels like

deja vu all over again. and i hope and trust but please tell me that these fines are not simply a cost of doing business for wells? >> mr. chairman, it's not a cost of doing business. this has been -- this is a serious, you know, trust issue with our customer. but i also want to say there's 268,000 people who came to work this morning at wells fargo trying to do their very best to serve customers. and they do it wonderful every day. and i don't want our culture to be defined by these mistakes. and we take accountability. >> i understand that, mr. stumpf. but it appears to be a little late. and particularly when you get caught doing it five years ago, you get caught doing it once again, somebody has to be held accountable. i now yield to the ranking member. >> thank you very much. mr. stumpf, you have said repeatedly that you were not

aware of this widespread fraud in your bank until late in 2013. and it appears that there were activities going on that indicate you may have known much earlier than that. for example, in 2007, just months after you became ceo, the sales quality manual for the community 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 before opening account. and so, am i to understand that you discovered that there was something going on and there was a need for you to do this? that manual also said that sales practices that showed, quote, questionable activity, unquote, would be sent via 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. and 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. and so it looks as if you certainly knew in 2008. what's more, i have here a consent order with the fed from 2011 that puts your company on watch for sales quotas and compensation schemes that pushed employees to break the law. does this sound familiar? >> ranking member, i acknowledge that we had a 2011 order from the federal reserve. and i think we've always known any sales organization you're going to 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 that, you know, you put people to work every day and mistakes are going to happen. it was not until 2013 when i learned that this problem had been growing. it 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. so these are things we've been working on. all of our strategies around training team members which get two weeks of classroom training before they go out into a branch is about doing things right, about ethics. and i'd also just want to remind the committee that there are -- the 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. in fact, our customer loyalty

scores now are the highest they've ever been in our company's history. >> let me just point out some other activities that should sound familiar to you. while you were under the consent order for the mortgage arm of wells fargo, this fraud was surging in the retail arm of wells fargo. but you didn't connect the dots on these high level trends across the bank. do you or didn't you know in 2011 that perhaps your salesin ce -- incentives were driving this fraud? >> congresswoman, i knew that -- at least i know today that we should have done more sooner. but maybe and not only maybe, some of our people -- and again, it's 1%, but that's a big number for a big organization. any time -- any one time we have

100,000 people in our branch network, and if 800 people for whatever reason either 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's why we're removing sales goals. they'll be gone as of this weekend. in fact, we don't even think they're an important requirement anymore for us to continue to grow. >> mr. stumpf, some people assume that you change your customer agreement to add force arbitration clauses, checking accounts and that these clauses prove to be incredibly helpful when you use them to dismiss multiple customer lawsuits. is that true? >> that's not true. i actually think arbitration does make sense. but in this case for any customer that might have been harmed in this situation, we're also paying for a mediation process so they have a mediator. >> all right.

thank you very much. my time is up. and i'll get to this later on, if i can. thank you. yield back. >> time of the gentle lady has expired. the chair now recognizes the gentleman from texas, chairman of our financial institution subcommittee. >> thank you, mr. chairman. mr. stumpf, here we go. you serve as both the chairman and ceo of wells fargo, is that correct? >> congressman, that is correct. >> and as you're aware section 972 of dodd/frank requires, the reason why the issuer has chosen to allow the same person to serve as the board chairman and the ceo, this wells states your dual role is a result of extensive knowledge in covering the company and provides the most efficient leadership of the board and the company. mr. stumpf, do you think it's a good idea for the chairman and to be the chairman of the board and the ceo?

