tv Varney Company FOX Business September 20, 2016 9:00am-12:01pm EDT
did they get that. maria: and cuomo did that. dagen: he said i said it was terrorism and he did say it was terrorism. maria: thanks for being here. "varney & company" begins now. stuart, take it away. stuart: thank you very much indeed. bring them in, says president obama, keep them out, says donald trump. tough vetting, says hillary clinton. good morning, everyone, terror and muslim immigration now front and center in this campaign and less than 24 hours after the arrest of the alleged new york bomber it it's donald trump who appears to be outfront. before in overflow crowd in florida, trump said immigration security, enemies and combatants are coming into our country. extreme vetting is required. go after them over there. knock the hell out of them. tough trump on full display. hillary clinton offered reassurance, go about your
daily lives don't be detoured by terror, we can handle it at home and abroad. she wants tough vetting didn't recall immigration. a and. and president obama will not link terror to the eligs-- religion of the attackers. avoids the word "terror". he addresses the u.n. assembly, he wants to bring in more migrants. wells fargo gets grilled and we'll bring you one of their victims. and the markets gear up for a very important decision from janet yellen. "varney & company" is about to begin. ♪ >> you know, you better get that buzzer ready because we're
going to talk about the fed. [laughter] sound effects from webster. okay. their decision on interest rates, we're going to get that decision tomorrow afternoon. you know, for wall street, it's all about janet yellen and the mess that she's in and maybe we're in, too. we're up about 50 on the opening bell on the dow. the price of oil is moving lower. hopes for any kind of deal between opec and russia and freezing production, those hopes fading rapidly. >> and the oversupply to the tune, and how about apple, it took off last week, thanks to the new iphone 7 and the dreadful samsung recall. and that stock is going 127. pretty close to the all-time high. and a little over an hour from now, the wells fargo ceo will be on capital hill. he's going to apologize for his employees setting up phony accounts and take full accounts of responsibility. and some senators will demand
that executives pay back salaries and bonuses from any unethical activity. one of those will be joining us later this hour, that's on tap today. the afghan immigrants who authorities believe planted bombs in new jersey and new york, he was captured after a dramatic gun battle with the cops found him sleeping in a doorway of a bar. we have late breaking news of a terrorist pakistani wife. what's that about, ashley. ashley: this was the wife that this suspect married over seas in pakistan back in 2011. he applied for a visa for her to come to the united states, but it was unclear whether she in fact did, but now we understand that two days before this attack happened, she left the united states. stuart: so the implication is two days before. >> she knew. stuart: the attacks, she took off and tried to get to pakistan. she was interrupted in her journey in the gulf states?
>> that's exactly right. stuart: what else do we know about that guy right there? >> well, he's 28 years old. it turns out he's had numerous trips back and forth between afghanistan and pakistan. what's interesting is, these are countries where a flag would go up. he came back to the united states, went through what they call secondary screening, but never ever was-- a hand raised and said, wait a minute, there's something not right here. they believe he was radicalized, but maybe in 2014. he had a lot of back and forth between the countries. stuart: and the man who carried out the minnesota stabbing attack at the mall there. what about him. >> 22-year-old, no known links to isis, shouted, according to witnesses at the mall made references to allah, asked one of the victims whether they were muslim. he comes from a sizable somali area in st. cloud. did he have any links to isis? isis claimed him as a soldier
of theirs, but there's a lot of doubt whether these true or not, taking credit for someone who went on a stabbing spree. stuart: unless he receives a phone call from isis, do it now, there's no connection liz: or an i.d. call. stuart: making a joke out of it, but unless you can say-- ments and asking people if they're muslim before stabbing. stuart: i want to get to the politics of terror. we got two very, very different approaches from the candidates. one says stay on our current policy, that's hillary clinton and let more muslim migrants come in. that's hillary clinton. keep them out, that's donald trump. kt mcfarland is here, close observer of this particular story. am i being too harsh here on hillary and too pro trump in my opinion? >> you know, don't look at what they say, look at what they do. what did hillary clinton do when she was secretary of state? she helped screw up the middle
east, right, the libyan war, the withdrawal from iraq created isis and now we have a syrian refugee crisis, but it's also a crisis of refugees throughout the region and she, like president obama said, come on in. open borders, we'll take everybody here. we'll increase the number and even our own fbi director said there are problems vetting these people and we've just seen yesterday that these people, who some of the ones causing the problems, were vetted correctly. now, there's something wrong here. >> 900 supposed to be deported and in fact, given citizenship, full citizenship, they can vote in this election and then there are 300,000 who have come here, i think i'm going to say. >> i think that's right. >> they've come here and they're planning to come here and we don't have their fingerprints. >> we don't have their fingerprints and how to vet people. the problem is, the reference with the files and the police
chief in raqqa, and tell me about ahmad. was that part of the terror group? >> hillary has not reversed her position on immigrants coming in. >> she's doubled down on it encourage more iigrants coming from those regions. if you want to be a real humanitarian don't bring them here, they don't have jobs, don't know the language, they're not wanted in some communities here. put them in a position when their countries are taken back, they can move back to their countries. not only is it bad for their security, but it's not humanitarian. stuart: kt, stay there for a second. the candidates, hillary clinton calling trump an advertisement for isis. listen to this. >> we know that a lot of the rhetoric we've heard from donald trump has been seized on by terrorists, in particular isis. because they are looking to make this into a war against
islam. the kinds of rhetoric and language that mr. trump has used is giving aid and comfort to our adversaries. stuart: aid and comfort to our add vversarie adversaries. that's a serious legalistic charge. answer the charge from her about your guy, donald trump. >> stuart, i have to say this is the height of hypocrisy. i agree with kt, the middle east is a mess and a messier largely made by terrible u.s. policy, a regime change and failed nation building under this administration and under the watch of secretary of state clinton, but specifically to this idea that talking tough about our adversaries gives them comfort, that'd be like winston churchill denouncing
germany, would give comfort to goring. think about that, we were not attacked by terrorism, we were attacked with knives and bombs and guns all over america and all over europe. this is a life and death struggle. >> it's not a battle of narrative. our words on our side matter and we have to clearly identify the enemy, and we have to have smart and tough policies to try to prevent and deter these kind of attacks. stuart: steve. stay there. a lot more for you coming up. sometimes, evil in others brings out the very best in us. case in point, a starbucks employee thanks new york city first responders with free coffee. just watch this. >> [inaudible]
>> thank you so much, man. thank you, man. >> you see? we're not about gloom and doom on that program. that man is a good man. take it from me. >> wells fargo ceo will take on the anger of the senate banking committee. he's sorry that his employees scammed thousands of customers. he takes responsibility. we'll show you one who was scammed. >> the fed's regulation on self-driving cars. the president says if one of the cars isn't safe, he would not hesitate to pull it off the road. that's president obama. >> donald trump says the expected terrorist should be treated as an enemy combatant. instead, he's got a lawyer, judge napolitano on that one. there will be fireworks there. and angela merkel, changing the tune on germany's migrant policy. she says if she could do it all over again she could turn back the clock. so why is she letting more migrants in still?
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. stuart: we'd like to bring you news, sears is going to close 54 more kmart stores. the sears stock opens higher. go pro, reviewing the new drone. it's called karma. it's got a new camera, and it's going up a few cents, that's it. george soros is giving 500 million to help migrants and star businesses. he wants other nations to follow suit. ashley, tell me what's going on. >> 500 million, what he says to invest in startups and establish companies and social impact initiatives and don't you love that term?
and businesses started by migrants and refugees. that's his pitch, 21 million refugees, by the way. i listened to this. great. what about the people in the country that could use that help themselves to get a leg up. charity begins at home. >> and that's a message that i think you should deliver to mr. soros. >> i will do that. stuart: to germany. angela merkel's party. lost big in the latest election and angela merkel now says she wishes she could turn back time over the migrants. looks like a job for daily mail columnist katie hopkins who joins us from london. she's in real trouble with this one, but she says she'd love to turn back the clock, but is not saying no more migrants. the policy stays in place. >> yeah, 82% of people in germany say they disagree with the migrant policy, that they want it changed and she's
always been saying, let them come, let them come. only now when she suffered two defeats against her party and pushed into place, third place, by an anti-immigration policy. she's saying, oh, if i could change it i would. if i could turn back time. but if in reality she doesn't want to change her policy, she's just a little sorry now that it's impacted of her and her chances of winning the next election. >> are you going to say that there's a parallel with the immigration discussion here? because hillary clinton and president obama are both saying, keep the migrant flow coming. >> it's unbelievable, watching the bombing in new york, watching the events unfold, it was like watching history repeat itself. i just sad there incredulous. first of all, no one would say the word terror in case they offended a muslim somewhere. no one was allowed to say the word bomb. then it was, oh, no, it's not terror, it might be international terror, that's all right then. it's not, you know, home grown. that will be okay.
and then, you know, this idea that we caused the problem with our narrative of hate. people like me, people like donald trump. we've caused the problem. we have that as well. and then you have standing up and saying do not let this make you afraid. do not have fear. we will not back down. that's very well if you've got 24/7 and fbi close protections, but like me and other new york families, it's frightening. and i know people in new york they wouldn't go out to dinner because they were afraid to go out. stuart: amazing. one last one on europe. if angela merkel is saying this and she's in such deep political trouble. would you go so far as to say it's the migrant issue, the muslim migrant issue that's broken up europe? again, have i been too strong on this? >> absolutely. for me, brexit was determined by the migrant issue. i believe we voted to leave the european union because we did not want to told how many
migrants we were going to have to take. i now believe the same parallel will happen and america will have its brexit and i believe this is the moment that donald trump wins this thing because we've had enough of people telling us, oh, it was only these three or four migrants or three or four muslims, and everyone else is lovely. we get told her, katie, a lot of the people injured are muslim. that doesn't make it okay. multicultural isn't if we all die together. i think this wins it for donald and that makes me a happy girl. stuart: you know, i think you should apply for a green card. >> i'm coming, i'm coming over, be afraid, be afraid. stuart: katie hopkins, thank you as always, we appreciate it. ashley: funny. stuar stuart:later on this morning, you're going to see the fireworks likely to be generated on capitol hill. wells fargo's chief is going to get grilled. the stock is going up at the opening bell, but the chief, to
use a cliche on the hot seat. will bank executives be forced to give back bonuses, if they're involved in the unethical activity. liz macdonald says, no, they will not liz: more after that. stuart: we'll have more on that one, too. president obama, he's really passionate when he's talking about getting hillary clinton elected and when he's talking about his own legacy. totally different tone when he talks about defending our country and terror. we'll bring you the contrast in a moment. more varney after this. so what else is new? how's your mother? umm..she's doing good. she needs more care though. she wants to stay in her house. i don't know even where to start with that. first, let's take a look at your financial plan and see what we can do. ok, so we've got... we'll listen. we'll talk. we'll plan. baird.
