Warren Buffett breaks silence on Wells Fargo

Buffett Says Stumpf ‘Made a Hell of a Mistake’ at Wells Fargo

Excerpt:

Stumpf is a “very decent man” who “made a hell of a mistake,” the billionaire said in an interview posted on CNN’s website Friday. “And he didn’t correct it. That’s the thing.”

Buffett’s comments were his most extensive public remarks on the bank since it agreed in September to pay $185 million to settle allegations that employees set up credit-card and deposit accounts without customers’ permission. Staff have said they were encouraged by cross-selling targets to open as many accounts as possible. “It was a dumb incentive system,” said Buffett, whose Berkshire Hathaway Inc. is the largest investor in Wells Fargo. “When they found out it was dumb, they didn’t do anything about it.”

Comment: Agreed. Image source is CNN Money

A Sacrifice to the "Beltway gods"

Wells Fargo’s Political Sacrifice - CEO John Stumpf is offered up to the Beltway gods.

Excerpt:

The political class got its second ritual sacrifice for the sins of Wells Fargo, as the bank’s chairman and CEO John Stumpf resigned Wednesday, effective immediately.

Mr. Stumpf had already forfeited $41 million in unvested equity grants as recompense for the sales tactics that caused employees to open accounts that customers hadn’t asked for. Now he’s paying with his job, as the bank tries to appease the political lords who under Dodd-Frank have become more or less co-owners of our largest banks. The politicians claim to want compensation clawbacks, but what they really want are heads on pikes.

You won’t read this elsewhere, but Mr. Stumpf has been one of the most successful American CEOs of recent times. Our colleague Dennis Berman reports that in nine years he produced some $149 billion in profits and saw an increase in market cap of $124 billion. Wells Fargo tried to turn down the government’s rescue funds during the 2008 financial panic because it didn’t need the help, only to be forced by Treasury to take the money.

Comments:  Oh the selective outrage in DC. Dump on Trump (he deserved it) and demand clawbacks (deserved and delivered). Why not demand clawbacks from Secretary of the Treasury Jack Lew for his Cayman connections or his tenure at Citi when it received taxpayer bailouts of $45 billion in cash, and hundreds of billions more in loans and guarantees. See Rep. Garrett Says Democrats Have Double Standard for Clawback Rules . Oh the outage over Trump (this is more the media, I suppose (and deserved)) but none for Hillary for her campaign's mocking of Catholics, Southerners, ‘needy Latinos’

Wells Fargo: John Stumpf retires, Tim Sloan new CEO

Wells Fargo Chairman, CEO John Stumpf Retires; Board of Directors Elects Tim Sloan CEO, Director; Appoints Lead Director Stephen Sanger Chairman, Director Elizabeth Duke Vice Chair

Excerpt:

Wells Fargo announced today that Chairman and Chief Executive Officer John Stumpf has informed the Company’s Board of Directors that he is retiring from the Company and the Board, effective immediately. The Board has elected Tim Sloan, the Company’s President and Chief Operating Officer, to succeed him as CEO, and Stephen Sanger, its Lead Director, to serve as the Board’s non-executive Chairman, and independent director Elizabeth Duke to serve as Vice Chair. Sloan also was elected to the Board.

Sloan’s appointment to CEO and election to the Board are effective immediately. He will retain the title of President.

Sanger said, “John Stumpf has dedicated his professional life to banking, successfully leading Wells Fargo through the financial crisis and the largest merger in banking history, and helping to create one of the strongest and most well-known financial services companies in the world. However, he believes new leadership at this time is appropriate to guide Wells Fargo through its current challenges and take the Company forward. The Board of Directors has great confidence in Tim Sloan. He is a proven leader who knows Wells Fargo’s operations deeply, holds the respect of its stakeholders, and is ready to lead the Company into the future.”

Stumpf, a 34-year veteran of the Company, joined Wells Fargo in 1982 as part of the former Norwest Bank, becoming Wells Fargo’s CEO in June 2007 and its chairman in January 2010.

“I am grateful for the opportunity to have led Wells Fargo,” Stumpf said. “I am also very optimistic about its future, because of our talented and caring team members and the goodwill the stagecoach continues to enjoy with tens of millions of customers. While I have been deeply committed and focused on managing the Company through this period, I have decided it is best for the Company that I step aside. I know no better individual to lead this company forward than Tim Sloan.”

