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tv   Squawk Alley  CNBC  September 29, 2016 11:00am-12:01pm EDT

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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 day in
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court, are you going to screw them out of that? >> this is not -- we're taking this very seriously. i told our people -- >> will you let them go to court if they want to go to court? yes or no. >> we're going to -- no but with an explanation. >> no, but. okay. thank you. that's a no. this sham was not an attempt to steal a few million dollars in fees from your customer, although that's important. because you could say that few million dollars wasn't material. what was material is the price of your stock. you opened 2 million phony accounts and then went and told -- and it had to be material because you were brackibrack i bragging about it to the people investing in your stock, that you had higher penetration rates, more accounts per customer, that the number of banking customers that had credit cards had grown from the mid-20% up to 42%. so it had to be material. you were talking about it. the peak firings according to your own documents was in 2013, so you knew you had a problem
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then. >> correct. >> why didn't you tell shareholders our penetration rates are phony, our new accounts are phony accounts, and when we tell you we're deepening our relationship with our customers we're doing so by putting them through the ringer? what internal audit system did you have that assured you that you didn't have a material problem? >> congressman, i have to push back here. this is the behavior of people that we found that we did not want and the vast majority of everything we do is -- >> mr. stumpf, you were firing, according to your own documents, the highest number of people in 2013 but bragging about your penetration rates, the number of accounts opening in 2014. so you knew it was material to shareholders and you knew it was a phony number that you fired people from -- for falsifying. >> congressman, may i just have a second?
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because we've gone back and looked -- the 2 million accounts could not be ruled out. we don't know if those are good accounts or not good accounts because we've already looked at 20,000 credit cards -- >> you're claiming my time, sir. you fired 5,300 people. you took 5,300 good americans and turned them into felons with a system that you created benefited from and drove your stock price up by bragging about your levels of new accounts. >> congressman, i have to disagree with that. >> i'm not surprised. we have institutions that are too big to fail. in 2008 we found they were too big not to bail. the eric holder has told us that they are too big to jail saying that he fears for putting them -- for bringing a criminal indictment. we now learn that they're too big to manage, too big to regulate. it's time to break them up. >> time of the gentleman has expired. the chair now recognizes the gentleman from missouri, mr. lukemeyer, chairman of our
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housing and insurance subcommittee. >> thank you, mr. chairman. today we're here to confront a total travesty in the financial market. consumers were failed on all accounts. the financial institution with whom they trusted their family's finances failed them. federal regulators who were charged with overseeing their protection failed them. the federal regulators failed to stop the ripping off of consumers and consumers lost. slapping a bank with a fine isn't going to go away. only 5% of that will go back to consumers who were fined. mr. stumpf, giving back your bonus isn't going to make that go away. more rules and regulations aren't going to make this go away. regulators sat at that bank for years and did nothing. meanwhile, thousands of employees are being fired for bad practices yet nothing was changed to address the issues. the regulators weren't doing their job as well from day one. instead, the institution pushed forward with the whatever it takes approach to meet sales
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targets and regulators sat idly by either oblivious or uncaring of bad practices even after reported in the news. to top it off, regulators neglected to fulfill their enforcement obligations after the fact, instead opting for a quick settlement and waiching right for additional actions so they wouldn't be viewed as late to the game. wall street needs to be held accountable, but so does washington. my question, mr. stumpf, how many regulators do you have in your bank on a daily basis? >> i don't have precise -- >> another contentious hearing on capitol hill for john stumpf, the ceo of wells fargo. we want to update you on that situation in hoboken where a commuter train has plowed into the station. our very own courtney reagan has made her way to the scene. what can you tell us? >> reporter: good morning. there are a lot of emergency personnel here, a lot of moving parts. here's what we know so far.
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a commuter train at 8:45 a.m. did crash into the hoboken terminal. more than 100 are injured, some critical. three have been reported as dead so far. the ntsb is taking the lead on this investigation. and so far preliminary reports from officials say that this does appear to be accidental or operator error. there is still a lot to be done. some of the firefighters and police officers are moving around to try to better assess the scene. we are about as close as we can get, but if you can pan this way, bob, you can see the emergency personnel and the train station is beyond a little bit where you can see and that's as far as we have been able to get so far. again, three passengers have died. there are more than 100 that are injured. 20 ambulances on scene. this does appear to be accidental or operator error, but there's still a lot of information left to be gathered. back to you.