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call liberty mutual for a free quote today at liberty stands with you™. liberty mutual insurance. > >> no such thing as a vote that doesn't matter. it always matters. and after we have achieved historic turnout in 2008 and 2012 and especially in the
african-american community, i will consider it a personal insult, an insult to my legacy if this community lets down its guard and fails to activate itself in this election. you want to give me a good send-off? go vote! . stuart: that was president obama on sunday night campaigning for hillary clinton. as you saw right there. he was energized. he was passionate. i think he was angry. less than 24 hours later he spoke with terror, a word he
will not use. watch this. >> we are going to continue to go after them, we are going to take out their leaders. we're going to take out their infrastructure. they are continuing to lose ground in iraq and in syria and you know, at moments like this, i think it's important to remember what terrorists and violent extremists are trying to do. they are trying to hurt innocent people and they also want to inspire fear in all of us and disrupt the way we live, to undermine our values. stuart: all right. that's quite a contrast, i think. kt mcfarland is with us. the real contrast. the man is talking about his legacy passionately and about terror, backing an i way. >> those two clips are brilliant. and you don't have to be a shrink, what does he care about his legacy, what does not he care as much about, the safety and security of the american people. stuart: that's a terrible thing
to say. >> the foreign policy is strategic patience and everything is going to work out in the end. we don't have to do much with the middle east, with china, with russia or iran and things will work out in the end. and no drama obama is going to-- >> i think he feels his legacy in question and that his legacy is in some degree in shreds and that's my opinion. >> or he's in parallel universe. stuart: that's a strong statement, the president of the united states. >> who thinks his legacy is much more important and more excited about it than he does when he talks about protecting the american people at home. stuart: i suspect you're unlikely to be an advisor to hillary clinton? >> i ran against hillary clinton. stuart: thank you for being on the show. wells fargo, you're going to see and hear about it, and the ceo will be grilled on capitol hill. in the next hour, you're going
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>> we're going to ring that bell and the focus today and tomorrow is going to be the federal reserve. there, i said it. 9:30, here we go, we're off and running and open that market tuesday morning. state up, 55 points higher and the first couple of seconds and there you have it. 18,180. left-hand side of the screen and almost all of the dow 30 are in the green and they're going up. and how about the s&p 500, the dow is up .3% and the s&p up .3%. the nasdaq, more technology stocks over there. and where is that going? up .4%. generally across the board, oil now down to $42 per barrel and apparently, having no impact on the stock market this morning, and the dow is now up 85. how about this? wells fargo's chief is going to face the senate banking
committee. there will be pressures for executives at banking institutions to give back their bonuses if they've taken part in unethical behavior. you're going to watch on capitol hill about 30 minutes from now, but the wells fargo chief faces the senate banking committee and the stock is going up. and they think it's going up to 127, not that far away from the all-time high of 134. there's a new camera from gopro, the hero five and they've rolled out the drone, called the karma. $800 if you want one. foldable blades and folds up into a backpack. sears announced plans to close 64 more kmart locations and its footprint is shrinking fast as on-line shopping grows. fedex, the company says it's going to raise rates after the holidays. who is with us on a tuesday morning?
i'll tell you, and ashley webster, liz macdonald, peter morici, steve cortez, a busy screen. i want to talk about wells fargo, yes, political theater, but i want to know would you buy the stock at the current price? i'll start with you, steve cortez? >> stuart, you know, i would not right here. the reason i don't like banks and you mentioned the federal reserve. i think the fed is on hold. i think that interest raets are going to stay low and interest rates compressed. not a great unfortunately for the banks unfortunately. >> what do you say about wells fargo stock? >> i think that wells fargo is a culturally broken company. and it's in its core, a criminal enterprise. i know that's strong terms, what they've done is fraudulent in nature. the ceo could not possibly know that this is not going on. long-term wells fargo is in a large amount of trouble. what i wouldn't want to own is
wells fargo bonds. stuart: okay. understood. how about you, todd? now, all of these banking stocks are going up, and nothing to do with wells fargo and everything to do with the federal reserve, is that right? >> that's correct and i would be a buyer of wells fargo, i think you've seen-- they've thrown everything at it and they've known what's going to happen and they've stayed in in business a lot longer and this is more in some way, shape and form and probably a buy down here. >> interesting, lots of sound and no impact on the-- >> and the banking, this was a victimless crime, it's not that big of a deal. they start people money without their knowledge. if i went there, 25 bucks from everybody's account, i would be sent to jail. stuart: and we've got a lady who was put through hell on the show. put through hell by wells fargo later on the show, not a victimless crime liz: they charged 5 million fees.
by law they don't have to do a claw-back. stuart: we're up 94 points already, 97 points on the dow industrial and this is all about the federal reserve. i'm sure they're not betting that they'll raise the rates. i think that's what the betting is right now. we'll see. how about apple? show me that, please. ubs says it's going to 127. that's not too far away from the 134 all-time high. steve cortez, same question. would you buy apple at 113? >> i'm going to punt on this and say i don't know. frankly. i think that apple, there are compelling valuation reasons it buy apple. on the other hand there's nothing compelling product-wise and i think it's pretty fairly valued right here. >> okay. anybody else? ys the ou buy apple at 113? apple i-7 is not versus the iphone 6 and talking about it later in the show. google is coming out possibly.
>> and ubs raised the price target, what's going on in china with the phone. no idea and verizon side the market for the iphone 7 is not that unusual from others. stuart: and how about you, todd. would you buy apple at 113? >> actually, i shorted yesterday at 115. no, i'm a buyer at 100. >> i think woo we need to-- >> this is now a maturing marketplace and we shouldn't expect massive breakthroughs. given the problems that samsung is having with its batteries. apple is ahead and even if it's fallen the last 60 minutes, 30 minutes underwater not to say 60 minutes and the camera isn't quite the latest thing. it is an improvement over the last phone and it doesn't have the drama that the principal competitor would have. >> the dow industrials are up
over 100 points. we're up 101 at 18,220. general motors and the canadian auto workers union announced a deal, gm 31. higher profits of the home builder, lennar, they're booking more orders for the new home and the stock is down 3 1/2%. maybe that's disappointing. talking about oracle, competing with amazon for cloud business. the oracle ceo is talking about it. it's the magic pc in the sky and holding voters and other things. amazon and oracle both up this morning. do you like that? [laughter] >> kellogg voluntarily recalls a limited number of their eggo, nutrigrain whole wheat waffles. serious stuff, possible listeria contamination, no reports of illnesses and got the recall and the stocks goes up just a little. sea world will suspend dividend payments and will use the money
to buy back shares the rest of the year. what's that about? it's down 5%. 800 bucks buys you a brand new gopro drone. anything on the knocks, nicole. nicole: we'll see whether there's an effect on the stock. probably the end of october. when the karma, this drone goes on sale, october 23rd to be precise. and in the meantime, you know a lot of the analysts have been watching gopro and say is it a one-hit wonder. it's great if you're biking or snow boarding or kayaking like that guy? what else do they have? they had like you said the magic cloud in the sky and you have your video up there, and logged up. and put up music that they provide and maybe that will help them. an extra five bucks, but this drone is the next greatest thing for gopro and it's going to be released in october. and they need a new camera to
go with it. stuart: i might get one. that's the news of the day. nicole: no way, no chance. stuart: i've been thinking about it here. >> and remember captain hook with the bird on the shoulder. you could have this one follow you around up the stairs and the elevator with you on fox. stuart: and i think it's insurance companies, the pirate with the bird on his shoulder, and the bird saying, sort of aw, aw-- >> liz: like aflac. stuart: what a die-- digressio in that was. and the driverless cars, rules
putting them on the road liz: backup in case of failure, and to the government. hands off the wheel, the government if they say it's not safe, they will pull it off the road, that car. ashley: although obama said something i never thought i'd hear from his lips, the government can go too far sometimes with regulation. stuart: he said that? >> he did. stuart: todd, what have you got? >> that was a punchline and a joke, right, ashley? >> all right, you got me. >> yeah, and the webster is ratio is starting to play out. the markets are selling off here. and to morici's point on apple. i think it's a mature company and active stocks. and particularly under amazon and the high-tech. apple is more of a solid company not chased after. and i think that's part of the problem. we're reaching too far to stocks. stuart: it's mature. ashley: i hear from a lot of people, they're not changing the apple phones right now.
they're waiting for the 10-year annirsary and widely expect apple to widen out the stocks. stuart: that's next year. all right. there's a lot of, shall we call this federal reserve same old thing going on this week ahead of tomorrow's big interest rate. we'll start today and get the news tomorrow. all right, we've got the buzzer ready. let's not get too technical here. peter, are they going to raise rates this year. you say what? >> we're not going to raise them at this meeting. there's a decent chance in december. there's a lot of pressure to do it, with an election coming up and all of those liberals, mr. obama appointed. i think they'll blink now and that's a mistake. stuart: i agree with you. i think it could be december. i don't think it's going to be september, october. i don't think it's going to happen. all right, everyone, we're out of time. thanks very much indeed. steve, todd, peter, we appreciate you being with us this morning. we still-- we've still got a gain on the dow industrials. 74 points. >> i think todd was right there.
the ashley webster ratio is coming into play. oil is down and the market is certainly off its highs, okay? so, take another victory lap. >> every day. stuart: happening at the top of this hour, political drama. capitol hill. wells fargo ceo will be grilled by those democrats and republicans. the question we want answered, will the bank executives be asked and told to pay back bonuses and pay if they're involved in unethical activity. that will set a pattern for the rest of the industry for a long time to come. we'll see about that. and also, the terrorist suspect arrested in new jersey, made multiple trips to afghanistan and pakistan. donald trump says, treat him as an enemy combatant. now, what do you think judge napolitano is going to say about that. can you guess? he's on his way in. ♪ ♪ go on, take the money and run ♪
now that fedex has helped us simplify our e-commerce, we could focus on bigger issues, like our passive aggressive environment. we're not passive aggressive. hey, hey, hey, there are no bad suggestions here... no matter how lame they are. well said, ann. i've always admired how you just say what's in your head, without thinking. very brave. good point ted. you're living proof that looks aren't everything. thank you. welcome. so, fedex helped simplify our e-commerce business and this is not a passive aggressive environment. i just wanted to say, you guys are doing a great job. what's that supposed to mean? fedex. helping small business simplify e-commerce.
>> well, the price of oil is way down at $42 a barrel and bearing in mind the webster ratio, we now have the stock market coming off its highs, okay? up 74 for the dow industrials. and how about google. they're hinting they're going to release a new smart phone next month. is this complete with-- pretty cool stuff. in less than two months time, possibly souped up camera and a metal version of the phone could be coming out. we don't know who the supplier is going to be, but google is pushing the new phone. stuart: especially with the samsung recall. and wells fargo chief will be
manufacturing on capitol hill and david vitter will be on the committee who asks the questions. senator, i want to ask this question of you. would you want a rule that says if a bank executive is in any way connected with unethical behavior, they should have their pay and bonuses taken off them? would you have that rule? >> absolutely. and depending on the behavior, it could be more appropriate to go much further than that. one of the key questions, stuart, at the hearing is who knew about this within the bank, how high did that go up? 5300 employees were fired, we don't know the highest level of employee that was fired. that question is going to be asked. >> forgive me of being pejorative, are you jumping on a political band wag began? wall street is not popular and here is your chance to have a go at him. >> listen, this is a serious case of fraud and it's massive fraud. if you look at the pure
substance, there's a lot to be concerned about that we need to learn from. i'm also concerned that these mega institutions, so-called too big to fail, are too big to regulate by the regulators or internally by their top leadership. if the top leadership knew nothing of the widespread fraud. what does that say? >> okay. now, yesterday on this program. we had a market watcher, a bank analyst on the show, dick bove and he said the wells fargo fiasco was not that big a deal. listen to him on tape, senator. roll tape. >> it's still at this point a victimless crime. nobody was hurt by it. some people paid $25, you know, that they shouldn't have paid, but they'll get that money back. to take this thing all the way up to the senate and the house, seems to me to be an extreme reaction to what was actually occurring here. . >> senator, i think you heard what he had to say there. >> i couldn't disagree more strongly.
