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Editorial

Wells Fargo is still getting off too easy

Wells Fargo chief executive John Stumpf offered more apologies and excuses Thursday during his appearance before the House Financial Services Committee. REUTERS/Gary CameronREUTERS

For the second time this month, Wells Fargo chief executive John Stumpf was greeted with a barrage of hostile questions from members of Congress when he testified Thursday before the House Financial Services Committee about the bank’s phony-account affair. As he was during a Senate panel smackdown last week, Stumpf appeared contrite and grim-faced throughout.

He was also a bit less wealthy.

Bowing to political and public pressure — headlined by blistering criticism from Senator Elizabeth Warren of Massachusetts — Wells Fargo’s board on Tuesday said it has docked Stumpf $41 million in stock options. It is also withholding his salary while the company investigates a retail banking division whose unrealistic sales quotas pressured employees into creating 2 million fraudulent accounts using real customers’ information. Carrie Tolstedt, the executive who was directly in charge of retail banking, is being forced to give up a massive stock and severance package. Both are being stripped of their bonuses.

The punishment may sound sufficiently severe, but it doesn’t fit the scope of widespread wrongdoing that was scarily similar to the banking industry’s bad behavior leading up to the 2008 financial crisis. Stumpf inexplicably gets to keep his keys to the corner office, and Wells Fargo itself still has not answered for the criminal activities, beyond paying $185 million in fines levied by the Consumer Financial Protection Bureau and other watchdog agencies — slightly more than pocket change for a company with annual revenue of $86 billion.

It took too long for the bank’s board to hold higher-ups accountable for what was clearly a corrupted work culture. Stumpf acknowledged the sluggish response Thursday, during four-plus hours of testimony. But he insisted the pattern of fraud was an anomaly. Committee members weren’t buying it. “Why shouldn’t you be in jail?” asked Representative Michael Capuano of Massachusetts. “When prosecutors get hold of you, you are going to have a lot of fun.”

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The scandal didn’t come out of nowhere, and it wasn’t the doing of a few rogue sales reps scheming over beers. During the course of five years, Wells Fargo canned 5,300 low-level employees who were involved in the scam. It’s impossible to believe top managers didn’t know what was going on.

“This is a small step in the right direction, but nowhere near real accountability,” Warren said in a statement posted Wednesday on her Facebook page. Nor will the bank’s own investigation be adequate, even though it’s hired an outside firm to conduct the work. The next steps should include Stumpf’s ouster, and a rigorous Securities and Exchange Commission investigation to determine if he deceived investors by signing off on financial statements that included the retail division’s bogus sales figures. (A Department of Justice inquiry into the aggressive selling tactics has reportedly already begun). Questions about whether the Consumer Financial Protection Bureau could have intervened earlier demand answers, too.

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The Wells Fargo mess and the bank’s response to it are reminders that in the financial services realm, accountability may be extolled in annual reports, but it’s rarely standard practice. Only when those in charge bear full responsibility for their companies’ business practices will cases like this one serve as a deterrent with real muscle.