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>> thank you for the update. we are also awaiting a new jersey transit official to give us an update. we do want to take you back to that house financial services committee hearing where john stumpf, ceo of wells fargo, is getting grilled over phony bank accounts. let's listen. >> they moved the compliance -- or the concern for this issue into a compliance area. by 2012 they were reducing goals and doing more ethics training. by 2013, corporate resources were brought in. and we worked with the occ. in 2014 more reductions involved. in 2015 -- and the occ was also in 2013. this does not represent the culture. in fact, we do an outside company -- >> i respectfully disagree with you. i've been in business like this all my life. you can't tell me when you have
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to fire people year after year after year after year that there isn't a problem. for a year or two, that's one thing. but four or five years? your own testimony says this. i have another question. i need to go on. in my examining days there was -- i examined a bank one time and found a material skimming money out of her cash drawer. took it to the president and he said, well, she's a good employee, as long as she keeps it to a minimum, we'll be okay. my jaw hit the floor. this reminds me of that situation. as long as they keep it to a minimum, i think we're going to be okay. my comment back to him at that point was have you reported this to your blanket bond insurance company that has a clause on it? do you have a blanket bond or are you self-insured? >> we have a fidelity bond and that's where we draw a line. >> when did you report this action of your employees to your blanket bond company? >> i don't -- i don't -- we have a group that does that. our corporate relations with your legal team.
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and i can share that -- we can have our people get that to you. >> this is a really big question because if you didn't report that immediately when you found this going on and you allowed year after year to have 1,000 people -- >> we do that. >> your blanket bond company is going to be going bonkers over this. we will have a request for that and i hope you will answer that. >> we'll work with your team. >> time has expired. the chair recognizes the gentleman from new york, mr. meeks. >> i can't believe some of what i'm hearing here. so let me understand. you've been the ceo since 2007. you've been the chair of the board and the ceo since 2010. is that correct? >> that is correct, congressman. >> and in the time that you have been that chair, i have a chart here that shows you've been penalized almost systematically every year since you have been in charge. every year.
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$1.2 billion in april of '16. $53 million in october of '15. $4 million in june of '15. another $24 million in january of '15. $5 million in september of '14. on and on. $869 million in september '13. while you were the ceo. right? and you're going to tell me that there's not a culture of something wrong at wells fargo? when you are the head -- you get credit, you get credit as ceo when you bring in all this matchup. because that's how you get your bonuses. is that not correct? you get a bonus from your board because x amount of dollars come in. but yet are you telling me that you don't have the responsibility of losing your position when you have a culture of being fined and costing the bank year after year, p month after month? there's no responsibility -- you can just stay to be the chairman and the ceo?
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is that what you want us to believe? >> congressman, that is not the case. i serve at the pleasure of the board. i'm willing -- i told you -- >> and the whole board needs to go -- if they're going to allow someone to be in charge when time after time you just talked about you fired 5,300 employees when you found out that they were doing something wrong. they were fired. because they were doing something wrong. well, something is going wrong at this bank. and you are the head of it. so shouldn't the board -- from your own admission, if the buck stops with you, as you came out here and said, i apologize, the buck stops with me, and you have to also admit that criminal activity was going on in your bank, then you should be fired because it stops with you. >> again, congressman, the board has that power. that's -- and my energy right now is to lead this company forward. i also want to remind -- >> you came here and started out by saying i apologize, et cetera. if somebody walked into wells
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fargo tomorrow and robbed your bank or defrauded your bank, and then after they're caught, they say, well, i'm sorry, i'm going to take full responsibility for robbing this bank, and i am sorry that i robbed this bank, so please don't prosecute me because i am sorry now that i robbed this bank. would you allow the person just to walk out after robbing your bank because he is now sorry that he robbed this bank after he took the money already? >> congressman, i see something very different between being honest and breaking our code of ethics and taking a -- >> you didn't break the code of ethics? >> i -- i -- >> do you realize that -- would you admit this, that not only does your bank have a black eye, that your bank, wells fargo, has given the entire financial service industry a black eye? your responsibility. >> yeah. i --
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>> you heard mr. sherman, and i agree with him, he wants everybody to come in here. mi whooi? only reason why. your bank, you, ceo, chairman, basically for me on top of what's basically been a criminal enterprise because when i look at consistency, time after time after time and time again you have to get fines. it must mean that you're making a lot of money because it's easier to pay the fine, because you know that nothing else is going to happen to you. so you pay the fine, you get away, you make a lot of money. now i'm upset. i'm from new york. you know, i believe in financial institutions. that's why i'm so mad. that i believe they make our country better. but till they rip us off. and they ripped us off, taking advantage of customers and consumers when we had the financial crisis. i've got individuals right now who are on the street, on the street, not back in their homes. they had these fraudulent mortgages. nobody has said, oh, i'm sorry
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that we gave you these fraudulent mortgages. we're going to put you back in your home and we're going to make sure that everything is okay. no one has done that for them. you haven't volunteered to do that. will wells fargo put people back in their homes? >> congressman, if i could just respond for a second, please. there's no question we don't do everything right, and we've made mistakes. we're upping our game. >> so who should pay for it? if you don't do things right, who's accountable for it? >> we're going to make it right for every one of our customers. >> your vp made a $125,000 bonus package. who is paying for it? who's taking responsibility for it? don't come tell me you're sorry. >> we're taking care of every one of our customers who was impacted. >> time of the gentleman has expired. the chair now recognizes the gentleman from wisconsin, mr. duffy, chairman of the oversight investigations subcommittee. >> good morning, mr. stumpf. i want to tell you i'm a 20-year customer of wells fargo. i started at norwest. >> thank you. >> my wife was with wells fargo.