2 million fake accounts, massive fraud. 5300 employees fired. that is widespread abuse and the fact that relatively small dollar amounts were involved doesn't mitigate that. >> elizabeth warren, senator warren, i think, wants to break up the big banks. are you in favor of that, too? >> no, i don't think the government should decide banks-- i think we need more protection against too big to fail. that's why i teamed up, for instance, with sherrod brown to have higher capital requirements for mega banks, but that's not the government saying there can only be this maxim maximum. stuart: when you get inside the chamber, will you take an aggressive tone with the ceo at wells fargo. >> this institution committed massive fraud so i'm going to take the appropriate tone and i think a lot of folks are going to be asking some very specific
questions, which have not been answered yet. stuart: senator, we appreciate you being with us this morning. >> thank you, sir. stuart: a busy day in front of you and we'll be watching you shortly. david vitter, thank you, sir. the dow industrials are now up 71 points, we were up over 100 and now we're up 71. the focus this week for the markets for investors entirely on the federal reserve and what are they going to do about interest rates? we'll know, by the way, tomorrow afternoon. suspected terrorist ahmad khan rahami arrested in new jersey. up next, trump says he's an enemy combatant. justice napolitano says he should have a lawyer. there's a difference of opinion there. (announcer vo) that's right, keep rockin'.
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>> we have a news item that's just developing, a palestinian teacher will speak at a clinton global initiative dinner tonight. there is some controversy here. yes, there is. this teacher, her husband is a palestinian official convicted in 1980 of a bomb attack that killed six israelis and he was in jail for ten years in an israeli prison. critics say this is not the person you should have giving this address tonight given that not that far away down the street here in manhattan another bomb went off and they
believe that it's in bad taste. however, some of the major donors of the clinton foundation call this teacher a beacon of hope. stuart: beacon of hope. okay. now this. donald trump addressed the capture of ahmad rahami. he addressed the subject at a rally in florida. he is against the rights given to that man. watch this. >> now we will give him amazing hospitalizati hospitalization. he will be taken care of by some of the best doctors in the world. he will be given a fully modern and updated hospital room. and he'll probably even have room service knowing the way our country is. >> well, i think donald trump made a cause there.
i wonder if it's a call that resonates with judge napolitano. >> it's an effective way to get his point across without directly criticizing the constitution and due process. senator lindsey graham himself a lawyer and a judge in the military, directly attacked due process saying we should take his due process away and-- >> he did not directly take his due process rights away from him. senator graham said that that man, rahami should be considered an enemy combatant because he had trained overseas and then came to america to kill americans. >> mcvay -- timothy mcveigh as well. stuart: and we put the questions to him and is there something wrong with my thinking, judge?
>> yes, it's british thinking, not american thinking. [laughter] kidding. it denies the right, the truism that our rights are natural, that our rights belong to persons. i can sacrifice my due process rights, but i can't sacrifice yours. just because we hate him and fear him, he has anti-american views, he hates america and he used violence to perpetrate that hatred does not deny the constitutional liberties that he has. if the government could take away constitutional liberties because it hates a person, fears them or they have assaulted the government, it could take away anybody's constitutional liberties and a guarantee in the constitution would be meaningless. >> but if the facts fit the case, and the fact is, he did train overseas, he went to avs, he went to pakistan and came back here, obviously to kill with fairly sophisticated cell
phone bomb, several of them. the fact fits the case that he's an enemy combatant. >> you would need to amend the constitution. the constitution says no person shall suffer the loss, liberty or property without due process of law, it doesn't say no good person. it doesn't say no citizen, it doesn't say no well intended person. it says no person. stuart: fortunately in, 11:00 hour this morning you'll be talking about the banking issue. [laughter] enemy combatants, that's another story. we welcome you back in the 11:00 hour despite the fact you're so totally wrong in the 9:00 hour. >> it's your show and still love you. [laughter] >> 88 point gain for the dow industrial average. we're back with the banking hearing in just a moment.
theater. moments from now wells fargo will be grilled on capitol hill. the bank created about two million fake accounts to boost its sales numbers. its ceo is about to be questioned. one is senator elizabeth warren. there's more to this man politics. this may shape the future. should executives be forced to give back their pay and bonuses if they provide over fraudulent and damaging activities? should they be fired and stopped from using sales incentive schemes. if you say yes to all of the above. how do you right the rules on that. yes, of course, there will be plenty of political theater and theatrical moments. there's an election coming. wall street is not popular and politicians can be expected to take time in front of the camerasme
camerasment-- cameras. before we go to the hearing. linda edwards, one of the victims of the schemes. i want you to tell us what happened. they opened fake accounts in your name and your daughter's name. then what happened to you? >> well, we pent to the bank to investigate the accounts. they told us they were auto generated and a computer glitch. we asked to see copies of the applications and they weren't able to do something. this is the summer that my daughter was entering college. in an effort to clear up the issues, we paid the credit card charges and we closed all of the accounts. in follow-up we wrote a letter to wells fargo any negative credit information be erased from her report. >> did you get letters from bill can collectors? >> we got a letter about her
credit card debt and she never had a credit card. stuart: how long did it go on? >> throughout the summer. stuart: if they made your life a hell for the summer? >> for the summer and beyond, thousands of hours to clear up her credit history. stuart: how long was it before you got satisfaction, if i can put it like that? >> we still don't have satisfaction, we don't know if wells fargo pulled that information from her credit report. stuart: before we go to the hearing, i want to ask you, linda, what would you do with mr. stumpf, the ceo of wells fargo and about to testify? >> well, there's an old saying that says when the ship is in trouble you look to the bridge. so, i think the customers will take care of that and hopefully the congress will create some sort of avenue for consumers who have been scammed. stuart: what punishment would you like to see for wells
fargo, fined $180 million, what would you like to see? >> i'd like to see the people scammed help. i formerly worked for the new jersey banking industry and i know the process of consumer protection and filed complaints through the consumer financial protection board. they had two shots of helping me, they didn't help and the only help i got was when i went to senator menendez when i learned he was on the banking committee. stuart: linda, would you stay there for a moment? >> sure. stuart: i'll introduce the rest of us who will carry us through the theater and listen in to what's said on capitol hill. we have judge peter napolitano and a former partner of goldman sachs. and ladies and gentlemen, i think we're getting into the hearings. richard shelby is reading his statement. shall we listen in for a second and get a sense how things are going. >> and court documents suggest these problems might have
existed long before then. the 2013 los angeles times articles led to an l.a. city attorney's office investigation into wells fargo sales practices. thousands of man hours by a dozen dedicated l.a. city attorneys culminated in a lawsuit against wells fargo in may of 2015. this timeline begs the question, where were the federal regulators during those years. the occ and the cfpp were aware of the issues, before the l.a. city attorneys lawsuit why did they wait until 2016 to bring an enforcement action. why did it take the l.a.-- why did it take the l.a. times report to uncover what should have been uncovered by wells fargo's regulators? if there were ever a textbook case where consumers needed protection, this was it. how many millions of unauthorized accounts does it
take before the cfpb notices and while the bureau a bidding this as the largest settlement in its history, it's unclear whether it had any significant role in discovering our investigating the conduct. just as it's fair to ask mr. stumpf what he knew, when he learned it, and what he did about it, it's also fair to ask those same questions of wells fargo's regulators. stuart: now, they're just laying out the time frame of the charges what wells fargo did. that's being laid out by the banking committee bank, mr. shelby, senator shelby. peter kearn is with us. you have some opinions. >> he's blown this from the beginning. it was several days after the announcement of the settlement before he appeared to the press to speak to the public where the bank stood. he represents millions and millions of shareholders and 270,000 employees. they were looking for guidance.
they didn't get it from him at the crucial moment. stuart: do you think he should take the blame for it? he should be punished? >> i think honestly, there's a lot of indignation and outrage here, but very little in the way of specific punishment. now, this is a bank for the last three years, each year, earns $23 billion. it earns a billion dollars every two weeks. stuart: profit. >> profit. stuart: a billion dollars every two weeks. >> one of the most profitable. 185 million is a tip, plus, guess how much of that went to the people who were harmed like the woman on before this liz: 5 million. >> 5 million dollars, irrelevant liz: and that's key and this is going to cause a lot of outrage in terms of punishment. in order by law, the dodd-frank law which elizabeth warren helped write. if the bank fraud caused a material restatement, that's the only time that the executive has to give back their compensation. this is just $5 million it's not material to the earnings under that law.
so what could happen, jamie dimon basically saw his pay cut in half after the london loss, will he give back compensation and say i'll take a pay cut. will he do that? under law they don't have to get their compensation clawed back. stuart: linda edwards. i think you're still there. you're the victim in this, if i can put it like that. forgive me for that, linda, but i think you are. do you want to see him give up a chunk of his compensation? >> i wouldn't mind. stuart: no, no, are you gung-ho giving up that money? >> i think the experts can decide. the behavior was so pathetic and just so widespread and they used the blame the teenager defense. it's beyond belief. >> judge napolitano, he doesn't normal lie like to see whole industries, raising their hands and swearing to tell the truth,
the whole truth and nothing, but the truth. >> i don't like inquisitions. >> do you think this is a in inquisition. >> and i agree with everything as tempered and charitable as she has been with what the victim said. that's a decision for shareholders or for the courts. it's not a decision for the congress. if the congress can bring every wrong doer it wants and swear the person under oath and get them on national television and beat them up. what kind of a system would that be? >> so, we cannot get hold of a known terrorist and charge him as being an enemy combatant. can't do that-- >> what does that have to do with banking? you have no-- >> yes? >> i lost my train of thought. >> you have antipathy for those
lawyers, but the punishment to distribute it to the victim. stuart: you're sure of this, that a class action will follow? >> i'm not sure it will follow, but it's a classic case for one. stuart: have we got senator brown there? is he asking questions? >> i believe he is. >> a record fine of $100 million. so $5300 team members earnings 30, 35,000 a year have lost their jobs while miss tollstead walks away with up to $120 million. despite firing thousands of team members, apparently decided it was not important enough to alert the head of the company, mr. stumpf or the board of directors or anyone else for two years, if ever, even though you both sat on that bank's board. center management and the board of directors apparently agreed. once the scandal became public
remedial action were stepped up against frontline team members, but the praise and performance bonuses continued to be lavished on miss tollstead until two months ago. you would take the lesson at the high cost of our country, to be fair many banks did take the lessons to heart. but every week we hear of a new lawsuit or enforcement action against one of them week after week after week after week. what are some of these lessons? first, the culture of the banks need to stop. and ending up in the c-suite. and the third in the rampant robo signing fraud, in wells fargo and banks need better controls. fourth, if you pay people on the basis of how many products they sell, that's what they'll do, whether it's in the
interest of the customers or not. and base pay needs to be increased. finally, change the pay structure and make incentives deferred so it's clear that the customer and company interest are aligned and enduring. wells fargo has come up short. re watching this and our people are listening to it and peter, he thinks that sherrod brown there was rather tepid, do you think? >> it just seemed sort of measured. one thing that he mentioned that has not come up much in the press, the board of directors. where was the board. you have the head of the corporate responsibility is pena, the former senate transportation committee. and the former head of deloitte and the former head chairman of general mills are the lead director. where are these gentlemen during this? where is the board? they're the ultimate governors, protectors of the shareholders. stuart: would the board have known about this? does it go that high? >> absolutely. once you have a lawsuit of this
magnitude, with are this got hit and where it really happened is if you look at the $14 billion fines and other multi-billion dollar fines, this is 185 million. so, it was so low on the fines they'd already written off enough, it was 1.3 billion they wrote off last year so it got buried. stuart: liz, what have you got? liz: sherrod brown is talking about the i.d. theft protection, but the theft protection did not alert that they were charged for $2 million in false bank accounts. stuart: are you as outraged about this as you appear to be? >> yes, to peter's point, a good one. the 185 million bucks, the woman who ran this unit walked off with some estimates. 100 million. her compensation was almost equated to the fines. that's unbelievable. >> the security issue is a good one. people wonder how did it work? it's called pinning. you get someone's atm and issue it to yourself on their behalf and you determine the pin.