Sloan said, “It’s a great privilege to have the opportunity to lead one of America’s most storied companies at a critical juncture in its history. My immediate and highest priority is to restore trust in Wells Fargo. It’s a tremendous responsibility, one which I look forward to taking on, because of the incredible caliber of our people, and the opportunity we have to impact the lives of our millions of customers around the world. We will work tirelessly to build a stronger and better Wells Fargo for generations to come.”

Sloan joined Wells Fargo 29 years ago, launching a career that would include numerous leadership roles across the Company’s wholesale and commercial banking operations, including as head of Commercial Banking, Real Estate and Specialized Financial Services. He became president and COO in November 2015, when he assumed leadership over the Company’s four main business groups: Community Banking, Consumer Lending, Wealth and Investment Management and Wholesale Banking. Previously, he headed the Wholesale Banking group after serving as the Company’s Chief Financial Officer and, prior to that, as the Company’s Chief Administrative Officer.

Comments: Image capture from Wells Fargo site.  I am not surprised and this is the best to resolve the scandal. WSJ article. Stumpf photo screen shot from article.

Update on 10/13/16: James Cramer noted this on CNBC this AM. Stumpf still on WF site

John Stumpf - Carrie Tolstedt Clawback

Wells Fargo Chief to Forfeit $41 Million in Wake of Scandal

Excerpt:

As John G. Stumpf, the chief executive of Wells Fargo, prepares to face a congressional tribunal on Thursday for the second time in two weeks, questions are intensifying about the bank’s sham accounts scandal and its lethargic response to it.

And late Tuesday, with the focus of the criticism spreading from the bank’s chief executive to its board, the company’s directors took action. Announcing an investigation into the bank’s sales practices, the board said Mr. Stumpf would forfeit approximately $41 million worth of stock awards, forgo his salary during the inquiry and receive no bonus for 2016.

The Wells Fargo board also announced the immediate retirement of Carrie L. Tolstedt, the former senior executive vice president of community banking, who ran the unit where the fake accounts were created. She will forfeit $19 million in stock grants, will receive neither a bonus for this year nor a severance, and will be denied certain enhancements in retirement pay, the board said.

Comment: Appropriate.  Image source for Tolstedt

John Stumpf's survival chances

Warren Buffett to Fox Business: I'll Remain Silent on Wells Fargo for Now

Excerpt:

If history is any guide, Buffett can't be thrilled about the ethics lapse.

25 years ago this month, Buffett testified before a Congressional sub-committee regarding the Salomon Brothers bond scandal. Buffett had become a major shareholder in Salomon when it was revealed that traders had been submitting false Treasury bond bids in order to skirt trading rules. Buffett swiftly took over as CEO and fired a number of management.

At the time, he said during the testimony, "Lose money for my firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless."

Whipping Wells Fargo - The bank blundered, and the politicians will make it pay.

Excerpt:

Now we see that even bread-and-butter retail can lead to political retaliation as Senators call for Mr. Stumpf to resign and demand a criminal investigation. Readers know that unauthorized accounts are an affront to customers, but Senate progressives on Tuesday described sales targets as inherently evil. Senators also want executive-pay clawbacks, though the scandal has hardly dented bank earnings.

Mr. Stumpf, who will be lucky to survive as CEO, is learning the hard way that as long as banks remain public utilities they are a lousy business.

Comment: "Buffett's Berkshire Hathaway (BRK.B) holds a near 10% stake in Wells Fargo (WFC). The Oracle of Omaha has been a longtime fan of the company but his silence may speak more loudly after Wells Fargo CEO John Stumpf gave a rocky performance on Capitol Hill before the Senate Banking Committee Tuesday morning. " My view below:

Wells Fargo once a "most admired" company! Since breaking of the scandal, Wells Fargo has lost $ 25 Billion in Market Capitalism. "“The stock has gone from loved to loathed in two to three weeks"

Wells Fargo is absolutely getting hammered on social media. Snip from Facebook below:

Updated: Multiple fired Wells Fargo employees report to CNN that they were fired after calling ethics hotline.

