Before Wells Fargo (NYSE: WFC) found itself in the midst of a fraudulent account scandal that cost John Stumpf his job as CEO, Stumpf was widely regarded as one of the best bankers in the industry. He successfully led Wells Fargo through the great financial crisis and became famous for pushing back on the idea his bank should be forced to participate in bank bailouts in 2008.
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This podcast was recorded on Nov. 7, 2016.
Gaby Lapera: I was thinking maybe we could start with a story we were following really closely before I left, but I don't know anything about right now, which is the Wells Fargo story. As you guys might remember -- I hope you remember, I don't know, the new cycle is so short these days -- Wells Fargo was accused, and it was eventually proven correct, that they had opened a bunch of fake accounts. They were being investigated, they had to pay a bunch of fines, John Stumpf, the CEO, was required to stand up in front of the Senate Banking Committee, in front of Elizabeth Warren, and he got absolutely roasted. Totally watch that footage if you haven't yet, even though it's totally a month old now. What's happened with Wells Fargo since I left?
Jordan Wathen: I think the big story with Wells Fargo is that John Stumpf's career actually came to an end over the fraudulent accounts scandal at Wells Fargo. To recap, they opened 2 million accounts for people who never said they wanted them, and now, John Stumpf, finally, after some push and shove, he exited on Oct. 12 and stepped down as CEO of Wells Fargo.
Lapera: This is really wild. John Stumpf has been the CEO of Wells Fargo since 2007. Before all this happened, people thought he was an incredible CEO and an incredible leader. And here we are, 2016, and he has to step down because his company has been up to things that they really shouldn't have been.
Wathen: Right. If you go back and read any book on the financial crisis, and look at what happened during the bailouts, John Stumpf basically said, "Wells Fargo is on solid ground, we don't need your bailout money, I don't even know why you're bothering me and bringing me here." Wells Fargo really was, they were perhaps better off than any other bank. Really, his legacy could have been that he successfully guided Wells Fargo through the worst financial crisis since the Great Depression. Now, basically, his name gets tarnished with this whole scandal.
Lapera: Yeah. And it's really interesting to me, because at the beginning of this scandal, it didn't seem like he had a great grasp of how seriously everyone was taking it. Like, I don't know if you've seen any of the footage of him talking about it really early on, but he didn't even seem like he was going to stop down or apologize, and Carrie Tolstedt was going to get a ton of money and stock options. So, it's really interesting to see how things have shifted. I wonder what happened that caused him to be like, "You know what? I'm stepping down."
Wathen: I think it's the pressure. This is one of those things that -- during the financial crisis, every bank was in trouble. They all underwrote terrible loans, they all lost billions of dollars on these loans. But right now, it's just Wells Fargo. It's just Wells Fargo that you're hearing about with these account scandals. And the numbers they've put out this quarter have indicated that there's at least been some kind of change in the sales process, because they noted that checking account opens were down 25% year over year in September, and credit card applications were down 20% year over year in September, also. It's probably two things. The consumers are wary of Wells Fargo to some extent. And there's probably a very obvious change in sales practices. People are no longer getting accounts they didn't necessarily request.
Lapera: Yeah, it's going to be interesting to see what happens to Wells Fargo long term. I'm not going to make a call right now, because I literally just got back, so I haven't looked at anything they put out. But you better believe we're definitely going to do a show on it later on, probably this quarter.