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made it easy to join our accounts when we were married. i've had a pretty good experience with your bank. that's why i've been there for 20 years. the people i've dealt with have treated me incredibly well and that's why i'm there. but what i'm hearing today is incredibly disturbing. i want to make sure we're on the same page. how do you classify what wells fargo did with this potentially 2 million account holders? >> well, the 2 million account holders were accounts about -- the pwc looked at 93 million accounts. >> no, i'm not -- >> the 2 million are -- i'm sorry. >> was this fraud? >> oh. >> was this just an hr problem? theft? how do you see this? >> yeah. the 2 million accounts could not be ruled out as -- >> i'm asking about how you classify when you took $22 to $25 from whatever the number, maybe 1 million, 2 million, how do you classify that? >> well, i think it was dishonest, it broke our code of
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ethics and the people who are responsible -- >> was it theft? >> pardon me? >> was it theft? did you steal? >> our -- our people did not do what was right. >> that's not my question. did you steal? are we on the same page? did wells fargo employees steal from 1 million to 2 million of their customers? yes or no. >> in some cases, they did. >> they did. >> yes. >> and so as wells fargo back to 2011 is stealing from their customers -- and by the way banking is based on trust. >> correct. >> right? so i don't care if p it's 10% or 1% or a half a percent of the people that you do business with, if you're stealing from them in 2011, 1,000 people are fired for stealing and what do you do? you don't fix the problem. and 1,000 people are fired in 2012. and you don't fix the problem. and in 2013. 1,200 people are fired. and we still have a problem. and you're stealing from people!
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so how do -- i guarantee you that any bank in my community, if they were stealing from someone at the lower level, fire and fix the problem. on day one. >> that's what we're trying to do. >> no, no, no. trying to do? we're five years on! >> let me just say something about as we understood this problem, we didn't -- when somebody would open an unauthorized account, a savings account or a checking account, it was not until -- and when an account gets opened and not funded -- it's really important, please -- when it's open and not funded it gets auto closed. we didn't -- we didn't believe as we looked that the until sometime in 2015 that there could be the possibility of a zero account that could affect a customer -- >> you're kidding me. you have got to be kidding. >> that was absolutely our analysis. >> the board members. you were not saying you knew but board members knew in 2011.
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they were looking at this. and if they're looking at 1,000 people fired, they don't know why they're being fired, they don't look to-in to say what were these people doing that caused them to be canned, and they just pull the curtain back a little bit and go, man, whether you want to call it defrauding our customers or stealing from our customers, wells fargo has a big problem. so you tell me that it took one year, two years, three years to 2015, i don't buy it. what i think is wells fargo was making a lot of money off what you were doing. and i think that you were hoping that you wouldn't get caught. and so it's a risk of doing business. you know what? we're willing to fire a few people so i can come in here and go, weren't we great? we fired a couple of people. we were trying to make it right. but we kept the practice in play because we were making big profits. is this over? >> we're stopping all of our sales growth -- let me just -- >> how could you stop it now but
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not in 2011 or -- >> we should have done more earlier but it's important i make this point, please. the $2.6 million in fees that were on accounts that these 2 million accounts that we could not rule out, it cost us $10 million to open those accounts and close them. forget even the cost of the team member and the dismissal. this is a loser for us. it only helps when customers -- >> it's a loser for you, i guarantee that. >> i'd rather have a customer have two products they use than four they don't. we're totally aligned can with customers. >> i told you i like wells fargo. i've been there 20 years. the problem is you were turning a blind eye to your customers who were being stolen from, people who couldn't afford $22, people who couldn't afford $25, and you didn't fix that problem in an institution that is based on trust with your customer, that you didn't take this seriously, that you didn't remedy it, that it has taken this long. shame on wells fargo.
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and i didn't get to my question, but hopefully at one point i want you to testify to how many cfpb employees were embedded at wells fargo. >> time for the gentleman has expired. the chair recognizes the gentleman from massachusetts, mr. capuano. >> thank you, mr. chairman. thank you, mr. stumpf. i want to thank you particularly for doing something here today that no other person has been able to do in the last four years. you have brought true bipartisan to congress. we're all together on this. we are not happy. they already started. the last few minutes they've been running a graphic in the back, and my colleague had run through some of them. but i think it's important to know what some of the other things you have done, what they were. they weren't just fines. you screwed student loan holders, credit unions, fannie
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mae, freddie mac, mortgage holders, african-americans, hispanics, health care workers, on and on and on. by the way, i understand this isn't material. just five months ago you paid $1.2 billion in a fine. this is only 15% of that. ah, who caires? we'll pretend to be sorry, we'll fire some workers and we'll get through this. you know where i heard that before? the guys who ran enron. the guys who ran arthur andersen. about the same thing. we're not your problem. we can't criminally prosecute you. hell, you're your own boss. you are the ceo and the chairman. hold yourself to accountability. oh, my god, you've been bad, oh,
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no, you haven't. that's ridiculous. your problem is coming. it's not today. you think today is snuf it's coming. when the prosecutors get a hold of you, you're going to have a lot of fun. so i want to thank you for that. i want to ask you, you've got the graphic up here. you know this guy? see, i'm not a real good researcher. i'm not a prosecutor. this is simple internet rnl. that's all i'm capable of doing. google it. wells fargo. boom. whole bunch of stuff shows up. this is mr. robert holmes, who apparently robbed your bank in lancaster, pennsylvania. he did not use a weapon. he got caught. they got all the money back. he's in jail as we speak on a
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$750,000 bail. you, on the other hand, have run an enterprise that has a culture of corporation, you encourage subordinates to abuse existing customers by opening fake bank accounts. you charge those victims illegal fees, interest, and late charges, and then you send some of them to collection agencies because they didn't pay them. then you fire 5,300 workers as if you care to cover everybody's tracks. in my opinion, you and your entire leadership team are clearly and unequivocally guilty of at least conspiracy to commit fraud, conspiracy to commit identity theft, clearly racketeering, which is something a lot of my friends know something about, and probably a dozen other crimes. only simple question -- what the heck's the difference between you and mr. holmes?
