Wells Fargo execs must give back $60 million in first-of-its-kind banking scandal punishment

The bank initially tried to blame frontline workers for a massive scandal that defrauded customers.

Wells Fargo CEO John Stumpf CREDIT: AP Photo/Susan Walsh, File
Wells Fargo CEO John Stumpf CREDIT: AP Photo/Susan Walsh, File

When news first broke that Wells Fargo would pay the largest fine in Consumer Financial Protection Bureau history for routinely opening unauthorized accounts that clients didn’t want or need, CEO John Stumpf put blame squarely on his worst-paid workers.

He’s changed his tune since, as political pressure over the years-long scandal mounted and evidence depicting the high-pressure sales culture at the bank got more attention.

And now, the bank’s board is reaching into Stumpf’s own pocket to discipline him. The CEO will forfeit $41 million in past compensation — all of it in the form of investment holdings that hadn’t vested yet — and the woman who ran his firm’s retail banking unit will give back $19 million of her own.

That subordinate, Carrie Tolstedt, was initially the only person at the top level of the bank to take a fall for the scandal, in which about 2.5 million fake accounts and credit cards were opened without customers’ permission or knowledge in order to generate fee revenue for the firm. She resigned in the wake of the CFPB fine, ahead of a pre-planned exit at the end of this year.


Clawbacks have never been used on a banking executive before, although JP Morgan head Jamie Dimon did see a big one-year pay cut after the “London Whale” fiasco. The junior employees involved in that scandal were subject to clawbacks, but Stumpf and Tolstedt’s portfolio losses are without true precedent.

By clawing back a large chunk of Stumpf’s roughly $100 million in compensation over the past decade, though, the board is hoping to signal that it’s taking the scandal seriously. The day news of the $185 million fine broke, Stumpf portrayed it as an issue of some bad apples at junior positions and said responsibility started and stopped with the 5,300 people fired in response.

That holier-than-thou response first started to crack in front of the Senate Banking Committee last week, when senators including Elizabeth Warren (D-MA) bounced the bank head off the walls of a hearing room for hours.

Wednesday’s announcement of clawbacks comes a day before Stumpf returns to Capitol Hill to face the House’s version of the same inquisition.


Clawbacks are a hot-button concept for finance watchdogs and Wall Street critics. Many of the industry’s sins stem from compensation policies that incentivize executives to break whatever rules they have to keep the company stock rising, knowing they’ll walk away rich even if the company gets caught. Clawbacks, observers and policymakers say, are an important tool in reversing that deviant cycle.

But even clawbacks are a post-facto make-good measure. Wells Fargo’s sins were first exposed three years ago by reporters. Justice, if clawbacks can be said to constitute it, has been excruciatingly slow here.

If lawmakers want to get proactive in combating banker cheating instead of constantly being a step behind, they know what they have to do.

Loopholes that make stock-based compensation tax deductible for executives across all industries can be easily closed. Executive compensation in the banking business can be reined in, with particular ease at firms that survived the 2008 collapse thanks to taxpayer generosity.

And, most importantly, prosecutors and regulators can get serious about going after financial criminals instead of striking milquetoast settlements years after the law was broken, when the people responsible have already profited from the “I’ll be gone, you’ll be gone” attitude toward fraud that thrives on Wall Street.