John Stumpf on housing crisis

Wells Fargo CEO: Why Americans are saving so much
Excerpt:

There are about 70 million homes in America. Fifty million have a mortgage on them. The average mortgage is $200,000, so you've got about a $10 trillion market. Today about 20% of those mortgages are underwater -- they owe more than what the home is worth. But we're starting to see values come back. I don't know that we'll ever be where we were or should be where we were in the last six, seven, eight years when it was just trading up. But housing is still, for two-thirds of Americans, the American dream. It's not for everyone to own a home. But I'm bullish on housing. I'm bullish on Americans' desire to own homes. It will be slow, but it's healing almost everywhere.

Comment: From December 3rd Forbes.

Wells Fargo's John Stumpf: How to fix the mortgage mess

Wells Fargo's John Stumpf: How to fix the mortgage mess

Excerpt:

First, all parties involved in making and investing in mortgage loans need to share a financial interest in the quality of those loans. That includes the customer taking out the loan, the financial institution or broker originating the loan, and the investor who ultimately owns the loan. All parties need to have skin in the game. If originators don't have a financial interest in the loan, they will have less concern for its quality, and poor lending decisions will happen and be passed along to investors. That creates a house of cards.

A healthy debate is already taking place about how much a homeowner should put down and how much a bank should keep on its balance sheet when it bundles and sells mortgage loans. There is no magic number out there, but I can tell you one thing: The more the risks and rewards of a mortgage loan are shared by all parties -- and the better those risks and rewards are understood -- the better the quality of the loan will be.

Will this mean higher down payments for homeowners and more financial skin in the game for banks? Probably so, but the long-term costs for homeowners, bankers, and the economy will be dramatically lower. Just look at what past mortgage lending practices have cost all of us.

Comment: Good article from Fortune Magazine

John Stumpf: no more acquistions for now

Big 3 won’t buy failed banks

Excerpt:

In an interview with Atlanta Business Chronicle, John Stumpf, president and CEO of Wells Fargo, said the San Francisco-based financial services conglomerate would likely not be an acquirer in a regulator-assisted deal in Georgia or anywhere else.


“To the extent we participate in the consolidation of [the banking industry], our No. 1 job, No. 2 job and No. 3 job is getting Wells Fargo and Wachovia merged and do it exceedingly well,” Stumpf said Nov. 19 following meetings in Atlanta with top clients and regional management. (See Stumpf interview, Page 4A.)

Wells Fargo (NYSE: WFC) acquired Wachovia in October 2008 and is grappling with the Charlotte, N.C.-based bank’s challenged loan portfolio. Industry watchers said the $1.3 trillion-in-assets mega-bank has its hands full, integrating Wachovia’s 3,300 branches, extensive business lines and dealing with legacy Wachovia’s rocky loan portfolio.

“We’re not going to play in the consolidation of the market unless it is very late in [traditional] merger activity, or if we are invited in some way [by regulators],” Stumpf said. “Otherwise, we’re saying grace over all the things we can say grace over right now.”

Wells Fargo/Wachovia is the second-largest bank in metro Atlanta.

Comment: Several more years before Wachovia completely merged!

John Stumpf is CEO of the Year

Wells Fargo's John Stumpf is CEO of the Year

Excerpt:

Wells Fargo & Co. didn't merely survive the economic tsunami that wiped out prominent financial institutions and transformed the Wall Street landscape. The San Francisco bank rode the wave, playing the upheaval to its advantage by picking up a crippled, but substantial, competitor on the cheap.

The roughly $13 billion acquisition of Wachovia Corp., completed on the final day of last year, converted the super regional bank into one of the nation's largest. Based on preliminary first-quarter results released this month, it's also among the strongest.

For that, the bank's leader, John Stumpf, is The Chronicle's Chief Executive Officer of the Year for 2008.

His office declined an interview request for this article, citing SEC rules in advance of the company's scheduled earning announcement on Wednesday.

Stumpf became CEO of Wells Fargo, San Francisco's largest private employer and one of the biggest charitable contributors, in June 2007.