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why shouldn't you be in jail? he didn't use a gun. you got the money back. i understand at his arraignment he said he was sorry. what's the difference? why shouldn't you be in jail right along with mr. holmes? >> congressman, i think that when you do something unethical or dishonest, which i have tried to exercise my duties as leader and ceo leadership -- >> you haven't done a real good job. you've had 16 violations in five years. that's a good job? this is only is seventh largest fine you've had. you've had six others a lot bigger. that's a good job? i forgot, you're the one judging yourself because you're also the chairman of the board. i actually think i'm the greatest congressman in the history of the world, i should be speaker, president, and maybe emperor of the world. that's my judgment of myself. sound good to you? >> there's no question that we've tone things that we need to improve on and we've paid fines. and we're trying to get better
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at every one of your businesses. >> mr. holmes pays a little fine, you know, a few bucks based on the amount of money he stole, and the victims he had, you think he should be let out and have no criminal record? >> again, being dishonest and breaking the law is something very -- >> so it's not breaking the law stealing my identity and opening an account i didn't ask for? >> our culture is about not doing that. we train for that not to happen. >> i don't know what kind of culture -- >> time, gentleman. >> -- 5,300 employees you say did it. >> time has expire preponderance of the evidence the chair recognizes the gentleman from california, mr. royce, chairman of the house foreign affairs committee. >> thank you, mr. chairman. mr. stumpf, the idea of a cross selling target of at least eight products clearly is part of a long-term practice at wells fargo. going back at least to your predecessor because in 1998, "fortune" magazine quotes,
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"doubling the average product purchase to eight" as your predecessors, quote, current obsession. you know, morphing the goal to a mandate here seems to be a big part of the problem, and i say mandate because if people are fired for not hitting that goal, it's a mandate, and that seems to be at the center of a toxic sales culture that you've overseen. but i'd ask you, was the goal of eight cross sold products something understand and embraced by management and by your sales force? >> it was a rallying cry to help work together the average consumer household has about 14 financial products. >> i understand. but i'm going to ask you a question. in retrospect, do you think that that target contributed in some way to the negative change in your sales culture? >> we never had a target of
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eight. again, it was aspirational. we had team members who would work with customers on need-based selling and when they did that right, the customer won and it was good for us. >> did you read the "l.a. times" article when it came out in 2013? >> i don't -- i'm sure i did. i just can't recall it right now. >> was it something discussed at the boortd level? >> we did discuss the l.a. article. >> here's my question. did the information in that article give you pause about reporting cross selling metrics or ratios in your annual reports and your quarterly reports, in the -- in the analyst conference calls that were clearly inflated here by fake accounts generated by your sales force? >> we love cross sell because it helps to find -- >> look, i understand your argument about that. here's the question. if you know fake accounts are going into that ratio, why would
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you keep reporting that ratio? because i've got a copy here of your investor day, i've got a copy of what is in your quarterlies. and, you know, you turn to mr. duffy here when he was asking the question, and you were say, well, it isn't that material in terms of our bottom line, in terms of the fee income from these fake accounts. but what you're reporting on your products per household is a constant upswing quarter by quarter by quarter. it certainly is material in terms of the stock price. what you were doing in constantly reporting these ever-increasing numbers was driving your stock price up. and the point i'm making is you have this story in 2013 that shows how much of that was based upon fraudulent behavior. that becomes material, right? >> well, let me just talk about that specifically. the cross sell ratio, even if you include all 2 million accounts in that, and we know we
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can't because we're already finding out in credit card that 75 -- or less than 25% either did not order it or did not remember, we've looked back for all the quarters going back -- i can't remember if it's 2010 or 2011, and it has i think 0.02 of product impact. it's absolutely immaterial. >> mr. stumpf, that is california company. you've got a lot of california customers. you've got people all over the world dependent on this company. you've got your employees and from what i understand a thousand of them being fired a year connected to this. i believe rebuilding the trust and righting the wrongs are going to take a course of action here that i have yet to see you set. and through opening unauthorized accounts, we're playing the shell game with a person's money. your employees and your company negatively impacted the credit of many people in this country,
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and i just want you to think for a minute about what that meant in terms of their ability maybe to qualify to get that home or maybe to qualify to get that car or maybe in terms of the student loan, to send that son or daughter to university, not to mention, again, working americans wrongfully terminated by your company for, what? refusing to break financial laws, refusing to break ethical laws? that's what we have to come to grips with here. and this is at the very least the result of actions over the last five years. that didn't happen by accident. >> time of the gentleman has expired. the chair now recognizes the gentleman from massachusetts, mr. lynch. >> thank you, mr. chairman. i have a unanimous consent request to enter into the record, a letter sent by ranking