once you have the pin, the customer can't know about, you're free to set up all kinds of accounts. pure stealing identity. >> the whole truth, nothing, but the truth, you may be seated. >> mr. stumpf, your testimony in the hearing. welcome to the committee. >> mr. shelby, ranking member brown and members of the committee. thank you for inviting me to be with you today. i am chairman and chief executive officer of wells fargo where i have wokked for nearly 35 years. it is my privilege to lead this company which was founded 164 years ago and has played a vital role in the financial history and development of our country. we employ more than 268,000
team members, 95% of whom are in the united states. one in every 600 working adults is a member of the wells fargo family and we have a presence in all 50 states. i am deeply sorry that we failed on our responsibility to our customers, to our team members, and to the american public. i've been through many challenges as wells fargo, but none of which pains me more than the one we will discuss this morning. wrongful sales practice behavior in our retail banking business goes against everything regarding our core principles, our ethics, and our culture. it runs counter to our vision of helping our customers succeed financially, and it is
not representative of wells fargo as an institution. i'm here to discuss the situation today, tell you about the actions we have taken, and our commitment on how to move forward. our entire culture is centered on serving our customers. and in this case, we let our customers down. our retail banking practice issues, sales issues, are not a reflection of our hard-working and talented team members who deserve thanks for helping our customers with their financial needs. i want to make very clear that we never directed nor wanted our team members to provide products and services to customers that they did not want. that is not good for our customers, and that is not good for our business. it is against everything we stand for as a company.
that said, i accept full responsibility for all unethical sales practices in our retail banking business. and i am fully committed to fixing this issue, strengthening our culture and taking the necessary actions to restore our customers' trust. and senators, will et tell you here today. the wells fargo board is actively engaged in this issue. the board has the tools to hold senior management accountable including me and care y toll stead. any actions taken with my executive officers will be appropriately disclosed and i want to be clear on this, i will respect and accept the
decision of the board. under new leadership we've already begun taking steps to ensure that the sales culture in our retail banking business is wholly aligned with our custome customers' interest. on september 13th, 2016. we announced a major decision that we would end product sales goals we want to make sure nothing gets in the way of doing right by our customers. the new leadership team's primary mission will be to provide the best possible service to our customers. i'm also announcing today, three new initiatives that will reinforce our commitment to our customers. first, we're expanding the scope of our account reveal to
2009 and 2010. second, we will be contacting every single one of our deposit customers across the country, using the same process that we agreed to with the city of los angeles for our california customers. and third, we have begun contacting hundreds of thousands of our customers with open credit cards, including those for whom we've already refunded fees to confirm whether they need or want their credit card. in addition, we've recently started sending customers a confirmation e-mail with one hour-- within one hour of opening any new deposit account and an acknowledgment letter before submitting a credit card
application. we recognize now that we should have done more sooner, to eliminate unethical conduct or incentives that may have unintentionally encouraged that contact. we took many incremental steps over the past five years in an attempt to address these situations, but we now know those steps were not enough. in 2011, a dedicated team began to engage in proactive monitoring of date an analytics, specifically for the purpose of rooting out sales practice violations. in 2012 we began reducing sales goals that team members would need to qualify for incentive compensation. in 2013, we created a new corporate wide enterprise oversight for sales practices. in 2014 we further revised our incentive compensation plans to
align pay with ethical performance. in 2015, we've added more enhancements, and began a series of town hall meetings to reinforce the importance of ethical leadership and always putting our customers first. throughout this five year period we've identified ip appropriate sales practices and identified those and took disciplinary actions for violations. the 5300 terminations over the five years widely reported. despite all of these efforts we did not get it right. we should have realized sooner, the best way to solve the problems in the retail banking business was to completely eliminate retail bank product
sales goals and one of the areas that we missed was the possibility that a compler could be charged fees in connection with accounts opened without their authorization. because deposit accounts that are not used are automatically closed. we assumed this could not happen. we were wrong. we took steps to refund fees and maintain procedures so this could not happen again. in august 2015. we started working with a consulting firm, pricewaterhousecoopers which conducted large scale data analysis of all 82 million accounts, deposit accounts and nearly 11 million credit card accounts that we had opened from 2011 through 2015.
of the 93 million accounts reviewed, approximately 2%, 1.5 million deposit accounts and 565,000 consumer credit card accounts were identified as accounts that may have been unauthorized. to be clear, pwc did not find these accounts had been unauthorized, but because it could not rule out the possibility, these accounts were further reviewed to determine if any fees had been charged. pwc calculated approximately 115,000 of these accounts had incurred 2.6 million dollars of fees, which had to be refunded to those customers. even one unauthorized account is one too many. this type of activity has no place in our culture. we are committed to getting it right 100% of the time.
and when we fall short, we accept responsibility and we do everything we can to make it right by our customers. i will close by saying again, i am deeply sorry that we have not lived up to our values in this way. i also want to take this opportunity to thank our 268,000 team members to come to work every day to serve our customers. today i am making a personal commitment to rebuilding our customers and investors' trust, the fate of our team members and the confidence of the american people. i'm happy now to address your questions. thank you. >> thank you, mr. stumpf. stuart: the questioning will now begin. that was very much eating humble pie by the ceo of wells fargo there. he says we're deeply sorry. we tackled the problem, but we did not get it right.
>> in 2011, how could there have been unauthorized activity before then? why 2011, i mean? >> i think we all know that not every team member will do everything right every day of every minute and we do a lot of training of our team members, coaching, they each sign an annual ethics statement and i can't guarantee it did not happen before that time. we are trying to manage it within the business and that's why i announced today that we're going back to 2010 and 2009 because at that time, as you might recall, we were putting the wachovia and wells fargo teams together and we just thought we don't want to leave any stone unturned. >> wells fargo fired approximately 5,300 employees
in connection with these practices. what was -- what were the criteria for termination and were any personnel actions taken short of termination? if so, what were they? in other words, i'm sure you didn't fire everybody. did you discipline them and why and so forth? >> senator, new for that question and it's a good one. we have a number of try angulations around how to understand when there might be improper behavior. if some customer all of a sudden shows up with three savings account, they probably don't need that. we have ethics lines, we have a culture of the company, if you see something that you don't think is proper, raise your hand, talk to a manager. so, we looked at a number of situations and some of them were perfectly legitimate. but for those who broke our
trust, were dishonest, put customers at risk, we do a very bright mind. and after all, we are a regulated institution and we have a fidelity bond in people who behave in this way, simply can't work here. >> mr. stumpf, your testimony also does not address when the violations were brought to the attention of senior management. specifically when did you find out that thousands of your employees were opening unauthorized accounts or fraudulent accounts? did it take that long? when did you find out? >> thank you, again, senator. the business last their own and the retail bank. after they had been working on
th this-- at any one time, team members in our banks-- after the business was dealing with this it was brought to the holding company and corporate assets. corporate audit. corporate compliance, so-called second line of defense got very active and that's when i became much more aware of the issue. >> does it bother you as the ceo of such a large bank that stemmic fraud was not brought to your attention soon by your employees. if i could turn the clock back, and i thought about this a thousand times, of course, i wish i would have done-- we all wish we would have done something more earlier. we didn't get on this fast enough. again, recognizing that this was, you know, the vast
majority of people who were doing the right thing. >> when-- let's go back to the question a minute ago. i don't believe that you answered it specifically. when did the senior management, you and others, you had deemed senior management, learn about this fraud? >> i can speak for myself. and i know that other corporate executives at the corporate area outside of the business, i could speak to myself and i believe others, it was 2013. before that, it was being dealt with with the audit and the compliance within the business unit. >> mr. stumpf, the board of directors of wells fargo has awarded the then head of the community banking, carrie tolstedt, in compensation for quote, success in furthering the company's objective of
cross-selling product and quote, reinforcing a strong risk culture, according to the 2015 proxy statement issued by your bank. explain to the american public today here, what accountability at a large bank looks like when an executive departs with millions of dollars in compensation after thousands of her employees defrauded customers. the question was raised by senator brown. >> i'll try to get to all of those, but please -- it's a good question. carrie tolstedt had a lot of requirements and things that her performance is measured on, putting the wachovia and wells business together, doing branding, doing, making sure customers were treated properly, and throughout that
entire period from 2011 until 2016 customer loyalty scores continued to improve. today they're top of class, even by independent studies of large banks. our team member engagement, we do a study every year and today we have 15 people engaged in that business and one that's disengaged. balances and customers had grown. now, in this particular area, she did not do enough and we decid decided, the chief operating officer she was reporting to at the time, and my consultant, we would go in a different direction, but i also want to be clear, carrie was eligible to retire when she was told we were going a different direction, she chose to retire and she got no retirement, severance benefits and her compensation she received in
the past, some of it, which is not-- which has been granted, but not yet vested, and other compensation, will be considered by the board of directors in an independent process that they have, and i will respect and accept whatever decision they make. >> that would be clawback? you have the ability at the bank to claw back, do you not? >> i'm not an expert in compensation, but i will get you whatever-- >> are you the ceo of the company, right? >> i'm the ceo. >> and so, are you the chairman of the board? >> i'm the chairman of the board. >> okay, then-- >> i do not-- >> and the buck stops here, so to speak? >> it stops, i'm the senior officer. >> so are you going to look into this seriously about what this person did, her responsibility and the big reward that she's getting that happened under her watch? >> senator, we will -- the
board of directors, the compensation committee and they'll refer to the board, i'm not part of that process. i want to make sure that-- that's a very independent process and nothing that i say would prejudice their deliberative process. whether she would have retired or she would have been fired. >> mr. stumpf, in a lot of banking based on integrity or trust by your customers in the bank itself? they do business with you, they put their money there, they trust you. what's happened to the banking system? not everywhere, but what has happened to the banking system? >> you know, senator, you think about it exactly the way i think about it. trust is the core element of any relationship and surely in the financial services business and we know, we have work to do in that area. and i intend to do all i can to help in that area. >> you believe you violated
that trust? >> there is no question with some of our customers, we have violated trust and we're going to have to work hard to reearn that. >> senator brown. >> thank you, mr. chairman. mr. stumpf, i'll make my questions short and ask you to be as concise as possible. to start with, your response to senator shelby, you became a wear of the widespread fraud in 2013. could you be more precise than that? when in 2013? >> well, i became aware that the problems the local business was working on in rooting out this behavior by 1% of our team members, gave or take and i don't want to minimize that, that we were not making enough progress. >> and when did you become aware more precisely? >> it was later. >> was it the l.a. times article that you became-- >> later in 2013. well, i had -- actually, i don't remember the exact time frame. i need to get back to you, but
it was sometime in 2013. >> okay, thank you for that. you suggest-- you mentioned that the wachovia merger, that you're willing to go back before 2011, 2009 and 10 in part because of the wachovia merger. the emphasis on cross-selling dates back at least to the norwest merger, this has been a wells fargo business plan for a number of years. what near was the norwest merger? >> what you were talking about-- >> the merger with wells. >> that was 1998. >> and so this wachovia merger, there clearly was some-- you're going back to 2009 and 10. you're offering to do that. why stop at 2009. we hear from people it's going on longer than that, with the cross-selling and the pressure and the sales goals.