The company would not have been in a position to seize the opportunities presented by the economic meltdown last year had it not largely avoided the boom time behavior that would eventually doom so many of its peers. Specifically, it offered far fewer of the exotic and now toxic mortgages that wiped out credit markets and sparked the takeover or dissolution of Fannie Mae, Freddie Mac, Lehman Bros., Bear Stearns, Countrywide Financial Corp., Washington Mutual and scores of other lenders.

"We were the No. 1 mortgage company in this country in the early part of this decade, and all of a sudden we started to see people do things that we didn't understand," Stumpf said in an interview earlier this year, citing negative-amortization and payment-option mortgages.

"We gave up tens of billions of dollars in loan-origination volume and millions and millions of dollars in profit," he said. "But we didn't see how doing this would help customers succeed financially. We don't think lending money to somebody who we know can't pay us back serves anybody. Others did that because they were interested in short-term profits, and they got nailed."

Comment: I've met John. Impressive guy!

Wells Fargo CEO on the Hill today;

Live-Blogging the Bankers’ Showdown on Capitol Hill

Excerpt:

11:01 a.m. | And yet more loans: Mr. Stumpf of Wells Fargo says the bank made $72 billion of new loans in the fourth quarter. “We do business and lend money the old fashion way — responsibly and prudently,” he says. “We are Americans first and bankers second.”

12:00 p.m. | Fannie and Freddie: Rep. Edward R. Royce asks to what extent the mortgage securitization process, led by Fannie Mae and Freddie Mac, was part of the problem. Mr. Stumpf of Wells Fargo — which originated relatively few of the most exotic kinds of mortgage loans — says that the problem started a long time before 2007 with “crazy things” such as negative amortization loans and so-called liar loans. “There’s no question that Fannie and Freddie played a part in that,” Mr. Stumpf says.

1:44 p.m. | Autos and bonuses: What are these banking chiefs’ views on the viability of the American auto industry? Several executives say that they are supportive of the industry, including by making auto loans.

Back to TARP money received, salary and bonuses, or lack thereof.
Mr. Stumpf: $25 billion. $850,000 salary. No bonus.
Mr. Pandit: $45 billion. $1 million salary. No bonus. He will take $1 salary until Citi turns a profit again.
Mr. Mack: $10 billion. $800,000 salary. No bonus.
Mr. Logue: $2 billion. $1 million salary. No bonus.
Mr. Lewis: $15 billion. $1.5 million salary. No “incentive.”
Mr. Kelly: $3 billion. $1 million salary. No bonus.
Mr. Dimon: $25 billion. $1 million salary. No bonus.
Mr. Blankfein: $10 billion. $650,000 salary. No bonus.


2:06 p.m. | Where’s the money?: Will the banks lose more money? Mr. Stumpf recollects his time as a collector and says that job losses are key to answering the question. Mr. Pandit agrees that unemployment is important; when asked about when credit will flow again, he says “we’re doing everything we can.”

3:42 p.m. | No less anger: A congressman from Texas says the American people won’t have any less anger after the hearing because they don’t know where the money has gone. He asks if the bankers can ascertain the amount of new money that has been lent out directly attributable to TARP. Everybody raises their hands except for Mr. Stumpf, who says all of the loans go into the same pool of capital.

4:16 p.m. | Mark to market: Mrs. Biggert asks whether anyone would do away with mark-to-market accounting. Mr. Stumpf and Mr. Lewis said it should be modified for extraordinary times when there is no market for products.

4:20 p.m. | “Feed the troops”: Representative Joe Donnelly, Democrat of Indiana, tells the bankers to “feed the troops before they feed themselves.” “We are counting on your good judgment,” he says. He also asks the bankers whether they can work with small businesses who are paying their loans but their ratios might be off. Mr. Stumpf says they are working with small companies.

Comment: My favorite part ... does not involve Wells Fargo:

3:30 p.m. | “Mr. Countrywide”: A congessman from Florida doesn’t seem to know who the bankers are. He mispronounces Mr. Dimon’s name and asks the panel who “Mr. Countrywide” is. Mr. Lewis said he is “not Mr. Countrywide.”

Wells Fargo CEO before congress today

Full statement here: Testimony of John Stumpf
President & CEO, Wells Fargo & Company, House Financial Services Committee, February 11, 2009 (PDF)

Excerpt:

Last quarter alone, we made $22 billion in new loan commitments and $50 billion in mortgages – a total of $72 billion in new loans. That’s almost three times what the U.S. Treasury invested in Wells Fargo. With the merger, we have reopened lines of credit to some Wachovia customers who previously had been denied credit.

