Senator Elizabeth Warren (D-Mass), picks her adversaries so well that she gains popularity and unearned credibility through the power of cognitive dissonance. Listen closely, however, and you will hear the ranting of a class-biased demagogue.
Joining in on the bipartisan and well-deserved roasting of Wells Fargo CEO John Stumpf before the Senate Banking Committee hearing this week, Warren accused Stumpf of profiting from the mass scam in which over 5000 bank employees signed up customers for services they hadn’t requested, without their knowledge. The bank collected fees for these accounts, cards and services, and the employees got bonuses.
He probably did profit, since the bank did more business and his stock holdings increased in value. Was he aware of the scam, or even behind it? There is no evidence of that yet. Warren also said he should resign. She’s sure right about that. He is accountable as the CEO, and he failed his duty of oversight. It is, as Warren said, typical and wrong that all the firing so far have avoided the executive suites.
But Warren seems to be oddly unaware of her double standard regarding management and leadership accountability. The standards that she was railing at Stumpf for not meeting should also apply to Barack Obama’s accountability for a corrupt IRS, a rogue NSA, a drunk Secret Service, a politically-biased Justice Department, a horrifically incompetent Office of Personnel Management, a criminally negligent VA, and, of course, a technically-challenged State Department that was operated as cash-cow for its Secretary’s personal foundation. Elizabeth Warren’s application of standards are driven by class bias and partisanship, not conduct or principle. She has enables an administration that has avoided assigning accountability or accepting it for multiple fiascos. The most recent? From Fox News:
“More than 800 illegal immigrants from countries of concern who were set for deportation were mistakenly granted U.S. citizenship because the Department of Homeland Security didn’t have their fingerprints on file, according to an internal audit released Monday. The Homeland Security Department’s inspector general found the immigrants used different names or birthdates to apply for citizenship with the U.S. Citizenship and Immigration. In the case of 858 immigrants from “special interest countries or neighboring countries with high rates of immigration fraud,” the discrepancies weren’t caught because their fingerprints were missing from government databases. A few even managed to get aviation or transportation worker credentials, though they were later revoked. One became a law enforcement officer. “
Did you miss this? You might have, because the only reports of it that I could find were on so-called “conservative media” sites….all part of the mainstream media’s “We have to stop Trump even if it means not reporting news that makes Democrats look bad” initiative.
Warren grilled Stumpf about “cross-selling,” which she described as if it was evil incarnate. Cross-selling is nothing more than getting current customers to buy additional products and services. It’s Business 101: your best future customers are your current ones. This is capitalism, and Warren, a socialist who views the profit motive as unethical, often talks as if she would like to criminalize it, and perhaps she would. “Cross-selling is all about pumping up Wells’ stock price, isn’t it?” Warren asked.
Well, it’s about making money…you know, then more jobs, higher salaries, families with more resources. Companies that make money see their stock rise. This is why Stumpf has been the best paid of the various bank CEO’s: the bank under his management made money and avoided the scandals other banks kept falling into. Only people like Bernie Sanders and Warren make that sound shady, because their message is “banks bad, bank management bad.” The fact that the stock of a bank goes up when the bank makes money doesn’t intrinsically have anything to do with illegally charging customers for what they didn’t ask for or agree to, but you’d be hard pressed to get that from Warren’s rhetoric.
Warren produced transcripts of Wells Fargo earnings calls Stumpf participated in from 2012 to 2014, while the scam was in full swing. “In all 12 of these calls, you personally cited Wells Fargo’s success at cross-selling retail accounts as one of the main reasons to buy more stock in the company,” Warren told Stumpf. She went on to quote him from the transcripts, as he touted the company’s record growth to more than six accounts per household.
So what? If the accounts were legitimate, it means that customers liked their bank, and sought more services and product for it. If the customer base was averaging six accounts per household, great! That’s something for Stumpf and his bank to be proud of, and it should raise the value of the stocks. The problem is that the growth was a sham. If it wasn’t a sham, there’s nothing—nothing—wrong with cross sales, nothing wrong with the bank making money, nothing wrong with the stock rising, nothing wrong with Stumpf being rewarded… except that his compensation is obscene and unreasonable already. Still, that’s not what the hearing was supposed to be about.
Warren produced documentation that Stumpf held about 6.75 million shares in the company in that time frame, and that the share price had risen by about $30, “which comes out to more than $200 million in gains, all for you personally, and thanks in part to those cross-sell numbers that you talked about on every one of those calls.”
Again, so what? Is Warren’s point that the CEO of a company shouldn’t make money if the business does well? Is her point that a bank shouldn’t seek profits, or try to sell customers products and services they may want? If her point is that Stumpf was aware of the scam and did nothing about it, she has nothing but the weakest of circumstantial evidence, and knows it: she was a law professor, for heaven’s sake.
“You should resign … and you should be criminally investigated.”
The bank certainly should be investigated, and it is being investigated. A U’S’ Senator should not imply in a public hearing that a citizen is a criminal without actual evidence or at least a hint of some. Yes, it is impossible to believe that over 5000 employees in the same company all independently came up with the same plot to cheat customers. It was a stupid plot, however: what were the chances that it wouldn’t be discovered? Why would the highest paid bank executive risk everything for such an outrageous conspiracy?
To Elizabeth Warren, Stumpf’s crime is that he runs a bank.