why are you only willing to go to 2009? >> senator, i would tell you this, we agreed with regulators in our agreements to go back to 2011, we made a decision to go back to 2010 and 9 and we want to make it right by am i customers. does that mean you're willing to go back before 2009. >> i have to talk about our folks, i don't know whether records and so forth, but i want to make sure any customer who had harm of any kind, is that a pledge for you to go back earlier than that if in fact there were customers harmed by unauthorized accounts? >> senator, i will take that under advisement and get back to you. >> if you're-- and i accept your.
why say if you have to talk to staff. if you want to make sure the customers are made whole you should go back as long as you probably can. >> senator, again, we have we'll consider that and take it under advisement. >> and talking about senator shelby's discussion on the clawback. you minimize your influence to us at least, minimized your unfluns. you're chairman of the board. the board goes through a mro cess and i respect that. you as the chairman, are you going to recommend to the board-- back up, you, i assume, are more familiar with the pros and the cons of performance of miss tolstedt. and she's slated to get some news report say up to 120 million.
you're aware most of the 5300 team members fired were low income workers as low as 11-something an hour, maybe up to 16, $17 an hour, but were generally low income workers, low paid workers. so you're more familiar with that than probably any board member, at least as familiar. so will yo with your knowledge and your stature and your position of the board, make a recommendation to this board to claw back a significant amount of her compensation? >> senator, i want to put something in perspective. the lowest paid worker we have are entry level in our least cost area is $12 an hour. our lowest paid worker in our high cost area is $16.50 an hour, in addition to that, about $6 per hour is also, that doesn't include the benefits around health care, which we pay virtually all of it for low paid people, but most of the
people who lost their jobs because they violated our code of ethics, were dishonest, were not the-- those were good paying jobs. we-- people lost their jobs who are bankers, bank managers, managers are managers, and even an area president. these were good paying jobs, jobs that were the average is-- i think were in the, you know, 35 to $60,000 area, if you want it take an average. with respect to your question specifically, i'm not on the human resources and compensation committee. it's an independent committee and they will take that under their deliberation. i don't want in any way to prejudice their activity and i'm going to accept and respect any decision that they made on anything of that. >> thank you for saying that. are you-- so you are not willing to make a recommendation based on the--
how this looks to the public, that call them good paying jobs at 16 or $17 an hour or not compared to what, but i'll put that aside. whatever these workers were making they were in the bottom some percentage of the work force, they made mistakes and dishonest and apparently certainly fired and i won't dispute that. just you're not willing, as the ceo of this bank, to make a public recommendation, to make a public statement that miss-- i'm sorry, miss tol-- i'm sorry, miss carrie tolstedt, to anyone that her compensation, over $100 million when she announced her retirement the last several weeks that any of that be clawed back.
>> i'll let this proceed and the board has already met and i made an affirmative comment in my testimony. >> that's unfortunate. you said in your tomorrow of august, 2015, your words, we began working with pwc, unquote, to locate reimbursed customers to incurred fees. was that decision or were you directed to do so by the regulators? >> that was in consultation with regulators and with the city attorney, its office. >> so you did not on your own, after finding out in late 2013 of these problems, through the rest of 2013, two months, three months, 2013, through all of 2015 and then into the first seven months of 2015, it never occurred to you that you should bring in somebody without the regulators suggesting it or pushing or in consultation, it never occurred to you to bring in somebody to really find out who was pursuant--
hurt, what kinds of issues were going on and how to find the customers to reimburse them. >> senator, that's a good question. i thought about that a lot, a lot about why and it was -- it was early in 2015 about the time that we were considering or talking about who we would bring in, that we finally connected a dot and there's no excuse why we didn't connect it before. what happens when an account is opened that is not funded, the system eliminates it within a couple of months. if it doesn't get funded, it's not used, it's not started, it's truncated or closed. it never dawned on us, and again, no excuses, and we were-- >> it never dawned that there could be a cycle where a-- a cycle, a 30-day cycle would have turned -- would have been
completed and there could have been a fee associated with that. it was the first time that light bulb went on. >> i appreciate your candor about this, but 2011, 1,000 employees were fired. 2012 a similar number. 2013 was the peak number. 2014, 2013 was the l.a. times article. 2015, throughout the year, nothing happened. it seemed to never occur to management to do any of this when it's just-- and then today. i don't question your integrity, but then today you come in and make all of these announcements. it's been five years since, at least five years since all of this has been happening. today you make announcements that you're doing-- you apologize, we appreciate that, you make announcements you're doing the right things. we appreciate that, but it just sort of begs the issue of where was management when these so many thousands of people were fired. stories were written, regulators were starting to come in.
i understand this is a huge profit center for wells, the retail banking rit large in terms of unauthorized accounts and everything else, but it doesn't seem quite right that it didn't occur to anybody on the board apparently or occur to the ceo didn't occur to top management they should do something more affirmatively until that august, 2015 date when the regulators sort of helped you suggest and come to that conclusion. thank you, mr. chairman. >> mr. corkrin. >> thank you mr. chairman. thank you, mr. stumpf for being here. as an observation, i know you have a whole host of people with you, and i'm sure one of you is a communications personment i would just make the observation, look, i know you talk daily with board members and i have been on boards myself. to not invoke some degree of clawback for yourself and others involved would be
committing malpractice from the standpoint of just public relations. so, at a minimum, i'm sure that is going to take place, i would be surprised if it doesn't. and let me just -- you found out about this through reading the l.a. times, is that correct? >> no, i don't recall back in 13, but i learned about it later in 2013, but remember-- >>, but it sounds like it was brought to your attention after a story in a newspaper. that's when the focus really began. i'm not criticizing that. >> no, and one thing i want to make, senator corker, is that we had dismissed a number of pooh em -- people and that's what caused the-- >> taken some actions and they wrote a story. your board, i know public
boards today, you know, intense scrutiny, this all kind of committees that are set up. what he did the board realize that you had a unit that was committing fraud? it seems to me that's one of the those things you flag pretty quickly or at least a committee of the board. >> yes, and i just want to say, these team members, you're absolutely right, they did not do us right. >> i didn't ask that. i'm asking you, when the board became aware that you had a unit that was involved in committing fraud. >> it would have been later 2013 and then 2014 and on. >> so, they weren't even aware of the l.a. times story? >> oh, i -- i think that was later in 2013. i'd have to go back and check my records, to the best of what i remembered, but it was sometime, you know, later 13, surely in 14. >> i read a sorry about miss tolstedt, i don't know her and sounds like she got to work incredibly early, rode a bus,
micromanaged, signed leases herself, i don't know if any of this was true. how do you-- when you have somebody that's that involved in sort of microdetails, is this a case of not raising their head up to 5,000 or 10,000 feet and understanding the kind of culture that was being created by slogans like aid is great and those kinds of things? it's hard to -- it seems to me within a bank with all the data you use to contact customers and i mean, you can, with algorithms, you guys can pick this stuff up so quickly. it's hard to believe there isn't some report within the bank that would cause-- cause this to jump out at people and say something really bad is happening here? >> senator corker, i think that's a good question and in a retail business where you have 100,000 people in seats at any
one time and 6,200 branches, there is a lot of turnover. and i'm not justifying. >> no, no. >> but there's an officer, there's a compliance officer. >> absolutely. >> and all banks have these, you all regulated to death and that's their job and this is something that you would think would be flagged and jump out at someone who was in that job. >> i was-- and thank you, and that's what i was trying to explain, that in her business, surely she was, i believe, and reporting situations where there was ethical breakdowns and-- >> but not to the board. >> and it got to the board level, it got to the corporate level in 2013 because progress was not being made and the board level and 14 as the corporate resources started to-- and we'd actually been seeing improvements since that time. >> in fairness, again, there
seems like a big disconnect there. so she left after 27 years and i think it would be good for the audience at some point not during my time to, explain the entire calm-- compensation, and i think it's different than most people think based on comments made. her departure after 27 years was based on this issue? >> it was based on one of them, we weed-- we wanted to take the business in a different direction. >> she was terminated. >> no, carrie-- there was a discussion with her and it was sometime in june or july and said we want to go into a different direction we want to put an end, more focus on this issue, but it was a variety of things and she was eligible for retirement and she decided to retire. >> well, my time is up and out of respect for other members i
will stop. there are members with other questions. thank you. >> senator reid. >> thank you mr. chairman, and thank you, mr. stumpf for being here. let me clarify more your position going forward with respect to the issues of compensation, not just miss tolstedt, but your own compensation. will you formally recuse yourself from board deliberation? >> well, i'm not even involved in board discussions around what the hrc does with anything respect to me and/or as they recommend to the board. so there's no recusal required, but if-- but i'm happy to do that, but i'm not even involved in that. >> it will ultimately come up to the board for a vote of affirmation of the compensation? >> it would and i'm not part of that. that's done in executive session without me, it's always been done that way. >> in 2013 when you learned of th this, what did you do? this has been asked several
different ways. did you inform the regulators instruct someone to inform the regulators for a growing problem? >> thank you, mr. reed, i should have he thinks med that, but, yes. our primary regulatory was informed at that time. did you inform the board at that time? >> yes, i can't recall the exact meeting, but i can-- but it was sometime in 13 and i know in 2014 various committees of the board were made aware of this. the rest of the committee, the audit examination, the corporate responsibility. >> did you take any steps to notify your employees of this type of behavior, which going back, was, you know, 11,000 12, 13, did you keep these internal to the board? >> i do a team member town hall
every quarter where i go to one of our various cities and there will be a couple thousand people in the audience and we'll webcast that broadly across our company. and i typically talk about ethics and doing what's right for customers. and in the case, the vast majority would do it and i was trying to bring home that-- >> but there was given specific evidence of techniques used to essential essentially defraud customers, those specific practices were not focused upon and made very clear that they were not tolerated or it would seem to be a generic discussion of follow the rules? >> again, senator reed, i-- at the time that the escalation
happened in 2013, there were many different meetings and things happening, as i mentioned in my written-- or my oral testimony, about reducing goals, talking about sales, efficacy, having manager meetings, talking with leaders, putting more controls in place, and again, not fast enough, not far enough, and i apologize for-- >> well, it seems that, you know, and i would suspect looking back that the emphasis on meeting sales objectives, of course, selling was unremitting and yet you had examples, specific examples of things happening and you knew should not be happening and yet, what i'm hearing is more or less, makes those sales and by the way, we have the ethical rules in place, too. again, i think you've said it,
and it's obvious that the tone, emphasis, what the leader does, what the leader says, is sometimes more important than anything else. for a weird there, this was recognized, but there was no specific stop, you know, stop this stuff. >> well, i can tell you, we said stop this stuff and the they think about cross sell is, i'd rather have a customer with two products that they use and they need and they want and they value than four products that are not used and valued. in the first case, customer wins, we win, we all do well. in the second case, everybody loses. we lose money. it does not help us so we've been-- we tried very hard and again, we were not as effective as we could have been in talking about, you know, the goal here is not, you know, products.
