Warren Slams Wells CEO "You Should Be Fired" As Buffett Counters "He Has My Faith"

In a repeat of what she said almost exactly one year ago, when Senator Elizabeth Warren told then-Wells Fargo CEO Stumpf "You should resign, you should be criminally investigated" - not long before Stumpf indeed resigned, moments ago the kangaroo court was back in session and Warren doubled down her attack on Stumpf"s replacement, Wells CEO Tim Sloan, blasting that he should be fired as he was part of a culture that pushed the bank to create millions of fake accounts for customers without their knowledge.

In prepared testimony, Sloan apologized for the creation of unauthorized accounts and said the bank has hired back more than 1,000 workers who were wrongly fired or left under a cloud. In late August, Wells admitted that as many as 3.5 million accounts were created for customers without their permission, nearly 70% more than originally thought. The scandal led to the departure of several executives including former CEO John Stumpf.

While the practice had been going on for years at the bank, it only became public last year, when Wells agreed to pay a $185 million settlement with regulators. Since then, it was revealed that the tactics extended to enrolling customers in auto insurance that they didn"t need as we previously reported and as CNBC noted. Wells paid a $142 million class-action settlement and $2.8 million in refunds to affected customers.

Meanwhile, Warren attacked Sloan over his past comments to investors, saying he “bragged” about high levels of new accounts even though he was aware of sales-practice problems at the bank: "You went to the stock market and you bragged about it," Warren said at the Senate Banking Committee hearing Tuesday.

"At best you were incompetent, at worst you were complicit," the Massachusetts Democrat lashed out at Sloan, adding that "either way, you should be fired" as “you enabled this fake account scam, you got rich off it, and you tried to cover it up."

Warren pushed Sloan on transcripts she found in earnings calls that she said showed the CEO was bragging about the bank"s sales ability even as he knew about the cross-selling problems. "I"ve read through them, and on these calls no one, not even John Stumpf, who was the CEO at the time, bragged more about Wells Fargo"s ability and commitment to open new accounts for existing customers," Warren said, referring to earnings calls between 2011 and 2014.

"I"m proud of the credit card products we have at Wells Fargo," Sloan defended himself, saying comments cited by Warren were taken "out of context."

Warren wasn"t alone, and other members of the committee also pressed Sloan about how the bank could have allowed the sales scandal to get so out of control. "What in God"s name were you thinking?" asked Republican Sen. John Kennedy of Louisiana, quoted by CNBC.

As a reminder, as many as 3.5 million accounts were violated as employees tried to meet aggressive cross-selling goals that have since been scrapped, and while Sloan vowed that the bank was making strides in restoring its reputation, Warren and others weren"t impressed. "Wells Fargo needs to start over, and that won"t happen until the bank rids itself of people like you who led it into this crisis," said Warren, who previously had demanded that the 12 board members in place during the scandal be removed, only to be defied by Warren Buffett during the bank"s last shareholder meeting.

Sloan defended his role at the bank, sidestepping questions over why he hadn"t acted sooner and instead focusing on the steps he was taking now. Sloan was chief operating officer before succeeding Stumpf, who was forced out as CEO last October, a month after the bank settled charged with regulators over the cross-selling practice. Sloan outlined a number of steps Wells Fargo is taking to improve operations and prevent a similar scandal.

"I don"t believe your criticisms of the board are accurate," he later said. "I think the reason I am the right person to run this company today, notwithstanding your criticisms, is because I have been making change at this company for 30 years."

"I"m not afraid to make hard decisions when it"s needed, and I have the support of 270,000 people," he said, referring to the bank"s employees. "That"s why I think I"m the right person."

"Are you kidding?" Warren responded.

One person who wasn"t kidding, was prominent democrat and billionaire Warren Buffett, who earlier told Becky Quick that he still believes in the CEO of Wells Fargo after the fake accounts fallout at the bank. "Tim Sloan has my faith," said the CEO of Berkshire Hathaway. "When you find a problem, you have to jump on it... Somebody messed up and the job is to find out who messed up."

Berkshire remains Wells Fargo"s largest shareholder, with a 9.4% stake. When asked whether he sold any shares of Wells Fargo, Buffett said "only enough to stay under 10 percent, which was something the Fed requires."