>> thank you, congressman, for that 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 that board. the independent directors and the lead director help set the agenda for the boards. they always have meetings that are executive session without me. and as you probably read about what happened this weekend because we filed an 8k yesterday about actions that they took as an independent board. and i was not part of that. so the board acts quite independently. >> so in these current situation is that you've -- you've recused yourself from board decisions on

this situation? >> congressman, you're right, i have either recused or i've not been invited. i'm not part of that. and i serve at the pleasure of the board. >> so you give me a good idea of how your board's structure. but the original question was, do you think that's a good idea for the ceo to be also the chairman? the board and the stock shareholders, customers be better served if there was some separation in that area? >> thank you. for our company, i believe we have the right structure. but again, i serve at the will of the board and the board can make a decision on that. >> now, mr. stumpf, you testified that you learned of these violations some time in 2013. when did you inform the board that this was an issue? >> yes. so the board had high level

ethics or high level activities around people who left the company involuntary, terminations, really through the 2011 to 2013 timeframe. after we learned -- >> will you repeat that? you said the board was having some discussions as early as 2011 about this? >> i was saying that the board from a 2011 to 2013 would get reports at a committee level at a high level about ethics lines, requests or information at not a granule level but at a company level. >> but you didn't fiepd out about it until 2013? >> in 2013 i became aware that there was an issue in the southwestern part of the country. and by 2014 then -- this was

late in the year, by 2014 we started to provide more information to more committees of the board. and then by 2015 the board had a -- so as ceo when did you tell the board we have a problem? >> it was in 2015 that we had a full report. again, 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. >> did you ever disclose this issue on a 10-k filing? >> we have -- our 10-k -- all of our k or q filings are facts and circumstances what we knew at the time. and as recently as our second

quarter q this year when we use our disclosure teams and our compliance teams to look at this issue, the facts and circumstances we believe were not material. >> well, i think i just -- you know, i'm not for congress setting the corporate structure, but i think there's some question here whether in this particular situation whether the company would be better served with those roles being separated. with that i yield back. >> time of the gentleman has expired. the chair now recognizes the gentlelady from new york, miss maloney, ranking member of our capital markets subcommittee. >> mr. stumpf, we know now that whistle blowers first contacted the consumer financial control board about the fraud at wells fargo in mid 2013. and you said in your senate hearings last week that you first found out about the fake accounts in late 2013.

and the "los angeles times" article about the scandal was published in december 21st, 2013. i have right here your form for filing, which i'd like to submit to the record. >> without objection. >> that shows that on october 30th, 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 dump $13 million of wells fargo stock, which you did 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? >> thank you for the question. first of all, the vast majority of our people go to work every day -- >> excuse me, that was not my question. >> i'll get to -- >> excuse me, 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. >> i did not sell shares at the time because anything related to sales -- >> but your form says you did sell the shares. >> i did sell the shares. today i hold four times as many shares as i'm required. >> did you sell these shares or not? >> i sold those shares, and i sold them with proper approvals with no view about anything that was going on with sales practices or anything else. >> well, it seems very, very suspicious that your largest sale was right after your $1.8

trillion bank was turned into a school for scoundrels. you acknowledge that your bank fired over 5,300 people who got caught willfully defrauding your customers. and a recent lawsuit alleges you fired even more people because they refused to willfully defraud customers. and then you blame the low level people, you fired them. you make profits then you dump the stock. so i just have to say that it seems that when you found out the fake accounts, instead of helping your customers you first helped yourself. so moving right along to the next question. mr. stumpf, you've said that wells fargo is conducting a review of all accounts going back to 2009 in order to

identify any scam accounts. but last week in the senate hearings you were asked if you would extend the review period to before 2009. and you refused to commit to extending the review period back to even earlier. so if you were -- if you were 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? >> thank you for that question. we have agreed with our regulators to go back to 2011. we voluntarily said last week that we'll go back to 2010 and 2009. i've told our team to leave no stone unturned. and if we find a situation where a customer is harmed that goes back prior to that, we will make

it right for that customer. >> thank you. because i have the evidence right here. and i'd like to submit to the record a court case in montana in which six wells fargo employees were fired. among other things ordering debit cards for customers without their permission, which is clearly illegal. and according to the court documents these illegal sales go back to 2007. >> without objection. >> so now we have evidence of illegal sale 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? >> again, congresswoman, we're going to go back to 2009. if we can find -- and we're going to contact every customer -- >> but this is evidence that it went back to 2007. my question is, and we thank you for going back to 2009.