the goal here is deep relationships. we had the wrong tool for too long to make that happen. >> my simple conclusion, it just seems it took too many months, years, literally, for some simple steps which should have been taken to be taken and it was only, i think, as a result of what ultimately los angeles county and the regulators and others did that forced the issue. thank you, mr. stumpf. >> thank you. >> mr. toomey. >> thank you, mr. chairman. thanks for calling this hearing. i have to say what we've been learning and so deeply disturbing at so many levels. first we discover that wells fargo had a sales culture that was blatantly antithetical to what's best for customers. we discovered that management had far too few common sense controls in place to prevent the kind of abuse that customers were subject to.
we discover wells fargo and executives completely out of touch. in 2011, forbes article, wells fargo was rated the best at cross-selling its products. only problem is we discovered wells fargo wasn't always cross-selling. signing up customers for products when you know the customer doesn't want the product. failing to notify customers about these sham accounts open and this isn't cross-selling, this is fraud. that's what this is. ap then we discover way too little done to prevent it from continuing even after it was discover discovered so wells fargo continued to george customers' signatures, including my constituents, and in the case of carrie tolstedt. something 20 million dollars in bonuses for her between 2013,
2014 were awarded because of strong cross-sales ratios. yet we know in some cases she was hitting numbers by these fraudulent accounts. so this is unbelievable. let me begin, mr. stumpf, do you acknowledge that the employees who engaged in this activity were committing fraud? >> you know, i'm not a criminal officer and i don't know the-- i'm not a lawyer and know the legal term. i know this, they broke our code of ethics, they were dishonest and we did everything we can to support law enforcement. >> i'm not a lawyer either, neither are most adults in america, but i think most people understand the mooning of the word fraud. black's law dictionary provides a useful definition and says that fraud is a knowing misrepresentation or concealment of a material fact to induce another to act to his or her detriment.
how does falsely signing a customer up for an account they don't want, how does it not meet that definition. >> well, again, if that's the definition that, you know -- i can tell you this, it's absolutely wrong. we found this out-- that has no place in our culture, that means fraud. >> at what point did you alert your regulators and law enforcement 5 minutes.
>> we did everything needed. >> it was required and we did it. >> when did you disclose in sec filings you had this material adverse circumstance that could damage your reputation. >> i can't answer that. i don't have it in front of me but this was not -- i would have to get back to you. i don't know. >> we haven't been able to discover such a disclosure in the sec requires disclosure of material adverse circumstances and i don't know how this could not be material was the market lost 9%, pretty material. >> from a financial perspective
2 $.6 million, too much, $185 million -- >> i get that those dollar amounts may not qualify as material to a bank the size of wells fargo, reputational damage done to the bank clearly is material and that has been manifested by huge adverse movement in stock prices. let me raise one other issue you mention in your testimony, there are no orchestrated efforts or schemes by the company. when thousands of people conduct the same fraudulent activity, it is a stretch to believe that every one of them independently conjured up this idea of how they commit this job. some orchestration happened at some level if not you personally by any means but doesn't it
deify common sense to define orchestration of this? >> i don't know what -- why people did this but we did fire managers and managers in the case -- this 1% is one too many. i don't want to minimize it but make sure we recognize the vast majority of people recognize the things we want them to do to deepen customer relations help them succeed financially and we put a number of controls in place besides taking them off of the table. we don't open any deposit account today or any credit card without a signature and a couple cases where there is a dual notice and giving customers a one hour notice and by email to
make sure that we know exactly and they know exactly -- >> it took an awfully long time to impose those basic controls. ici am out of time. >> you are already on the way, i appreciate you holding it. let me say i am appalled by the size and scope and duration and impact of the scandal and shocked and disappointed by the response of wells fargo's corporate executives. in the last week you and your chief financial officer have taken to the press and laid blame squarely on low-paid retail bank employees. i don't excuse what they did by any stretch of the imagination but i find that despicable. wells fargo touts to its
investors and customers that we will never put the stagecoach before the horses. i tell you what. the bank recklessly rolled to million of your customers in what in no way can be viewed as other than a large-scale scheme to boost your growth and whatever that meant for your shares and to your shareholders. you didn't fire 10 employees or 500, you fired 5300 employees. is that right? >> 50 -- >> they were not located in one branch or one district. >> that is correct. >> they were located across the country. shouldn't the workplace actions of employees reflect the values of the institution no matter what part of the country they are in? do you believe senior executives like yourself are responsible
for nurturing and honing a companywide culture for employees actions? >> absolutely. >> this is in the work of 5300 bad apples the work and result of sowing seeds that rotted the entire orchid. and through sales guides and employee training manuals some of which i reviewed were explicitly through demands from hard-driving managers you and your senior executives created an environment in which this culture of deception and deceit thrived and yet i see this as a toxic combination of low wages. in response to senator brown's question of what is and average banker at wells fargo made, between $30,000 and $60,000 how much money did you make last year? >> $19.3 million. >> that is good money.
>> this is a combination of low wages, punishing quotas and grossly misaligned compensation incentive through the organizational structure after evidence you removed it. when you were holding ethics sessions did you ever specifically, seeing this information, begin to whip up on your radar scheme and specifically say in those sessions we do not want to open accounts for our customers that they don't ask for. >> i will get to that but i want to ask when it team member opens an account that is not use that does not help customer and does not help us and the vast majority -- >> did you specifically -- >> specifically said yes, we do not push product, we sit down
with customer, have need-based analysis and based on what we hear we match product. >> did you specifically say i don't want to see accounts open for customers they did not ask for. >> when did you say that? >> many times in many town halls. >> let me ask you, miss -- did you -- >> it is in public filings. >> salary bonus and stock awards. the average wells fargo bank or, 24,545 and the average salary for wells fargo personal banker is 37,560. imagine what the poverty wage is for a family of 3. >> i do not have that.
>> 24,300 for a family of three, 20,160. imagine you are a single parent working with two young children as a personal banker and wells fargo, say your base salary is in the $30,000 range, you have a hard-driving boss breathing down your neck to meet rigorous sales quotas, call into a call center when you don't meet those quotas and if you don't me to wonder you get carried to the next day so you have a higher quota and you are being sold forget the incentive of making more money, it is about losing your job. you think that environment is the appropriate environment to protect your customers and have the culture that wells fargo had? >> we had been reducing sales goals and bringing other gold in
place even before we decided to get rid of sales product goals and the vast majority loved wells fargo and we go to regional banking, retail banking people 15 of people in a census by gallup every year love the environment of wells fargo and put customers first. i can't excuse the behavior of the 1000, i know it is too many but the culture is a caring collaborative culture. >> let me ask a final question. did you or any senior executive at wells fargo suffer any financial consequence as a result of what transpired over the years? >> first of all -- >> have you suffered financial consequences? >> the board has gone through, women have been held accountable. >> senior executives have.
people in charge of risk in the retail bank, people in charge of sales efficacy, regional presidents who don't meet their goals of proper sales, people are held accountable and will be held accountable. >> thank you for holding this hearing, appreciate it. the people of nevada have struggled to gain what they lost in the aftermath of the housing crisis and we all know this housing crisis was caused by greed and excess. were too long, the unfortunate distinction of one of the highest rates of unemployment, foreclosures, underwater homes, short sales and personal bankruptcy, the center point of any relationship of business is trust and i assume it is the
same, wells fargo has broken that trust. i consistently fight to ensure nevadans retain protection of their personal privacy, shocked to hear the reports. mister chairman, the employees of wells fargo open millions of bank accounts and credit cards without customer consent. they took money from americans pockets in order to artificially inflate company quotas. a number of constituents called my office. this was from anderson, nevada saying she was affected by wells fargo's tactics, said she was insulted that leadership at old fargo was unaware of these policies and given a culture of wrongdoing your boys exhibited taking responsibilities, refunding customers and conducting internal investigations is only the first step as we plan to fix this mess. accountability and customer interest first should be wells
fargo at the top. so with that just a couple questions. to my constituents have a right to be insued i heard a number of comments more directed at you, take the sergeant shultz position that you knew nothing in this was moving ahead but perhaps from one of my constituents, hillary clinton, what difference does it make attitudes, and let me tell you why they are talking about this. the letter to your valued customers, explain the problems, you may have seen news that some wells fargo customers receive products and services they did not need to be you didn't tell them you were sorry in your customer service letter. you came to the committee and told us you were city but did not tell your customers you were sorry. do they have a right to be
insulted? >> i had a number of media contacts, one broadcast, four in print, i am sorry, i am accountable, i was i think misquoted or misunderstood in one where i blame team members. don't accept behavior not consistent with our culture but i do accept responsibility and i am sorry. >> disappears you are downplaying the concerns, you said some wells fargo customers, we are talking almost 2 million accounts that were open. let me ask you this question. with anybody on your board, or your self, did any of you have any accounts in your name? >> i don't know that which i have not seen a letter.
i was not refunded any of the dollars. >> and unauthorized account, what would you have done? >> they are stolen, my identity, i would be very disappointed, your constituents, we have a lot of work, a wonderful important state, we have been here a long time and i apologize to all the american people and customers and make it right. >> in the compensation board to send you -- $100 million of the compensation package would you support that? >> i am not on that board.