And since the decision whether Sloan stays or goes ultimately is in the hands of Wells Fargo"s shareholders, perhaps Warren should target her anger at the Omaha billionaire: it was his input during the last Wells Fargo proxy vote that made sure the current board escaped unscathed from the bank"s ongoing scandals.

Wells Meeting Turns Into Screaming Match, Shareholder Kicked Out After "Physical Approach" Toward Board Member

What may be the most controversial annual shareholder meeting in Wells Fargo history, in which the board is seeking re-election after last year"s misselling scandal, devolved into a screaming match on Tuesday morning and was briefly halted following interruptions by angry shareholders as the bank"s chairman and chief executive tried to calm nerves ahead of a vote that could oust the majority of its board.

According to Reuters, at least one shareholder was ejected and the meeting went into recess after he made what Chairman Stephen Sanger called a "physical approach" toward a board member. Others were escorted out and the meeting was interrupted several times as investors demanded answers related to the bank having created as many as 2.1 million unauthorized accounts in customers" names without their permission.

"You"re saying we"re out of order. Wells Fargo has been out of order for years!" the first angry shareholder said, before being ejected. Board Chairman Sanger and Chief Executive Tim Sloan repeatedly asked him to sit down because he was out of order, and then called a recess, only to have other shareholders stand and shout.

The meeting is unusual in that a dozen of Wells Fargo"s 15 directors on the ballot, who have come under fire after it was discovered that employees in its retail banking business had been creating accounts under customer"s names without their knowledge for years, face a rare negative recommendations from Institutional Shareholder Services (ISS). The influential proxy adviser argued that the group, including Chairman Stephen Sanger, failed in their oversight duties, although Wells Fargo"s top investor Berkshire Hathaway has already voted in favor of the bank"s board. According to the WSJ the board is expected to remain having clinched a majority of the votes.

Wells Fargo"s guidelines require that directors offer to resign if they fail to receive a majority of votes cast. But in practice, directors who win with less than 80 percent support should consider exiting the board, said Charles Elson, a University of Delaware expert on corporate governance, Reuters notes. "If they"re below 80 (percent) I"d say they have a lot of soul-searching to do," he said.

The bank"s board and management have said steps taken to fix problems and punish employees responsible for abuses show there is now strong oversight, and that directors nominated deserve to be elected. But the public firestorm that hammered its shares and led to the resignation of then-Chairman and Chief Executive John Stumpf last year was not forgotten. They repeated those messages on Tuesday.

"It"s been a busy seven months but we are focused on making things right," Sloan said.

At most S&P 500 companies, director support averages around 95 percent of votes cast, according to pay consulting firm Semler Brossy. Typically a recommendation from ISS that investors vote "against" a director will reduce the support they receive by an average of 17 to 18 percentage points.

Should Wells Fargo directors win narrow majorities - between 50 to 80 percent of votes cast - the board would have to decide whether to accept any individual director"s resignation. University of Pennsylvania law professor Jill Fisch said a likely outcome, in the event of a close vote, would be for the board to bring in fresh faces over a period of months or longer. "From a business perspective that may be the best response you could make," she said. "You don"t want the whole leadership to be in flux."

"I Went To A Wells Fargo Branch... And This Is What Happened Next"

Submitted by Wolf Richter via WolfStreet.com,

They have learned nothing.

I walked into my Wells Fargo branch to put my data backup into my safe deposit box, as I’ve been doing for a decade. This routine business turned into a wake-up call about safe deposit boxes and churned up insights into how Wells Fargo conducts to this day its cross-selling efforts: the algo makes them do it!

To clarify, I’m a happy customer. Wells Fargo handles day-to-day banking for me and my vast WOLF STREET media-mogul-empire corporation. The people are nice, and I have not yet noticed any fraudulent accounts in my name.

It doesn’t bother me that every time I call one of the national numbers with a problem or question, I have to swat away their offers of “pre-approved” credit cards, lines of credit, or other high-margin products. Having run a car dealership earlier in my life, I appreciate the art of aggressive cross-selling. However, we never-ever did it over the phone! We waited till we saw the whites of their eyes.