my question is, we have clear evidence that it goes back to 2007. will you live up to your commitment of helping your customers that were defrauded with clear evidence back to 2007? >> we will go back, and if we find any evidence of any customer that was harmed to 2007 through our review, through 2009, we will take care of each customer. >> the time of the gentle lady has expired. the chair now recognizes the gentleman from north carolina, mr. mchenry, vice chairman of our committee. >> thank you, mr. chairman. so i have the honor of representing suburbs of charlotte, north carolina. north carolina had an incredible banking culture over decades. you had in charlotte first union, home grown bank, great reputation. went through challenging times in the economic crisis, as you well know. but before that time they teamed up with a bank based in

winston-sa winston-salem. wakovia. as you know in acquiring what was then wakovia, first union and wakovia, your pitch was that your culture from california was very similar to this north carolina culture, this banking culture. you know, as you well know, john grimes midland, great chairman of wakovia, sort of imbued in wakovia that a banker is a civil servant as well. there's this obligation to society they have in their community. you eulogized it, paid tribute to that culture. >> yes. >> i want to think about that culture. because what is so sad to me is that pitch of culture doesn't conform with my experience with my constituents in north carolina. it doesn't conform what i know about first union, what i know

about wakovia. and this cultural pitch that you had in acquiring them in the financial crisis. i know you have huge head count in north carolina, we're grateful for it. but what's sad to me is the impact of this on them and those employees you have in north carolina. so i wanted to look at your code of conduct that you tout. so let's look at your code of ethics in business conduct. and you said 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. the code of ethics in fact says our code applies to all team members including officers as well as 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. and finally, it's critical that

all team members have a solid understanding of our company's code of ethics and business conduct and understanding that noncompliance with the policy may result in disciplinary action up to and including termination of employment. you clearly have failed. you've clearly failed in your own ethical standards internally. you have broken and your company's broken longstanding law. you've broken longstanding ethical standards that you have within your company. this has nothing to do with this debate about dodd/frank or anything else. you've broken a longstanding law, and you've defrauded your customers. how can you rebuild trust? how can you rebuild trust? and how can you 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 that? >> well, thank you, congressman.

the culture of the company is strong. and i don't -- i know -- >> it's really hard to say that when you're before congress for the second time. and behind you was all the settlements you've had for problematic relationships you've had with your customers by taking their money, right? counter to the law. counter to your ethical standards. it's great you say you have a strong culture, but why are we here today? how are you addressing that? >> yeah. we are addressing it, first of all, with respect to culture. we have 268,000 people who've made their life's work and careers out of helping customers. there's people today who out -- >> that's why i raise this in the way that i do, by severe disappointment. severe disappointment. that's all. you broke the law. we make the law in congress. this is not new stuff that all the sudden congress changed some rules and you can't have your

employees create fake accounts and take fees from customers unknowingly unwittingly. that is, that is -- there's never in human history when that has been an ethical okay, right? so for you to say the culture's okay, this seems to me that you're just tone deaf to this. the final thing you need to think about, and your board of directors need to think about is this. the impact you have is not simply on your institution but the wider conversation on how my consumers can access credit. and the implications on what you've done and your leadership has done has this broader societal impact that is very negative. >> time of the gentleman has expired. the chair now recognizes the gentle lady from new york, miss velasquez. >> thank you, mr. chairman. mr. stumpf, now that you were on the senate side and you testify

ed and the senators asked you whether or not the 5,300 wells fargo employees that were fired for their misconduct, how many of them were fired because they failed to meet sales quotas? at that time you say you didn't know. now that a week has passed and you have had a chance to consult your records -- >> q & a continues with john stumpf in front of the house financial services committee this morning. in the meantime, want to get you some details on this train crash in hoboken, new jersey, this morning. at least three people are dead, more than 100 injured. some of them critically after a new jersey transit train hit the terminal building in hoboken around 8:45 a.m. eastern time this morning. hoboken is just across the hudson river from manhattan, was full of rush hour commuters going to work in manhattan. officials still trying to determine why the train went