i understand and will get you the information about $100 million, purchasing the open market or exercise for 27 year career, there are some dollars in the money options she has not exercised and finally there is a part of future grants that will be testing over a number of years and the board will consider all of those, they will consider the situation in deliberations. i want to be respectful of the committee and respectful of their process and not in any way a certain decision. >> thank you. >> mister chairman, ranking
member brown, i have been on this committee ten years now, you have done something that never happened in the last we 10 years an united this committee on a major topic and not in a good way. credit card accounts were opened. there were fees charged. if customers were unaware that these accounts were opened up, there must be many instances, 2 million accounts were opened up that negative information with integrated viewers. is that accurate? >> the part that is accurate is 565,000 credit cards that were opened up that were never activated. 400,000 of those have customer signatures on them. 5.7% of those accounts in that time were not activated which is
a pretty standard industry, we are going to go back to each of those customers now and find out if that was the legitimate signature and open and if it is not -- >> that is not what i asked. i asked if it was negative information turned into credit euros because of these actions. >> i don't know the algorithms. >> i know when a credit bureau is requested, it has an impact on the credit score. >> this is a big deal. it is a big deal. i could ask you for the page break down on these 2 million accounts that were opened up. if information was sent into the credit bureaus because of these falsely opened accounts of the impacts are far far more than the fees or fines associated with it. did that not get reported to
credit bureaus? >> when i pull a credit -- >> just tell me, did the information if there were fees and fines in the credit bureau's request that information get forwards the credit bureaus. >> trying to work with you. we pulled the credit bureau. >> what is wells doing about fixing that problem? >> we are calling each credit card customer to find out if this was a card they wanted. if they did not want it, we are going to go back and make sure it is made right at the credit bureau and the customers. >> what is the timeframe for that? >> we started that process. >> the stocks we 5 years, has been documented, 2011 until
fairly recently. if i had a credit card issue in the first volley and in the meantime between 2011 and now i decided the house information was reported to the credit bureau you probably -- maybe 1/2% or more than that. on a $500,000 mortgage, 50 grand over 30 years. what is being done about that? >> we will look at each of those and determine -- >> you will go back in and find out even if they didn't do business through wells if they bought a house and it impacted their credit rating, go back and find those? >> i will go back, we committed to go back through all the credit card customers -- >> what about the ones -- the refund all their fees, reestablish their credit rating
as of today, what about the folks who may have bought a house through chase and got higher interest rate, how do you find them? >> we are working on that. i told our people go back and make it great and as we go through that i am happy to have the team report that. >> it is important to understand it is a big deal. i know you feel bad about it, we feel bad about it. there are real world implications, and in a poverty situation because of this even though it is a few hundred bucks it is more than that, much more. you found out 2013, don't want to beat this anymore, they were setting up accounts -- >> some of our team members, and
opening accounts, on customers. >> a simple edict would have been pretty helpful. if you do this you are gone. >> we have even more than that. >> i can tell you multiple times 5300 people went, anytime you say that, ammunition to folks that bring it. 5300 people. >> 2 million people is twice the population of the entire state. this is far too long. i you know that. thank you, mister chairman. >> i want to follow up on the
line of questioning, i want to ask questions about data, and not used to open and unauthorized accounts. >> did the party analysis you engaged in, were created uniformly, where their areas in the united states that were more heavily created. >> more heavily biased towards the southwestern part. and more specifically, california and arizona, that would be correct. >> i have new jersey here on my list, was new jersey heavily impacted. >> there was an over index, that
did the wrong things. a much larger bank in southern california, new jersey, and it fits the pattern of the organization in those communities. >> it wasn't necessarily the management in those communities were the ones who were driving this more aggressively but the size of your business. >> it was both. >> one of the questions and constituents in the country, am i one of those and an account created in my name. wells fargo is calling every customer, is that correct? >> all of these accounts came on
the books and pause within a 60 day period, and the potential again, were not eliminated. and couldn't eliminate them, and credit card customers, contacting all of our customers, and talk to our people. >> someone who doesn't want to wait for the call. >> if you email us we will call you, and the study was very comprehensive, and i wanted this
service and i am just saying we want to make sure we don't hurt any customer and if they want credit they have it. and make it right by them. >> it into the question about credit, causes an impact to the credit rating. >> i am not an expert in this field, we prove a bureau, is it a strike, lowers your credit score, how many requests are in this time, a positive impact and i'm not here to justify, we will do what is right. >> in my questioning, we are going to make it right.
in the calls that the -- an unwanted credit card accounts, how do you make it right with regard to the impact and potentially charges on that account caused the credit rating of that cardholder. >> starting that process, and have to come back to the committee until you more of what we learn. >> a little time i have left i want to ship topics, my understanding is the primary regulators you are dealing with the city of los angeles, is that correct? can you give me a timeline, can
you notify them, were you involved and when? >> you don't have precise dates but general timeline, the city of la is in the may timeframe, in 2013. it is missing on dates, the occ was involved, we shared with them, when we learned of their lawsuit and was actually 15, 2015, and they were involved with the 2013 timeframe. >> the acc would be involved
first before the city of los angeles? >> and yes. >> the cf tv would have been the final last one. >> we noticed, called them in the may time period of 2015. >> my time is over, thank you, mister chairman. >> the wells fargo vision and value statement which you frequently cite said we believe in values lived, not phrases memorized. if you want to find out how strong a company's ethics i don't listen to what people say, watch what they do. let's do that. since this massive, years long scandal came to life, said
repeatedly, quote, i am accountable. what have you done to hold yourself accountable? have you resigned as ceo or chairman of wells fargo? >> the board? no, i have not. >> heavy returns one nickel of the millions of dollars you were paid while the scan was going on. >> this was by 1% of our people. >> that was not my question. have you returned one nickel of the millions of dollars you were paid while this scan was going on? >> the board will take care of that. >> have you returned one nickel of the money you earned by the scam going on? >> the board will -- >> i will take that as a no. have you fired a single senior executive to give by that i don't mean regional manager or branch manager. i am asking about the people who actually read your community banking decision or your compliance division.
>> we made a change in a regional banks. >> i am not asking about regional managers. i'm not asking about branch managers which i'm asking if you have fired senior management, the people who actually led community banking, oversaw this fraud or the compliance in charge of making sure the bank complied. >> kerry said -- >> did you fire any of those people? >> no. >> you haven't resigned, haven't returned a single nickel of personal earnings, haven't fired a single senior executive. instead evidently your definition of accountable is to push the blame to your low-level employees who don't have money for pansy pr firm to defend themselves. it is gutless leadership. in your time as chairman and ceo, wells has been famous for cross-selling which is pushing existing customers to open more accounts. it is one of the main reasons wells has become the most
valuable bank in the world, measuring cross-selling by the number of different account customers have. other big bank average fewer than 3 accounts per customer but you set the target at eight account. every customer of wells should have eight accounts with the bank and not because you ran the numbers and found the average customer needed eight banking accounts. it is because eight rhymes with great. this was your rationale in the 2010 annual report. cross selling isn't about helping customers get what they need. if it was you wouldn't have to squeeze your employees so hard to make it happen cross-selling is all about pumping up well that stock price. >> cross-selling is shorthand for deepening relationships.
>> you say no? here are the transcripts of 12 quarterly earnings calls you participated in from 2012 to 2014, the three fool years in which we know the scan was going on. i would like to submit them for the record if i may, mister chair. thank you. these are calls where you personally made your pitch to investors, a great investment and in all 12 of these calls, wells fargo's success, cross-selling retail account as one of the main reasons to buy more stock the company. let me read a few quotes. april 2012, retail banking cross sell ratio to a record 5.98
products. april 2013, retail banking cross sale of 6.1 products per household. april 2014, quote, we achieved retail banking of 6.7 products per household. the ratio going up and up. it didn't matter of customers used those accounts or not. wall street loved it. here is a sample of the report from top analysts in those years. all recommending people by wells fargo stock and i submit them for the record.
when investors are good cross-selling numbers that was very good for you personally, wasn't it? do you know how much value your stock holdings gained when the scan was underway. >> deepening relationships -- >> i asked a simple question. do you know how much the value went up when this was going on. >> all of my conmen compensation -- >> do you know how much it was? it is all in public records and i looked it up. while the scam was going on you personally held an average of 6.75 million shares of wells stock. the share price during this time period went up by $30 which comes out to more than $200
million in gains, all for you personally, thanks in part to the cross numbers you talked about on every one of those. >> here is what gets to me. if one of your tellers took a handful of $20 bills out of the cash drawer, they would be looking at criminal charges or theft they could end up in prison. but you squeezed your employees to the breaking point so they would cheat customers and you can drive up the value of your stock and put hundreds of dollars in your own pocket and when it all blue up you kept your job, you kept your multimillion dollar bonuses and went on television to blame
thousands of $12 an hour employees who were trying to meet cross sell quotas that made you rich. this is about accountability, you should resign, you should give back the money you took while the scan was going on and you should be criminally investigated by the department of justice and securities and exchange commission. this isn't right. a cashier who steals a handful of 20s is held accountable but wall street executives who almost never hold themselves accountable, not now and not in 2008 when they crushed the worldwide economy. and if executives face jail time, they preside over massive fraud. we need tough new laws to hold corporate executives accountable and we need tough prosecutors who have the courage to go after people at the top.
until then it will be business as usual and giant banks like wells fargo cheating as many customers and investors and employees as they possibly can reach thank you, mister chair. >> what astounds so many americans and virtually all of us is how significant this fraud was, how widespread it was for how long a period of time. i am very concerned about this timeline of when top corporate leadership like yourself knew about it. stuart: going to break away because senator elizabeth warren just wiped floor with the ceo of wells fargo demanding that he re-sign and suggested there be a criminal investigation. she discovered on the panel, the personal profit of $200 million, the stock has gone up, million
shares gained $200 million during the course of what elizabeth warren, was a scam. is mister stump finished? >> he is in deep trouble. his answers have not satisfied any, even democrats or republicans on the panel. and his response to the crisis for many dollars short. this getting warmed up. >> a criminal, the failure to state secrets, this is a crime of intent and he intended for cross-selling, for personal wealth. this is the first time we have seen the suggestion of criminal prosecution. >> there will be a class-action suit inevitably against wells
fargo. it would have been better -- >> a potential class-action suit has been filed. he is in the fight of his life and proved about cross-selling. and he did admit that. judge napolitano: giving a different version of eventss under oath and deposition later on, barred from doing that. he is locked into the version of eventss as peter said extremely unsatisfying. stuart: we had on the show linda edwards, at wells fargo, went through hell for an entire summer and tried to secure the credit rating entering college.
you heard the entire exchange. are you satisfied with what they got out of mister stump? >> my reaction, he said so many times we are making it right, but brought this to their attention. and if he had an atmosphere, he listed all of the initiatives. why is it when i brought it to the attention of the local branch and local prosecutor had a subpoena, they had a chance to make it right, went to the regional area, to the consumer financial protection board and appealed to them, so many chances to make it right when they knew this was going on. stuart: really quickly, the bank
was fined $180 million, went to the consumer product safety financial product safety, they got 100,000,0,305 million went to control of the currency, $50 million went to los angeles people will wells fargo is from, $2 million like you who suffered because of what wells fargo is doing. >> not just the money, my daughter has bad credit for 7 years now, that was her birthday present. stuart: something mentioned frequently in these exchanges called cross-selling. if you go to a bank and open an account the bank will try to sell you other products because they got you into an account. or some other financial product
linked to your initial account, that is cross-selling. senator elizabeth warren zeroed right in on that, almost a moral principle you should not be doing cross-selling. you know all about this. am i right in saying if they were to abolish cross-selling, you have abolished modern banking as we know it. >> in the end the customers will be poorly served with the problem is not cross-selling but the way it was and lamented. having run sales forces with hourly sales meetings puts too much pressure on people to have really aggressive targeted tough management in those circumstances so what do you do? get across the goal line. that is where the problem is. they lost sight of the real goal. of the one one of the senators united the entire committee, whether it was republicans or democrats he united them all.