Yet at the counter for safe deposit boxes, I was in for a surprise. The young man – a 30-year-old employee would have looked suspiciously over-age at that branch – checked the computer for my box number. There was a problem. He asked for my driver’s license. He rummaged through a file cabinet, found the signature cards. He conferred with another kid. He came back, embarrassed. Turns out, the fact that I’ve been renting the box for a decade wasn’t in their computer system. So no-go.

I thought: That’s how easy it is to block you from getting into your safe deposit box.

He called over a “personal banker” – a young woman – to “fix” the problem. We trotted off to her desk. She said the bank had “updated” its computer system. My box rental hadn’t made it into the new version. So she got busy on her computer. Took a while. She had to set it up. There were fees and discounts to discuss. There were things I had to read, agree to, and sign. She was just about finished, when she suddenly did a mini double-take of her screen. Everything came to a halt.

“I don’t mean to sell you anything,” she said after a long pause, with an embarrassed smile, “but….”

She could see the whites of my eyes! She turned her computer screen. It was filled with a Wells Fargo credit card promo. You’ve been pre-approved for this great offer, she said. “Your credit must be really good. Not many people get this offer.”

An algorithm had decided it was time to cross-sell; and she had to cross-sell to finish her job. That credit card promo was the next step in the procedure.

The algo that forces employees at the branch and at call centers to cross-sell was designed by humans, after strategic decisions had been made and funded, under the direction of top management at headquarters, such as current CEO Timothy Sloan and former CEO John Stumpf.

This cross-selling push is embedded in the software, is algorithm-driven, and kicks in at the most effective moment.

Even the recent disclosures, settlements, the keel-hauling in California and other states, and further investigations have not motivated Wells Fargo to strip these algos out of its computer system. They’re still there, working hard for your own good.

After she got rid of that promo page, and elegantly handled another topic she wanted to cover, I was finally allowed to get into my safe deposit box.

The next day, I received an email from Wells Fargo and Gallup. It asked for “feedback” on my “recent Wells Fargo visit” and offered me a chance to win $1,000.

Now I was curious. Though I never fill out surveys, I decided to check this out.

Up front, it asked if I spoke “to a banker about opening a NEW account or product,” or about one of my “CURRENT Wells Fargo accounts or products.” Was Wells Fargo trying to figure out if the “banker” did her job and pitched a new account?

After it asked me to rate my “overall satisfaction” with the visit, it listed a series of questions about the employee, whether they did things right the first time, etc. etc. It never once asked about the bank, how it screwed up with the safe deposit box.

And this: “The employee asked questions to identify options for meeting your financial needs.” Should I check “strongly agree” to help the employee out? She deserved it. She was nice. Clearly, the survey is checking on her to see if she did her job and tried to sell me something I didn’t need or want.

Remember, I’d gone to the branch to get into my safe deposit box, and not for retirement planning.

“Did you visit the branch to resolve a problem or error?” Nope. A “problem or error” occurred after I got there.

“Did you work with an employee to establish or confirm your financial priorities?” And “The employee provided products or services that aligned with your current financial needs.”

Again and again, each time couched in slightly different terms, the survey checked on the employee to see if she had been sufficiently aggressive in cross-selling.

The fact that surveys check to see if employees did their job in cross-selling tells me how big the pressure on them still is, even after all the revelations.

These survey results are used to manage employees. They probably get them rubbed in their faces during sales meetings and in performance evaluations. They know they’re being evaluated, not only by the algo-driven computer system at the bank, but also via customer responses, to make sure they push new accounts, credit cards, credit lines, brokerage accounts, and other products.

This is inbred into the bank. It’s part of its management doctrine and computer system. It’s partnering with Gallup to accomplish this. A contract with Gallup isn’t set up at the lower levels. And a few slaps on the wrist aren’t going to change a whole lot. It’s not just Wells Fargo. It’s the industry. It puts banks into the same category as car dealers. So steel yourself when you deal with them (just like you would walking into a dealership).

No bank is “so powerful as to be untouchable,” explained California State Treasurer John Chiang. Read…  Wells Fargo Getting Clocked by California: What, No Perp-Walk?