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member cummings, gentleman from maryland of the oversight committee, to mr. stumpf, related documents by october 13th. >> without objection. >> thank you, mr. chairman. i would also like to ask the chairman toll consider doing a hearing at a later time with a number of the employees, both whistle-blowers who were fired and others who were fired for retaliatory attempts to provide information on the fraudulent conduct being conducted at wells fargo. i'm aware of at least three u.s. attorneys that have also issued sps subpoenas in this case, so i'm hopeful we may eventually get to the bottom of this. while the city of l.a., the city attorney there, and the cfpb and the occ have done good work in
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this case, the fines thus far are pathetic. totally inckainadequate to try bring wells fargo into compliance with the law. and that is certainly reinforced by the way mr. stumpf, you have diminished the offenses that have gone on at your bank is really, you know, proof positive that whatever -- whatever the ocpf -- or excuse me, the occ has done is not adequate to make you realize the level of your offenses here. again, 5,300 employees were fired. up to 2 million fraudulent accounts. and this has gone on for at least five years. and i want to point out here, and mr. duffy has hit on this, this is the banking industry. it exists based on trust.
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and what your employees did, at least, well, as many as 565,000 fraudulent credit card were secretly opened by your employees using the social security numbers of your customers. so they open fake credit cards so they could charge them for that. they assigned fictitious pin numbers when the customer didn't even know that that was going on. they put pin numbers. then they assigned e-mail addresses so they could comply with it and get the bonus so that the account was opened. and these are your customers. now, we've had credit card companies up here who have sent credit cards to noncreditworthy borrowers and seniors who didn't understand what they were getting. but in this case, these are your customers. these are the people that they became victims because they did business with your bank. that is unbelievable. and, you know, i know that
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mr. meeks and mr. capuano have made comparisons to criminal activity, but i do want to note that under the racketeer, influence and corruption act, you've satisfied that, all the elements of that. number one is fraud and there's no question about that. mail fraud, securities fraud. you've done it all. you've covered basically every aspect of fraud in your bank over the last five years. and secondly, in many cases these employees, these whistle-blowers, were intimidated or fired in some cases. you've got an hr employee here who says you had a system to retaliate in your bank against whistle-blowers. and that's another predicate offense under rico.
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so let me ask you, as the ceo and chairman of the board, you had a responsibility to file sars, suspicious activity reports. >> correct. >> right. have up to 2 million separate accounts being opened, up to 565,000 bogus credit cards being opened by your employees in secret against your customers, and yet when we ask the treasury department for the suspicious activity reports that you filed, they don't match up. you're not in compliance. >> well, let me say a couple things. we filed -- we did everything that was necessary to abide by every regulator and regulation issue -- >> are you saying you filed reports on -- >> i can't say on that because that's -- >> well, it's your responsibility. let me read you the law. i'll close with this. >> i know it's my responsibility, but there's
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actually a -- a prohibition -- i mean, i have to do what's right -- >> all right. >> -- according to the law. >> let me explain. this is my time. i'm claiming it back. the board of directors, this is under the bank secret i can act and anti-money laundering statute. the board of directors acting through senior management is ultimately responsible for ensuring the bank maintains an effective bankruptcy act internal control structure including suspicious activity reporting and monitoring. your responsibility, sir. >> and we do that. we do that. >> the time of the gentleman has expired. the chair now recognizes the gentleman from oklahoma, mr. lucas. >> thank you, mr. chairman. mr. stumpf, while my day job is that of a congressman, i am a er by trade and my university degree is in agricultural economics. looking at your resume, about the time you were entering into the banking industry 30-some years ago i can remember taking
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a class on money and banking at oklahoma state. we had a professor who was very enthusiastic about the market economy and we discussed the banking model we used now, essentially 500 years to italy, and the concept that under a market economy bankers were the individuals who determined what save iings were worth and pooled those, and by the same token made risk determinations, figured out what the cost of money should be, and allocated that out through loans. glowing example. and he would compare western europe at the time, north america, much of the rest of the world, how effective that was compared to the demand economy model of the old communist countries at the time -- china, russia, all of those sort of places. very glowing discussion. i don't know that i have a particular question for you about what's gone on. i think between the other
