We somehow knew that the Wells Fargo scandal was historical. The scope of its basic dumb venality - and the almost slapstick-level attempt at cleaning up the mess - were jaw-dropping. The idea that a major bank would open that many fraudulent accounts brought back the darkest memories of the mortgage crisis and gave Americans a whole new reason to hate Wall Street in the throes of a dystopian presidential election.
But now we have an actual precedent being set by the fallout at Wells Fargo.
Wells Fargo & Co. Chairman and Chief Executive John Stumpf will forfeit $41 million for the bank’s burgeoning sales scandal, marking one of the biggest rebukes to the head of a major U.S. financial institution.
Wells Fargo is clawing back, y'all.
The bank’s board moved to rescind pay for Mr. Stumpf and former community- banking head Carrie Tolstedt ahead of a hearing of the House Financial Services Committee Thursday. Wells Fargo’s board said Ms. Tolstedt, who oversaw retail banking during bad behavior there, will forfeit unvested equity awards valued at $19 million.
This is a big deal, because we've never seen it before, but if Wells Fargo somehow 'gets away with it' we'll be seeing a lot more of it every time a major financial institution screws the pooch. And for Wells Fargo, the timing - finally- is perfect.
Unlike his appearance before a Senate committee last week, during which Stumpf was eviscerated by politicians looking to score political points off of the financial equivalent of the Washington Generals, the House Financial Services Committee will now have to contend with Wells tactic of sending in Stumpf monetarily shamed tomorrow morning. And with that committee chaired by a longtime and intimate friend of Wall Street in Jeb Hensarling, it might just be enough.
Essentially, Wells Fargo is taking a quarter of Stumpf's total compensation since he took over as CEO in 2007. That's a big chunk of flesh that will wound him enough to let him appear before Congress and maybe not get totally destroyed (just mostly), give some kind of strongly worded statement about Tolstedt's "punishment," and therefore give Stumpf an outside gambler's chance to keep his job.
What will maybe trip him up is that Democrats on the committee will surely see through both clawbacks (especially Tolstedt's) as placebo and go HAM on Stumpf for trying to pull the wool over their eyes. And house members hate nothing more than having the wool pulled over their eyes...again.
That said, they might have a point. Since the conceptualization of Dodd-Frank, clawbacks have been envisioned as the final insult to bankers who got rewarded for doing bad things. Wells Fargo is essentially using clawbacks to retroactively convey the essence of an apology in the middle of a PR shitstorm and preserve the career of its CEO. The clawbacks are just watered-down enough to let Stumpf save face:
The bank said that the $41 million is from Mr. Stumpf’s unvested equity awards. It also said that he would forgo salary during an independent investigation the board is leading and has recused himself from all matters related to that as well as independent directors’ deliberations. Neither he nor Ms. Tolstedt will receive a bonus for 2016.
That's a bummer, but it's not the kind of slap in the face that tells Stumpf and the world that Wells Fargo has had it with the kind of leadership that led to two million unauthorized accounts and about 5,300 layoffs. John Stumpf is not getting a bonus for 2016? That's about as shocking as telling us that Anthony Weiner is not getting a wedding anniversary present.
But he might be keeping his job in exchange for $41 million of money that he never really had, and that is pretty fucking ballsy.