As a result of the righteous outrage following news that Wells Fargo rewarded Carrie Tolstedt, the head of the group that was recently exposed as creating some 2 million fake credit card and bank accounts so it could churn late fees, and was in charge of what the bank’s employees called “sandbagging”, was leaving the bank with a $125 million package, this morning a panicked Wells Fargo, Warren Buffett’s favorite bank and the largest U.S. bank by market capitalization, said that it would eliminate all product sales goals in retail banking, starting next year.
Wells Fargo said it had fired 5,300 employees involved in the sales practices described by the settlement; what Wells did not say is provide any explanation over the hushed departure of Tolstdet and her $125 million golden parachute.
The move comes days after the Consumer Financial Protection Bureau (CFPB) and two other regulators fined the bank $185 million over abusive sales practices. As Reuters reminds us, the bank paid another $5 million to customers for creating more than two million fake accounts for products like credit and debit cards to meet aggressive sales targets.
In an amusing statement, Chief Executive John Stumpf said that “customers should know that Wells Fargo retail bankers are always focused on their best interests.” Well, except when the bank is caught not only engaging in massive fraud against its customers, but also rewarding the person directly responsible for it with a $125 million pay day.
On Monday, five lawmakers wrote a letter to U.S. Senate Banking Committee Chairman Richard Shelby calling for an investigation.
That may not be the end of it. As the FT reported overnight, the country’s biggest mortgage lender was also facing calls to claw back bonuses paid to senior executives, including the outgoing head of its community banking division, as the fallout over its sham account scandal intensifies. Two top institutional shareholders in the world’s most valuable bank by market capitalisation have demanded answers over payments to Carrie Tolstedt, who headed the division where the episode took place.
One large investor told the Financial Times that Wells should reclaim bonuses from the Wells executive, who has received at least $45m in total pay since 2011.
“There’s no point having a clawback if it doesn’t claw in circumstances like this,” the shareholder said. “What has happened at Wells is an affront to the integrity of the institution.”
Another investor said: “If this person presided over this, why no accountability? We have share-based pay so that it can be clawed back when people have been earning bonuses under false pretences, and if fraudulently opening client accounts isn’t false pretences, then I don’t know what is.”
Cited by the FT, Bernie Sanders, the US senator who ran unsuccessfully for president this year, also weighed in, calling the pay for Ms Tolstedt a “disgrace”.
Moody’s on Monday described the regulators’ disclosures as “highly disturbing” in what has been an “embarrassing episode” . The rating agency said the developments were a “credit negative” for the bank.
We expect that after some congressional hearings and several carefully phrased press releases, some or all of Toldstedt bonus will be clawed back, at which point CEO Stumpf will once again repeat that customers should know that Wells Fargo retail bankers are always focused on their best interests.” Sadly, just like in the case of Goldman and every other bank, customers are merely the muppets to be abused and since nobody ever goes to prison, the abuse is certain to continue indefinitely until something finally changes.