Before Wells Fargo (NYSE: WFC) found itself in the midst of a fraudulent account scandal that cost John Stumpf his job as CEO, Stumpf was widely regarded as one of the best bankers in the industry. He successfully led Wells Fargo through the great financial crisis and became famous for pushing back on the idea his bank should be forced to participate in bank bailouts in 2008.
In this segment of Industry Focus: Financials, join The Motley Fool's Gaby Lapera and contributor Jordan Wathen as they discuss the end of Stumpf's career as Wells Fargo CEO, and how differently history might remember Stumpf if not for Wells Fargo's recent scandal.
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A full transcript follows the video.
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Gaby Lapera: I was thinking maybe we could start witha story we were following really closely before I left, but I don't know anything about right now,which is theWells Fargostory. As you guys might remember --I hope you remember,I don't know, the new cycle is so short these days --Wells Fargo was accused, and it was eventually proven correct, that they hadopened a bunch of fake accounts. They were beinginvestigated, they had to pay a bunch of fines,John Stumpf, the CEO, wasrequired to stand up in front of the Senate Banking Committee, in front of Elizabeth Warren,andhe got absolutely roasted. Totally watch that footageif you haven't yet, even though it's totally a month old now. What's happened with Wells Fargo since I left?
Jordan Wathen:I think the big story with Wells Fargo is that John Stumpf's careeractually came to an endover the fraudulent accounts scandalat Wells Fargo. Torecap, they opened 2million accounts for peoplewho never said they wanted them, andnow, John Stumpf, finally, after somepush and shove, heexited on Oct. 12 and stepped down as CEO of Wells Fargo.
Lapera:This is really wild. John Stumpfhas been the CEO of Wells Fargosince 2007. Before all this happened, people thought he was an incredible CEO and an incredible leader. And here we are, 2016, and he has to step down because hiscompany has been up to things that they really shouldn't have been.
Wathen:Right. If yougo back and read any book on the financial crisis, and look at what happened during the bailouts, John Stumpf basically said, "Wells Fargo is on solid ground,we don't need your bailout money,I don't even know why you're bothering me and bringing me here."Wells Fargo really was, they were perhaps better off than any other bank. Really, his legacy could have been that he successfully guided Wells Fargo throughthe worst financial crisis since the Great Depression. Now, basically, his name getstarnished with this whole scandal.
Lapera:Yeah. Andit's really interesting to me,because at the beginning of this scandal,it didn't seem like he had a great grasp of how seriouslyeveryone was taking it. Like, I don't know if you've seen any ofthe footage of him talking about itreally early on,but he didn't even seem like he was going to stop down orapologize, and Carrie Tolstedt was going to get a ton of money and stock options. So,it's really interesting to see how things have shifted. I wonder what happened that caused him to be like, "You know what?I'm stepping down."
Wathen:I think it's the pressure. This is one of those things that -- during the financial crisis, every bank was in trouble. They all underwrote terrible loans,they all lost billions of dollarson these loans. But right now,it's just Wells Fargo. It's just Wells Fargo that you're hearing aboutwith these account scandals. And the numbers they've put out this quarter have indicated that there'sat least been some kind of change in the sales process,because they noted that checking account opens were down 25% year over year in September,and credit card applications were down 20% year over year in September, also. It'sprobably two things. The consumers are wary of Wells Fargo to some extent. Andthere's probably a very obvious change in sales practices. People are no longer getting accounts they didn't necessarily request.
Lapera:Yeah,it's going to be interesting to seewhat happens to Wells Fargo long term.I'm not going to make a call right now,because I literally just got back,so I haven't looked at anything they put out. But you better believe we're definitely going to do a show on it later on,probably this quarter.
Gaby Lapera has no position in any stocks mentioned. Jordan Wathen has no position in any stocks mentioned. The Motley Fool owns shares of Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.