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committee and my colleagues here they've done an exceptional job of getting the facts. and i suspect as a number of my colleagues have discussed quite straightforwardly, this has legal implications far and beyond the activities of this -- of this committee or the other committee and the other body. but i'd say, mr. chairman, the most challenging thing you've done is by the actions of your company, your management of the company, you made it really hard for those of us who are defenders of the market economy to continue to maintain the system that has helped drive this successful enterprise called the united states of america and the free market system. that's probably the most tragic thing about this. now, in those econ classes they used to lecture us about the concepts of enlightened self-interest. that's the nature of any
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consumer. that's the nature of any business person. but then there are the responsibilities we used to talk about of good corporate citizenship, about self-restraint, about not pursuing greed. i guess i simply note to you, sir, whatever ultimately legally comes out of this process and clearly a number of my colleagues think something will, or whatever your stockholders determine or your -- just made it really hard, really hard for those of us who want to maintain that concept of a market economy, want to continue to make sure that bankers, not some bureaucrats somewhere, are the arbitragers of capital that floif make this country move forward. i don't know how you correct this, but i suspect, sir, when
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you interact with your peers within the industry, you're going to have some challenges for a long time to come because the brush with which you will be painted will stroke all of them too. i suspect that's blatantly unfair and unfortunate. but then, i'm just a farmer by trade, multigeneration debtor, working hard to service my debts every year. you have to think about that. you have to think about that. what this episode has done to your industry and ultimately to me and all of my fellow consumers out there. it's just very unfortunate. >> may i make a comment? >> please. >> thank you. and we take this very seriously, and i also come from a farm. i understand what it's like to be on a small farm or at least ours was small with a large family. i know right from wrong. i know we have a lot of wrongs to right here. but i also wanted to tell you
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that wells fargo is a great corporate citizen. we employ 268 authorization wonderful team members across the country. we have a culture based on ethics anding to what's right. not everyone does that. >> wells fargo's john stumpf. it has been a punishing session for stumpf has house members have pressed him on everything from the timing of the company's discovery to the timing of his own stock sales. of course it's been said that there's only one investor in wells whose opinion really matters and that is warren buffett. doug cass has written some comments about wells fargo and buffett today. our own beky quick has talked to buffett's office about that and more. she joins us on the phone. >> rar ben buffet has remained silent on this entire issue up to this point. no one's been able to get him to comment about what he thinks about wells fargo or john stumpf with any of this going through it.
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there have been calls for butch buffett to speak out including a note from doug cass this morning. he's the president of sea breeze partners, money manager, a frequent guest on cnbc too. he put out a note today saying he had intel on warren buffett and wells fargo. he says here's what he's heard, one, warren buffett has spoke on the wells fargo board directly and has ix pressed his ix treatment satisfaction. two, buffett will not sell his wells fargo stock. he is committed to the investment. three, if anything, should wells fargo remedy the issue it's entirely possible berkshire will add to its wells fargo holdings subject to federal approval. i forwarded that note to buffett's office this morning. not expecting to get a response. but i did get a response from his assistant who said this can be reported to be false. that's coming from buffett, that this note in particular can be reported to be false. you can read that a lot of different ways.
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there are three different things. this is a broad denial of what was said in this. i think probably what's most key here is the firsts aeration that she makes that buffett has spoke on the wells fargo board directly and expressed his dissatisfaction and need for radical transformation. my read on this would be that he has not spoke on the board and that he has not expressed an opinion one way or the other. this is not unusual for buffett not to be making comments, at least not publicly. usually he works behind the scenes. if there's something he's unhappy with one of his investment holdings, like he did with coca-cola in recent years, when he was unhappy with the executive compensation plan, he worked with the board. but it sounds to me like he has not weighed in with the welles fargo board at this point. not to say that he is going ahead and saying that he is condoning any of this behavior, but it doesn't sound like he's weighed in one way or the other
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on it. the other thing i can point out is the idea that berkshire would be buying more wells fargo stock. i don't think therea way to get approval to do something like that. berkshire hathaway is already the largest shareholder with over 10%. and with financial companies you're not allowed to continue to buy after you open that much. his shares, his stake, buffett's stake in wells fargo, has increased because wells fargo's been buying back stock, very similar situation with why he owns more than 10% of american express. as a company buys back stock, berkshire's stake goes up, but it's not because of purchases that he've been making on the open market. again, this is not clarity. it doesn't tell you a whole lot. but this is the most that i've been able to get him to weigh in on something concerning wells fargo since the scandal broke. >> becky, it's great context. sarah here. to the stock performance, we're looking at wells fargo shares they're down about 9.5% this month bringing the year to date lotszs to 11.5%.