>> i'm glad senator warren pointeded this out, the initial acts were criminal, opening up an account in someone's name, pretending you have that person's permission, these are low-level crimes that they were criminal. he didn't commit the crime but the people that worked for him did. the real question is i went through their website and right there, a question they ask at a fork in the road how it would look if your actions became public? isn't it ironic, a flowchart of how to make the right choice, this is what is going on, the top guys may have been saying play the honorable game, down below trying to get across the goal line, meet that target and if you need the money you do what you got to do. liz: eight is great, eight accounts is great. stuart: senator warren nailed that, the cross-selling.
ashley: a withering statement. stuart: you are involved in the financial industry, you just heard senator elizabeth warren blast what was until recently america's biggest most important and powerful bank, just blasted. >> she mopped the floor and every point she made was a valid point. i would say what is the unintended consequence? if you are not allowed across all products you have overreached but something fundamental broke here and the most important thing to me is where was the bank's reaction? where was the board's reaction? if you have people doing something against the law how can you not enforce to fix it? >> humidity in 2013. stuart: would you like the hearing we have just been watching, the tobacco company hearings, where they nail them on addiction to the automobile industry, nail them when you got
supporter didn't get support, is that the same momentum for the banking committee today? >> wells fargo did a great disservice to the current whole industry because it violates the number one thing that makes banks work and that is trust. you break that you have broken everything. stuart: excuse me a second. i want you to tell me why it is with this extraordinary negative publicity for the wells fargo bank this withering criticism from senator warren and others stock is up nearly 1%. why is that? >> because this is a sound franchise and people think it is a criminal enterprise but they are pressed by low interest rates to look for fees because you can't make the fed with low interest rates. people figure interest rates will go up. this is a bank that routinely makes half $1 billion a week in profits and even now they lost
$20 billion market value, you're getting to a point where it might be a worthwhile franchise for someone else to lead. in someone else's hands is this a great by? it is starting to get there. stuart: you would think at this point wells fargo with $46 a share could be a goodbye. stuart: i think there is a franchise here, so my lines, and will wind up paying a huge fine but at its core this is an amalgamation of wachovia bank, great bank. many other great franchises, question of can someone manage it well? we have seen this many times, chrysler, the auto companies, not saying invest now but there is a core franchise that is valuable. >> elizabeth warren lit in, exemplified government leadership and he should be commonly prosecuted. that sounded like a takedown. >> have you isolated that
soundbite from elizabeth warren? in one minute we will have senator elizabeth warren's statement question to mister stump. you can see it again. it was the highlight of the morning's hearings, she went after him on a variety of subjects and we will tell you the whole thing. >> did you return one nickel of the money you earned when the scandal was going on if you knew it was going on in 2014 and he didn't answer and she said he refused to answer, that was frustrating her. stuart: who at the bank was accountable for what senators said -- heavy resigned? no. judge napolitano: this bank like all banks are regulated not only by the fed but every state in which they do business and every state has a state attorney general and many are politically
ambitious. and every one of those state attorneys general can commence action, criminal action, civil action, that is essentially what brought big tobacco down. wasn't the federal government, was the state attorneys general, 34 banded together and brought tobacco down. >> if there is a criminal outcome the bank is toast. stuart: what do you mean? >> if you are found guilty of criminal enterprise -- liz: usually d for criminal prosecution. >> if you look at clawback in the dictionary you almost never see a clawback, and is very rare, laws that enforce different ones are not in effect yet so it is on the board of wells fargo to make this clawback happen or not. liz: senator elizabeth warren said i am accountable, what have you done to hold yourself
accountable. stuart: this is senator elizabeth warren ten minutes ago, roll tape. >> heavy returns one nickel of the millions of dollars when the scan was going on. have you fired a single senior executive? i don't mean regional manager or branch manager, but led community banking or compliance. you haven't resigned, haven't returned a single nickel of personal learning, haven't fired a single senior executives. instead evidently your definition of accountable is push the blame to your low-level employees who don't have money for a pansy pr firm to defend yourselves. it is gutless leadership. stuart: that was only half of it. a main point senator warren
brought out was ownership of wells fargo stock, during the period of the stamm as elizabeth warren call that he held an average of 6.5 million shares. she looked at the rise in the stock price of wells fargo during the time mister stump held 6 million shares, concluded that his profits from this scam was $200 million. he did not contest that or confirm it. she said resign and you should be part of a criminal investigation. strong stuff. >> very strong stuff and if you look at who else owns stock in this country, 10% is owned by warren buffett. he has to be having a hemorrhage over this. he is going to try to clean this up. stuart: he will crash at the board to say these clawbacks, give back that money, and --
>> franchise value, you have to do the testing. fidelity and wellington, first-class mutual funds, the finest funds, they won't sit by and say business as usual, get away with no clawback, i don't see this working out where mister stump survives. >> senator warren said you personally cited cross-selling to invest in wells fargo, with your earnings, multiple years he did that. >> as a matter of pride, a huge plus and put in the annual report. stuart: what have you got? >> each of these cases has to be proven individually. cross-selling is not a problem. it is overcross-selling, fraudulently based cross-selling which is the problem.
sometimes you want another product, only those forced down your throat because you don't know what is being bought in your name that is the basis for this fraud. >> a bunch of employees are minimum wage earners pushed to the brink to produce an outcome that is very difficult and if someone doesn't want an auto loan it is hard to get them an auto loan. that basically, whatever you say about ethics, they have a global department of ethics and integrity at that bank. >> if this moves to 2013, when did they disclose it and their sec filings. that is a big deal. stuart: i forget which senator said he could not do a record of any filings with the fcc. liz: that is sarbanes-oxley. judge napolitano: made the concession under oath and the bank is stuck with it. stuart: stock is up at $46 a
share. judge napolitano: a franchise worth looking at. one of the issues they will hide in is the notion of materiality. in the context of a bank this big, $185 million is almost irrelevant. they routinely deserve $1 billion for other reserves, this is easily covered by their reserves so it is not a big number. at the same time you are seeing jpmorgan writing checks for $14 billion, 185 it lost in the sauce. they minimized it. they focus on the dollar. stuart: linda edwards appeared on the program earlier. i called you a victim of wells fargo, put through hell with your daughter's credit rating but you don't seem terribly outraged. are you now outraged after
listening to the proceedings on capitol hill? >> i have been outraged for a long time. this has been going on for two years, watching these hearings brings it all back. stuart: where you had any point contacted by the bank before you went to senator menendez to get things sorted out? >> the only contact i had was in response to complaints i filed and defiance and arrogant conversations and letters blaming my daughter. stuart: i don't know where you live, which bank branch, not the specific name but which state were you operating? >> new jersey. stuart: all you got from this bank in new jersey were arrogant denials that anything was wrong. >> right. they lied to the police. i went to the consumer protection board, whatever the
agency is, essentially the response i received from wells fargo from my complaint was file a complaint. stuart: what happened to you was you had an account with the bank and they opened other accounts in your name or your daughter's name without your knowledge, charged fees which you did not pay, you got calls from bill collectors because you haven't paid the bogus fees. >> wasn't a matter of cross-selling. we had legitimate accounts at the bank and they forged our signatures, lifted electronic signatures, created false identification to create these accounts. stuart: what are you going to do? >> i want the credit report for now. stuart: i know what it is like to be on the phone with bankers, bureaucrats, trying to sort something out. don't you want compensation for the hell you went through? >> i would.
stuart: how much do you want? judge napolitano: like a plaintiffs lawyer. stuart: pay your daughter's tuition. you will get more than that. >> i will say there is nothing more mute and immobile than a giant bank. there is a political overtone because a lot of people but the consumer finance protection bureau, it was on the endangered species list. a lot of people said it is unnecessary, it doesn't fit, we have enough regulation, this is planting the whole thing, we deserve to be in business. judge napolitano: a simple lawsuit asking a judge force the bank to fix her daughter -- come filing herself, that might open a pandora's box which leads to many other credit fixes, something the bank should have done on the phone in response.
>> it is a great point, a footnote, the bank is saying to these customers you have accounts with us that say you have to go into arbitration, you are not allowed to sue. the lengthy annoying arbitration proceedings to get their credit reports and accounts -- judge napolitano: it is not arbitration for specific performance, to compel the bank to do something. stuart: the lady asking the question is asking about refunding lost money and restoring credit worthiness. let's listen to the question and answer. >> something going on in wells fargo is addressing it. at 15 there is something going on and wells fargo is addressing it. but it didn't get done and now you are coming to us and saying
we now get it, now we know. now we figured it out so we need a clear dialogue but of the failures is you haven't come with a lot of remediation or a lot of dialogue on this is what we are doing to restore confidence and like senator scott, i am one of your customers, not doing what we need to do, and not doing what you need to do to restore confidence, and the american public. talk about changing cultures, there is no one on this committee who believes 5000 people independently act with impunity and dishonesty. no one believes that. if they do i have done law
enforcement. this is a behavior that was created by the culture that was allowed, created by a whole lot of folks saying let's do it this way. this is -- i get what you are doing, not just tellers. and the one person who was responsible directly other than your self isn't in front of the community. he walked off with a pretty good deal hoping all of this -- and as quickly enough the board should call back the salaries. and he would be in a lot better position sitting in that chair right now so i will tell you you have not done enough to restore
confidence and this dialogue will continue with the american public. with that, 5000 people, i want to say maybe they deserve to have their reputation restored. maybe they deserve not to be the person -- stuart: for those watching this since 10:00 this morning it appears the temperature has been rising. questions and statements from the senators have become more aggressive. the peak was reached with senator elizabeth warren and it is followed through by heidi camp of north dakota laying down the law saying the whole bank was doing wrong. the whole culture of the bank was wrong, temperature has risen to the point that he is taking
heat, not even answering questions, just taking it from every single senator. they were good performers. judge napolitano: elizabeth warren who shares ideology with no one on this nevertheless raised extraordinary points and opened our eyes to something we haven't thought of before. stuart: there is going to be a huge legal problem for the bank going forward. judge napolitano: from state attorneys general. stuart: they lose billions. judge napolitano: the question is changing the organization, the board is on trial, when things come -- this gentleman was not well prepared. stuart: he was poorly prepared. ashley: it started slowly which came him an advantage but as it heated up it was clear he wasn't prepared. stuart: i thank everybody who helped us get through the
hearings this morning especially linda edwards, a victim of wells fargo who has been patiently sitting there offering her opinion. thank you very much, we appreciate it, judge andrew napolitano ably assisted our regular team. that is it for the moment, neil cavuto, not sure what he has got for you, probably more hearings. neil: imagine, how was your day, dear? man oh man. we are going to carry on with this and we are waiting to hear from donald trump in north s show the trends continuing but the story of the hours what is going on with wells fargo ceo john stump who appears to be stumped as he continues to get grilled and this woman started it.