through a bumper stop at the end of the track coming to a stop at an area between the platform and the inside of the building, bringing down part of the metal shed roof. very early indications however are that it was an accident or the result of operator error and not something deliberate. that's according to law enforcement sources quoted by wnbc, our affiliate here in new york. one passenger in the first car of the train told the station it felt like the train didn't slow down at all as it came into the station. the national transportation safety board is sending a team of investigators, but again, sarah, the headline here 100-plus injured, many of them critical, three confirmed dead and some still trapped. >> clearly emergency vehicles of all kinds have been at the scene trying to help people there. we should make the point, you mention that hoboken is right across the hudson river from new york city. it's a key transit point. it's a key transfer point. it's where people get off the

train and take the path train that goes directly to new york city. so a lot of commuters obviously. the new jersey transit says that it carries 200 million passenger trips annually. it also operates a bus service. and clearly this was by rail. but it is a clearly this was by. but it is a major hub, a major transfer point with a lot of people. we await details of course as we get them on conditions. >> go teams obviously from the ntsb work quickly, and you would expect a press conference perhaps this afternoon, hard to say, but they tend to communicate rather quickly with the press after an accident. so we'll be looking for that for sure. meanwhile, the fierce questioning of john stunt continues on the house. let's get back to capitol hill. >> -- may have spread to the small business side. where your front-line employees under similar pressure to cross sell products to the banks, sba-7a clients. >> first of all -- thank you,

congresswoman. we are the nation's largest small business lender. i'm very proud that we do a lot of work helping men and women across this country start businesses and so forth. that's a very different business, and i don't know of any product sales goals which, again, we've eliminated in our retail bank, in that business. it's a very different business. >> so the 78 program is just a fraction of your overall small bitz lending portfolio. can you provide us today with assurances that these illegal practices did not affect any of your small business clients at wells fargo? >> i don't have that information in front of me. i'm happy to work with my staff or team and get paback to your staff and cooperate on that as best i can. >> well, so given the fact that you lack the leadership to give us assurances that this was not

the case, i'll be writing to the sba administrator so that they could review all the 7-a portfolio to make sure that we protect small businesses as well as taxpayers. my next question to you is, now that you have decided to end sales goals and financial rewards, have you considered raising the salaries of your retail banking employees in order to make up for this loss in compensation? >> yes. we are working on a new incentive program. it will be out by the first of the year. and we want to make sure that our team members are totally aligned with our customers, and we want to make sure that compensation for our team, again, who the vast majority do it right, are not hurt in this process. >> i know that you're not aware of, but it's very difficult in

this country to live with a $25,000 salary. >> time has expired. the chair recognizes the gentleman from new jersey, mr. jarrett, chairman of our capital market subcommittee. >> thank you, mr. chairman. mr. stumpf, let me start by making a few observation, then i'll end with a couple questions. first and foremost, i find it, as we all do, extraordinarily troubling that as i look through the history and time line of the scandal, a time line that stretches over years, you see as has already been testified to, 5,000 employees were dismissed fir their involvement in opening unauthorized accounts. was also interesting and troubling as the firings did not happen all at one time. my understanding as we've heard already today, roughly 1,000 employees per year, '11, '12,

