The head of the biggest American mortgage lender is leaving as the company grapples with an epic scandal that resulted in thousands of employee firings and millions of fraudulent accounts created.
Last month, Wells Fargo Bank, N.A., agreed to pay $185 million to settle allegations that its employees fraudulently opened 1.5 million deposit accounts and a half-million credit card accounts.
The Consumer Financial Protection Bureau received $100 million of the settlement. CFPB Director Richard Cordray noted in a news release that it was “the largest penalty the CFPB has ever imposed.”
Wells Fargo & Co. Chairman and Chief Executive Officer John G. Stumpf was summoned to Capitol Hill where he was berated by senators including Massachusetts Democrat Sen. Elizabeth Warren, who criticized the company for not firing senior managers.
On Wednesday, the San Francisco-based bank-holding company announced that Stumpf will immediately retire.
Stumpf’s ouster follows a 34-year career at Wells Fargo and its predecessor, Norwest Bank.
He joined Norwest’s loan administration department in 1982 and worked his way up through the ranks as Norwest Corp. acquired Wells Fargo in 1998.
Stumpf was named CEO in June 2007 and was elected chairman in 2009.
In a statement to Mortgage Daily, Sen. Warren said that Stumpf’s resignation doesn’t go far enough.
“As I said at the hearing last month, Mr. Stumpf should resign, return every nickel he made while this scam was going on, and face an investigation by the Justice Department and SEC,” Warren said. “So far, he’s one for three. If Mr. Stumpf is leaving with all of his ill-gotten millions that’s still not real accountability.”
Warren also questioned the disparity between senior management and lower level employees.
“A bank teller would face criminal charges and a prison sentence for stealing a handful of 20s from the cash drawer,” she added. “A bank CEO should not be able to oversee a massive fraud and simply walk away to enjoy his millions in retirement.”
Today’s Wells Fargo announcement indicated that
Stephen Sanger, the lead director on Wells Fargo’s board, will take over the role of chairman in a non-executive capacity.
Sanger joined the board in 2003 and became lead director in 2012. He was CEO of General Mills Inc. from 1995 to 2007 and was chairman of the packaged food producer from 1995 to 2008.
“John Stumpf has dedicated his professional life to banking, successfully leading Wells Fargo through the financial crisis and the largest merger in banking history, and helping to create one of the strongest and most well-known financial services companies in the world,” Sanger stated in the announcement. “However, he believes new leadership at this time is appropriate to guide Wells Fargo through its current challenges and take the company forward.”
Wells Fargo President and Chief Operating Officer Tim Sloan will take over as CEO. He’ll retain the title of president.
Sloan has been with Wells Fargo for 29 years. He was named president and COO in 2015.
Sloan noted in the announcement that his most-pressing priority
“is to restore trust in Wells Fargo.”
Sanger added, “The board of directors has great confidence in Tim Sloan. He is a proven leader who knows Wells Fargo’s operations deeply, holds the respect of its stakeholders, and is ready to lead the company into the future.”
In addition,
independent director Elizabeth Duke has been voted to serve as vice chair.
Wells Fargo originated $107 billion in residential loans last year — more than any other U.S. lender. It’s mortgage servicing portfolio was $1.6 trillion as of June 30, 2016, the biggest of any mortgage company.
