Wells Fargo CEO John Stumpf apologizes to Senate Banking Committee
California Treasurer John Chiang hit Wells Fargo Bank with the loss of state investments and other sanctions Wednesday, punishing the mammoth bank for “fleecing” customers who had credit cards and other accounts fraudulently opened in their names. Other state and local governments should follow suit, he said.
For the next 12 months, the state will not invest in Wells Fargo securities, the bank will not be used as a broker-dealer in investment purchases by the treasurer’s office, and the bank will not be considered for managing underwriter on sales of California state bonds where the treasurer assigns the underwriter, Chiang’s office announced.
“Whoever chose to cheat in small matters cannot be trusted in larger matters,” Chiang said at a San Francisco news conference. “In the case of Wells Fargo, how can my office continue to trust the public’s money to an organization that has shown such little regard for legions of Californians who have placed their financial well-being in its care?”
Chiang said he would extend and potentially broaden the punishment if Wells Fargo doesn’t live up to the terms of the $185 million settlement with federal authorities. The consent orders include reimbursing the bank’s victims and changing internal policies and procedures to prevent future abuses.
Additional punishment could involve severing all ties between the treasurer’s office and the bank, Chiang’s office said. In addition, Chiang said he will work with colleagues on the boards of the mammoth CalPERS and CalSTRS pension systems on changes to ensure “this type of behavior and systemic corruption does not reoccur.” The two pension funds have a total of $2.3 billion invested with Wells Fargo.
Chiang’s office, the largest issuer of municipal debt in the U.S., oversees nearly $2 trillion in banking transactions a year and manages a $75 billion investment pool. Chiang said the sanctions imposed Wednesday involve “lucrative” business for Wells Fargo but the exact amount of the fiscal hit to the bank is unclear.
Wells Fargo fired 5,300 employees over the account scandal. In a statement later Wednesday, the bank said it stands ready “to continue delivering outstanding service to the state.”
“We certainly understand the concerns that have been raised. We are very sorry and take full responsibility for the incidents in our retail bank,” the statement said. “We have already taken important steps, and will continue to do so, to address these issues and rebuild your trust.”