• by Thom Forbes  @tforbes, September 30, 2016

Members of the House Financial Services Committee hammered Wells Fargo CEO John Stumpf yesterday for his leadership at a time when at least 5,300 underlings were fired for cross-selling transgressions. Some members of the panel said Stumpf should lose his job or go to jail. Others indicated that the bank should be broken up. And the sentiment that there may be other rotten big banks in the barrel — look for more hearings exploring this line of reasoning — was expressed.  

“We are here today because millions of Americans were ripped off by their bank and seemingly let down by their government. Fraud is fraud and theft is theft. What happened at Wells Fargo over the course of many years cannot be described any other way,” the chairman, Rep. Jeb Hensarling (R-Texas), said in his opening remarks.

“Why shouldn’t you be in jail?” asked Rep. Michael E. Capuano (D-Mass.). “When prosecutors get hold of you, you are going to have a lot of fun.” “Do you think what you did was criminal?” Rep. David Scott (D-Ga.) asked. Stumpf responded that he had led the bank with ‘courage,’ but was interrupted again,” Renae Merle reports for the Washington Post.

Members “lambasted” Stumpf “during a vitriol-filled, four-hour hearing,” James Rufus Koren and James Puzzanghera write for the Los Angeles Times, “saying that his bank violated numerous federal laws and that its sins should lead to a broad review of industry practices.”

“‘Your colleagues should at least come forward,’ Rep. Brad Sherman (D-Calif.) told Stumpf, in calling for testimony from CEOs of other major banks. ‘I don’t think, Mr. Stumpf, that you should be alone in this joyous experience,’” they report.

For his part, “Stumpf apologized repeatedly for his bank’s failings and repeated his earlier pledge — given last week to the disgruntled Senate Finance Committee — to accept ‘full responsibility’ for them,” Stacy Cowley reports for the New York Times. “But he again rejected lawmakers’ attempts to cast the scandal as a consequence of broader failings in Wells Fargo’s leadership and corporate culture.” He did admit “that the company ‘should have done more sooner’ to address the problem of unauthorized accounts being created by employees in the names of real customers.”

“Lawmakers discussed [with] dismay that an alleged scam involving more than 5,000 employees accounts for just 2% of Wells Fargo's workforce,” writes Matt Krantz for USA Today. “‘Can you really know what is going on at this bank?’ said Rep. Maxine Waters (D-Calif.), who declared that she would move forward to break up Wells Fargo, which is based in California.”

One might also ask the lawmakers what took them so long to look into the issue, which was first uncovered in a Los Angeles Times report by E. Scott Reckard nearly three years ago.

“My takeaway is about the banking industry. You heard the phrase ‘cross-selling mania’ and ‘cross-selling bubble’ as it refers to the industry,” CLSA banking analyst Mike Mayo said on CNBC's “Fast Money: Halftime Report” yesterday, Elizabeth Gurdus reports. “I think this accelerates the transition from physical banking to virtual banking.”

But “he warned of the unintended consequences that could occur if big banks were dismantled,” saying it could add up to the loss of 200,000 jobs “if the United States were to return to the number of bank branches that existed in the 1950s.”

Meanwhile, the Justice Dept. announced yesterday that the bank “will pay $24 million to settle allegations that it mistreated members of the military — including illegally repossessing their cars,” reports Jackie Wattles for CNN Money. 

According to the feds, the bank “seized 413 cars owned by service members without a court order, a violation of federal law” from 2008 to 2015. “Wells Fargo said in a statement that it apologizes for not living up to its commitment of ensuring that all service members ‘receive the appropriate benefits and protections,’” Wattles writes.

As Financial Services’ chairman Hensarling’s five-minute opening statement wound down yesterday, he proclaimed: “I know Wells Fargo is an iconic brand, a bank with a proud heritage. ...But this sordid affair reminds me why I trust markets but not individual businesses.” His final blow was to reveal that he has a mortgage with the bank but wishes he didn’t.

That’s a sentiment that no doubt resonates across party lines and financial classes. In Q2 2016, mortgage debt in the U.S. added up to $13,973,725,000,000.