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it's clearly speculation at this point, but your study of warren buffett, how he views his long-term investments, do you think he's just waiting to see how it shakes out after some of the political pressure comes off hike we're seeing in this bipartisan beatdown on capitol hill today? >> you know, it's that and i think it's also he just tends to work behind the scenes. i think he's of the opinion if you have something to actually get done you can mediate it through the press or you can work behind the scenes or wait and see what happens. like i said, he's not somebody who i would expect to be commenting on this stuff without talking to all of them first. but to me, the most significant denial in all of this is the ytd that he's expressed his extreme displeasure to the board. i don't know for sure because i have not been able to get him on the phone. but that to me says he hasn't weighed in with the board and he's waiting to see how it plays out. >> stock awfully steady, becky, at 45, hasn't moved far from
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that level all morning long. the best guidance we have at this moment in terms of when he would weigh in publicly remains what? >> don't know. i don't have an answer on that. i've been waiting and trying to see if i got a response this morning. i was surprised actually when i did. my guess is it's not going to be for some time. >> beky, we appreciate that. of course people are clamoring for any guidance as to what his opinion is regarding wfc. we appreciate it. becky quick joining thus morning, having already worked through squawk today. we're monitoring the situation in hoboken, new jersey. courtney reagan is on the scene this morning. hey, court. >> reporter: hi. good morning, carl. so here is the latest. we have gotten an update from the jersey city medical center. they are holding a press conference and they say that they have received three patients that are in serious conditions, eight others a bit
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less serious, 40 more patients that walked in on their own and should be darnled soon. none of the injuries are life-threatening of the patients that have come to the jersey city medical center. this according to the chief medical officer in a presser. he also believes they have received the last of the patients that they will be receiving from the train that crashed here this morning at around 8:45 a.m. hoboken medical center will be holding a press conference in about a half an hour to update us on the severity of the injuries and the patients that they have received. and an update on what we know so far. we believe that there are three passengers that have died from the train crash this morning. more than 100 have been injured. some of those are critical. there are more than 20 ambulances on the scene. the ntsb is the lead investigator here but they are also getting assistance from the fbi, from new york city, from new jersey medical and police staff. there are many, many moving parts still to this
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investigation. it is still considered active and rescue. we do not know if all of the passengers or those that were in the train station have gotten out of that area. that is something that we are still waiting on some clarity for. but that's what we know as of right now. it's been about three hours since the incident happened. so this is still very much an active scene. we do not believe that this was any way related to terrorism. what they believe at this point is it was accidental, potentially operator error. wnbc's jonathan dienst is reporting that the new jersey transit had actually not implemented the positive train control, which is supposed to be implemented by the end of 2018. that would have possibly prevented a train from crashing the way that it did. initial reports from passengers say the train did not slow down and it continued basically through the train station until it came to a stop as a result of that crash. that's what we know for now.
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we'll bring you more as we know it and when these press conferences begin. carl, back to you. >> i'll take it, courtney. we'll continue to check in as we get any new information. courtney reagan reporting from hoboken, the site of that crash. we want to take you back to that hearing on capitol hill right now where wells fargo's ceo continues to get question and admonished by lawmakers. let's listen. >> what was it that would cause all those things to go under the radar and not be recognized, not be seen? >> thank you for that question. as we learned more about this issue, we made investments. we made investments in training. we reduced sales goals. we brought in a regulator. >> i understand. you've been through that. >> okay. >> what kept you from seeing -- what kept this from rising to the -- i'm sure that today that you probably consider the problem somewhat different than
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you did in 2011, '12, '13, '14, '15. why did not you see the importance you would attribute to it today at any stage of the process? >> congressman, good question. i've said in my testimony -- >> i read your testimony. -- >> i read your testimony. i did not see the answer. since you appear not to want to see it, i'm sitting here in a balanced scale as a business manager is always there. do we want to take that job cleaning out that well and we can't clean it out and we get a bad reputation? well, maybe we will. or maybe we won't. are we going to overlook the numbers of terminations. we're getting the calls, don't we really want to investigate. the stock price is doing okay. my compensation is okay. you get the balance is there. your compensation in that period of time is approximately $200 million. that would cause one to say i think things are running okay. yeah, maybe we've got that
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little problem over there. but another thing on the side of the scale that says i don't want to look at this or i can't see $10 billion in settlements, that it just doesn't come to my attention. 5300 terminations doesn't come to my attention because we've got 260,000 employees. obviously we're doing things 99% right. forget the 2 million people that we defrauded, mostly we're doing okay. and so i see size and complexity being a great problem. when you can't see 5300 people being terminated, when you can't see $10.8 billion in settlements, then you've got a problem in size and complexity. i would say that there is no community banker in this country that would not have seen people doing illegal acts. and so maybe it was your stock compensation, maybe it was the size and complexity. but, sir, i think today listening to things that
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everyone has said, you have proved that you did not offer leadership in this. you have kind of shirked around and said the board can do anything it wants at any time. i, sir, think you ought to submit a resignation and your board cannot hold off action on that. thank you. yield back. >> mr. chairman, may i just make a comment about that. >> witness may comment. >> we did take accountability. we did invest in things to help reduce this. and we saw the numbers coming down. >> problems continued, sir. the problems continued right on through your actions. 2011 you did this. 2013 you did that. and the problems continued. >> the time of the gentleman has expired. the chair now recognizes the gentleman from texas, mr. green, ranking member of the oversight and investigation subcommittee. >> thank you, mr. chairman.
