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Senators heap criticism on Wells Fargo CEO, who apologizes

Posted September 20

FILE - In this Monday, Dec. 7, 2015, file photo, Wells Fargo chairman & CEO John Stumpf is interviewed by Maria Bartiromo during her "Mornings with Maria Bartiromo" program on the Fox Business Network, in New York. Wells Fargo is in the spotlight after its employees allegedly created up to 2 million bank and credit card accounts, transferred customers' money without telling them and even created fake email addresses to sign people up for online banking in an effort to meet lofty sales goals. When Stumpf testifies before a Senate committee hearing Tuesday, Sept. 20, 2016, it won't be just his bank under fire for turning friendly branches into high-pressure sales centers. It'll be the entire industry. (AP Photo/Richard Drew)

— The CEO of Wells Fargo faced calls for his resignation Tuesday from harshly critical senators over allegations that bank employees opened millions of unauthorized accounts to meet sales quotas.

Members of the Senate Banking Committee showed bipartisan outrage over the long-running conduct, unsatisfied by Chief Executive John Stumpf's show of contrition.

Stumpf said he was "deeply sorry" that the bank failed to meet its responsibility to customers and didn't act sooner to stem "this unacceptable activity." He promised to assist affected customers.

Sen. Elizabeth Warren flatly told Stumpf he should step down. "You squeezed your employees to the breaking point so they would cheat customers," she said. "You should resign. You should give back the money you took while the scam was going on."

The Massachusetts Democrat, one of the fiercest critics of Wall Street, also advocated for a criminal investigation by the Justice Department and a civil probe by securities regulators.

Stumpf, a 34-year veteran of Wells Fargo and CEO since 2007, earned $19.3 million last year. The bank does have in place provisions its board could implement to claim back executive compensation.

Wells Fargo sales employees, trying to meet targets that called for every customer have eight products with the bank, opened more than 2 million bank and credit card accounts, regulators said last week in levying a $185 million fine.

Money in customers' accounts was said to have been moved to these new accounts without their permission. Debit cards were issued and activated, as well as PINs created, without telling customers. In some cases, bank employees even created fake email addresses to sign up customers for online banking services, the regulators said.

Wells Fargo has long been known in the banking industry for its aggressive sales goals. Stumpf bristled at Warren's suggestion that the sales practices were a "scam."

He defended the cross-selling of products — trying to draw customers into taking on more — as "deepening relationships."

The senators also challenged assertions that Stumpf and other Wells Fargo senior executives didn't become aware of the problems until 2013 — when the sales misconduct was reported by The Los Angeles Times. The practices apparently began at least in 2009.

Carrie Tolstedt, the former head of the retail banking business, announced in July that she would retire from the bank this year. She is expected to leave with as much as $125 million in salary, stock options and other compensation.

Sen. Bob Corker of Tennessee said it would be "malpractice" if the bank doesn't institute the compensation clawbacks, and Stumpf said the board "has the tools to hold senior leadership accountable," including himself and Tolstedt.

Questioned again by Warren, Stumpf said the bank had not considered firing her.

Peppered with criticism for nearly three hours, Stumpf appeared taken aback by the intensity of the verbal lashing. At one point he stumbled a bit over his words.

"It struck me that he was berated in a way that shook him a bit," said Chris Kotowski, an analyst at Oppenheimer & Co. That contrasted with Stumpf's usual "poised, deliberate" manner when speaking in other venues, he noted.

Under the settlement with regulators, it neither admitted nor denied the allegations. It later said it plans to eliminate the sales targets by Jan. 1. Some 5,300 Wells Fargo employees have been fired.

Stumpf offered some detail at the hearing about who was fired, saying "bankers, bank managers, managers of managers, and even an area president." They ranged in pay from about $35,000 to $65,000.

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