Comment: Meanwhile CNN's Campbell Brown bashes Wells Fargo

John Stumpf Q & A

What Wells Fargo plans to do on a bigger stage

Excerpts:

Q: In the investor presentation, the company said the consolidation will allow $5 billion in annual savings. Where will that savings mainly come from?

A: There's a lot of obvious things, like you only need one CEO. Well, maybe you need more than one, but you're only going to get one. You only need one Internet platform, there are myriad things. Some of it will be people, no question about that. We're going to work hard to minimize job losses, but there will be job losses.

...

Q: What did Wells Fargo do right? Why is it now in the position where you're buying a major competitor, becoming one of the biggest banks in the nation, while many of its peers are struggling or dying?

A: We did not have a crystal ball better than anyone else. We did not see this downturn to this degree. We didn't avoid all the mistakes because we feel the pain that our customers feel and we made some loans that I wish we would not have made. I think the major thing is, we did not confuse our reason for being in business and the results. In other words, our mission statement is to help customers achieve financially and the result of that is, (we) make money. We didn't do it the other way around.

We were the No. 1 mortgage company in this county in the early part of this decade and all of a sudden we started to see people do things that we didn't understand: negative (amortization loans), Pick a Pay or option (adjustable rate mortgages).

We gave up tens of billions of dollars in loan origination volume and millions and millions of dollars in profit. But we didn't see how doing this would help customers succeed financially. We don't think lending money to somebody who we know can't pay us back serves anybody. Others did that because they were interested in short-term profits and they got nailed.

Q: Can you give us any color on how Wells Fargo has used the $25 billion in government bailout funds it received?

A: We were asked to participate in the (Troubled Asset Relief Program) funds. The government made a $25 billion investment in preferred stock in Wells Fargo and they get some warrants. We're Americans first and we're bankers second. If this strengthens the industry, and we benefit from a strong industry as do our consumers and small business customers, then that's terrific.

It adds to our capital and we use that to operate our business, we don't segregate those funds out and say, we're using these funds for this loan and we use this capital for that. It's all part of the same capital.

We've been making loans all along. In fact, we didn't grow our balance sheet two years ago or three years ago, when people said there was no risk in these assets and we said we think there's risk. Since the credit pressure (that began in the middle of 2007), we've been growing loans and our balance sheet by double-digit rates because we're getting paid for the risk today, we're winning new relationships, we're winning new customers.

Q: Wells Fargo and other banks appeared before Congress and answered questions about how they were using the TARP funds. There seemed to be some explicit pressure to use the funding for lending. Given that loose lending is what led our economy to this point, should the government be pressuring banks to lend in your view?

A: At least in Wells Fargo's case, we cannot responsibly say to anyone, we will make X number of loans into the future without any conditions. We will make all the loans that we can make responsibly, profitably, with proper risk and proper concentration limits. Part of the reason we're in this soup is there were a lot of people who thought loans were the goal.

Comment: Full article is a worthwhile read.

John Stumpf on Fast Money

Outlook 2008: Banks

Excerpt:

What is your outlook?

“For next year, it will be more of this year with respect to housing,” says Stumpf. “But from a Wells Fargo perspective, we’ve been operating (in the do more for consumers model) for 20 years or more. It’s served us well in the past and it will be our mantra going forward.”

What is your exposure to future mortgage weakness?

“About 92% of our mortgages are prime mortgages. Only 8% are subprime,” says Stumpf. “And our subprime loans perform twice as well as other banks. Really this is a very small issue for Wells Fargo although a larger one for the industry.”

What do you think about the teaser freezer?

“I think Paulson has done a terrific job,” says Stumpf. “He’s trying to do the right thing. But it’s not going to be a silver bullet. I suspect President Bush will sign FHA reform. .. But this idea of a bailout doesn’t work. In that case the medicine is almost worse than the disease,” he adds.

What are you thoughts on the Fed?

“I think the Fed has done a terrific job so far,” Stumpf replies. “This is somewhat uncharted territory and they’ve been very responsible in their actions as well as responsive.”