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i think t i thank the ranking member as well. i'm grateful that you have given us a very positive response and we are holding this hearing. mr. chairman, with $5.6 billion in earnings in the second quart quarter, wells fargo is not in this because of need. this is about greed. it's about the same kind of greed that created credit default swaps, that created negative amortization, that created no dock loans, that created prepayment penalties that coincided about tiza rates. the same kind of greed called exotic products that created the housing bubble. this greed has caused this cross-selling to become the
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equivalent of an exotic product. a product that has now created a cross-selling bubble for wells fargo. the cross-selling bubble exists because you were marketing yourself as a company in a growth mode by virtue of the new products you were having with your customers. you had customers that were coming in and you were growing. this enticed investors, it enticed consumers to buy your stocks. when your stocks were bought, it benefited you and top level executives to the detriment of lower level entry employees. they get fired, top level executives get golden parachutes, and it's business as usual. well, mr. chairman, this will not end by simply having some
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lower level employees go to jail. if top level executives go free and lower level employees go to jail, it doesn't end it because there is no reason for this to cease and for top level employees to be more mindful of what's going on. so we've reached a point now where the public expects to see more than lower level people punished. 5300. 5300 working people who, by what i seem to read, were encouraged to the point of having themselves coerced to engage in this activity. these were people who were trying to make a living, not trying to make a big bonus and a big payday. these people deserve a fair day,
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not just an exit from your company. and what do i mean by a fair day? i think they deserve an opportunity to be heard in terms of what happened at wells fargo to cause them to do what they have done. i think that they ought to be given an opportunity to come before congress. they ought to be able to explain. and i would also add this. we have to find out how pervasive this bubble is. we have to. we do have to bring before the investigations committee, oversight investigations other ceos, top level executives, and let them tell us. and i think that we have to start with you. so tell me, please, sir, how commonplace is this cross-selling in the banking industry? >> thank you, congressman. for our company, cross-sell is a good thing because it -- >> i have to intercede because
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i'm asking you about the industry now. >> i have no idea. >> you have no idea as to how pervasive the product is? >> i don't know what other companies use. >> are you saying you have no belief or no idea that other companies are cross-selling. >> i do not have that. >> i must tell you, i cannot believe your answer. you're telling me that you have no idea as to whether or not they even engage in cross-selling? >> i don't know. >> but do you know that they engage in it? >> every bank, every retailer out there has some motivation, some way to make sure they recognize their people. >> do they engage in cross-selling? >> i don't know -- i don't know their situations. >> you don't talk to your colleagues? you don't talk to other bankers? you have no idea as to whether they engage in cross-selling? >> i don't know what they use. >> i thank you for your answer. let me finish. because, mr. chairman, this is the evidence that we need to bring the others in. we have to ask them what they're doing given that this gentleman refuses to give us what i
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believe to be a correct answer. >> time of the gentleman has expired. the chair now recognizes the gentleman from florida, mr. posey. >> thank you, mr. chairman. mr. stumpf, members of this committee has already expressed outrage that we all feel that this atrocity was able to happen. it's absolutely deplorable that your customers were subject to this practice, and i'm sure the fine that wells fargo will pay will be insufficient to comfort the customers or adequately compensate them. at best, at the very best, you and our federal regulators were asleep at the switch. at worst, it's almost if not a criminal enterprise. my biggest concern, and i think it's the biggest concern of every member on both sides of the aisle here is that we need to ensure that it doesn't ever happen again. that means we have a shared interest in understanding what caused and what perpetrated the
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unprecedented level of fraud. and i have just a couple of questions that i think will help drive us in that direction to understanding it. first, mr. stumpf, i understand that wells fargo sets goals for new banking products. each employee was expected to sell daily. is that correct? >> i don't believe that's the case. i know as part of our reward system and our performance management that products was part of their performance management along with customer service, customer loyalty, doing things right. but again, as of this friday, we're getting rid of those goals. >> i've read a range of reports that puts the sales goals somewhere between 8 to 5 new sales each day. compared to the reported industry standard of 3 to 5 per day. briefly i was going to ask you to give us an idea of how the
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goals were determined. >> within our business, i wasn't part of that process and i don't know if that's -- you made reference to an industry standard and what ours is. i wouldn't have specific -- i can try to get back to you on that. >> are you aware if the expected targets vary between various bank branches of different size and constituencies? >> i believe that was the case, yes. >> you believe it is. >> i don't know when that was introduced, but i believe in the past, locations that would have more activity, we'd either have more bankers or more goals. >> thank you for the straight answer. >> okay. >> as a follow-up, did the bonuses associated with those goals vary between those branches or did wells fargo use a single uniform system? >> again, that's a level detail i don't know. i can try to get back to you on that. >> okay, okay. now, so far in the investigation of bad actors, have you found any correlation between the likelihood of employees committing fraud and

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