Posted by on October 3, 2017 4:33 pm
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Categories: Becky Quick Berkshire Hathaway Business Economy Elizabeth Warren Finance Financial District, San Francisco Global Systemically Important Banks John Stumpf Senate Banking Committee Sloan Testimony Timothy J. Sloan US Federal Reserve Warren Buffett Wells Fargo

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.

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