'13, '14, and 15, extraordinary that wells fargo did not move the stop those activities after the first 100 or 500 or 1,000 employees were fired is beyond me. the fact it was allowed to go on and on for years is apparently a failure of corporate governance and a failure, quite candidly, of your management. for your management to do what is foremost, protect the customers, who have trust in you. what concerns me more, is it appears most of the 5,000 employees who were fired were low-level or midlevel employees. i think the chairman found out the highest level was a branch manager. and it doesn't even include those that resigned due to culture at wells fargo. as i say, meanwhile, no, to the best of my knowledge, senior executives have been held accountable in the same manner that the lower-level employees work. would not be surprised if a number of those people ended up losing their homes, going into

massive debt after they were s dismissed. no, i'm not defending their actions, just making the point we have a problem in this country where it would seem, as we've seen previously, that the well-connected and the well-connected on wall street or the well-connected here in washington, the elite, if you will, in washington or wall street, seem to be playing by a different set of rules while everyone else has to play by another. i know you just lost reportedly i hear $41 million of your salary. and if i understand that correctly, that's only a quarter of your pay over the last decade or so, so you will forgive all of us if we don't really feel that sorry. second point i'd like to make is under dodd/frank, wells fargo remains fully eligible for taxpayer bailout going forward under title 2 of the law should you run into trouble going forward. taxpayers have already spent a lot of money bailing out poorly run wall street firms over the last decade. mr. stumpf, i hope you're aware

that the anger now directed at you by my stilts and others around the country isn't just over the actions of the employees, it's the fact they seem forever on the hook toll underwrite whatever kind of risky or in this case fraudulent activities wells or other large banks engage in. fortunately, earlier this month, a side note, we passed a bill out of this committee, the choice act, which will ensure that if wells fargo does run into trouble again, its shareholders and management would pay the consequences and the taxpayers will no longer be on the hook. third and final point i'll make, i know they're not here, but once again the financial regulators more than apparently were completely asleep at the wheel as this massive fraud was occurring. if you look at one of those, the cfpb, they have one job, only one job in our regulatory framework and they completely blew it. it took a reporter from the "l.a. times" to undercover what

was going on at wells fargo, so i hope my friends on the other side of the aisle will keep that in mind as they may pat the cfpb on the back for a job well done. in the time remaining, securities exchange act requires a public company to keep disclosures in place required to the ceo and the cfo to attest to financial statements. you refer to some of that. are you saying that all those quarterly reports you're filing, the informs you had in 11, 12, 13, and 14, none of that information was material? >> at the time with facts and sirks we followed accurate reports and did not believe it was material. >> when you got the pricewaterhousecoopers analysis, when was that, by the way? >> late in 2015, early '16. >> and as soon as you had that, has that been filed as a material statement? >> we've considered the facts and sirks and we believe that not to be material.

>> it's not material. why not? >> well, the pwc material looked at 93 million accounts that we opened over four years. they could not rule out through a large data net analytics about 1.5% of those accounts. that's still a lot because of the size of the organization. >> well, that to me, mr. chairman, if that's not material, this occurring over a five-year period of time a systemic problem in the organization, i don't know what it is. i yield back. >> time has expire pd. the chair recognizes the gentleman from california, mr. sherman. >> mr. chairman, the american people need an assurance that this cross selling mania that s that has afflicted wells fargo is not to be found at the other banks. and i would usual you to have hear wrgs we hear from the ceos of b of a, citi, others, and

until then i hope that you would join with me in a letter of inquiry to ask what new account opening quotas they had for their bank material, how many people they fired for not meeting their quotas or how many people they fired for opening phony accounts. we had wells fargo before me but i don't think you should be alone in this joyous experience. your colleagues should at least come forward with some assurance. we're now engained 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? >> virgin american. >> and when you came to the

senate? >> i think it was united but it was one of the two. >> it shows wall street's learned something. thank you. >> thank you. >> now, you've got these forced arbitration clauses in your agreement with your customers. you've said, oh, they can have mediation too. some of them want their day in court. are you going to hold them to 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're caught up in this you get your choice whether you have arbitration or not? >> thank you, mr. congressman. i believe in arbitration. i think it's a fair way to -- >> but your customers may want something else. are you going to deprive them of that? >> no, we're not. we're going to pay for a mediator and -- >> if they want their d