Here was the full, unexpurgated, anti-capitalism and ethics-addled demagogue at work, as Warren delivered her final attack on the Wells Fargo CEO:
“Here’s what really gets me about this, Mr. Stumpf. If one of your tellers took a handful of $20 bills out of the crash drawer, they’d probably be looking at criminal charges for theft. They could end up in prison. But you squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket.And when it all blew up, you kept your job, you kept your multi-multimillion-dollar bonuses, and you went on television to blame thousands of $12-an-hour employees who were just trying to meet cross-sell quotas that made you rich. This is about accountability. You should resign. You should give back the money that you took while this scam was going on, and you should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission. This just isn’t right.”
1. Yes, the bogus charges for fake accounts constituted theft, just as taking cash from the till is.
2. Contrary to Warren’s innuendo, however, just as the bank manager whose teller steals twenties isn’t guilty of a crime, neither is the CEO whose employees engage in a conspiracy to bill customers for services and products they didn’t ask for.
3. Correct: neither should incompetent management benefit from criminal conduct that employees engage in while they are asleep at their posts. Warren is right that Stumpf and other Wells Fargo executives should give back any enrichment created by the illicit product fees.
3. I must have missed the part about Stumpf squeezing employees “to the breaking point.” Because Warren hates business and capitalism, she appears to believe that sales bonuses are some kind of torture. IF, and only if, management knows or should know that its sales quotas are causing employees to cheat and break laws, then management should be criminally culpable. Warren has no proof of that at all.
4. What’s “the breaking point” where any employee has no choice but to break the law, steal money from customers and falsifying documents? There is none. This is the “I have no choice” rationalization for unethical conduct. Sure, there is a choice. Don’t cheat. Don’t be corrupted. There was no gun to the heads of any of those 5000+ employees. If an employer tells an ethical employee, “Cheat or you’re fired!” the response is, “I quit!” and also, “I’m going to talk to a local reporter and a lawyer about this.”
5. The worst: “You went on television to blame thousands of $12-an-hour employees who were just trying to meet cross-sell quotas that made you rich.”
Warren is dangerous and shameless.
a. “Just” trying to meet quotas? No, they were “just” robbing customers. This is deceit by Warren. “Just” meeting quotas would mean “just” meeting them fairly and honestly.
b. He blamed them because they were guilty. The fact that Stumpf is accountable, responsible, and should resign or be fired doesn’t remove the blame earned by employees who stole from customers.
c. Warren here embraces the dead bottom of the situational ethics barrel where classist revolutionaries dwell: if you aren’t rich, its okay to steal. Her inspiration comes from Abby “Steal This Book” Hoffman, Lenin, Jesse James and all the anarchists and demagogues through history who told their followers that the way to achieve social justice is to steal wealth from those who have worked to earn it, and give it out like CARE packages to the unfortunate, the criminal, the lazy and the manipulative.
d. The dishonest employees’ salaries are irrelevant to the seriousness of their misconduct—except to Warren, who suggests a sliding scale: the less one is paid, the more justifiable crime is. Moreover, it was not only tellers (whose starting salaries are about 12 dollars an hour, but who earn more with seniority) but also their managers who perpetrated the scam.
e. “Cross-selling” is not what was wrong here, but again and deceitfully, Warren misleads the public by suggesting otherwise.
It is nothing less than frightening that this radical, anti-capitalist demagogue could be elected to the Senate, and that she is so effective at attracting support through misleading rhetoric and cleverly disguised socialist ideology.
Facts: NPR, New York Times, USA Today
22 thoughts on “Wells Fargo Ethics: The Unethical Demagoguery Of Elizabeth Warren”
Thank you for a much needed unbiased newsletter. I have only one request… could you “lighten” the background image a bit??? The copy is hard to read with the background that’s there now.
Judith Gianareles email@example.com ——————————————————— Never ignore a person who loves and cares for you, because one day you may realize that you’ve lost the moon while counting the stars.
“You went on television to blame thousands of $12-an-hour employees who were just trying to meet cross-sell quotas that made you rich.”
I suppose it’s my fault if an employee steals from me because I did not pay for hours not worked.
It’s the height of chutzpah to vilify him when she is drawing a $430,000 income from Harvard while serving double dipping as a senator. Is the Harvard gig a part-time one? She would not make that kind of money handling Chapter 13 cases for the unwashed masses. How does she reconcile her objection to high college debt loads when she is part of the problem.
Warren is the 76th wealthiest among the 541 Senators and Congressmen and women. Ironically, her claim to fame is bankruptcy law. This is how she teaches people how to shift the burden of their debts onto others legally. Come to think of it that’s what qualifies her for the senate – shifting financial burdens from taxpayer group one to another.
She makes almost half a million a year at HLS? Wow. I’m always amazed the salaries academics command.
Wait till you find out what college football coaches make.
Millions. As do the other white guys in charge- athletic directors, etc. That’s been going on for decades since big time college sports teams can bring in huge amounts of cash to colleges and universities. Not that that fact makes coaches’ salaries any more palatable. I just didn’t realize being a college prof could be so absurdly lucrative. They act as if they are paid like monks.
She’s a scold extraorinaire. She’s a turbo charged HRC, on steroids.
I watched Stumpf sit quietly without squirming, while dreaming of having the opportunity to be in a similar place to him, just to hear Warren’s scolding directed at me, just to have a moment to grinningly respond with:
“Have you balanced the federal budget lately?”
Made me think of a scene from Blazing Saddles – wishing I was in Gene Wilder’s “deputy” saddle, saying to Warren before she made it to “high gear:”
“I wouldn’t do that, if I were you.”
My…my…my…expecting philosophical consistency? Geez….that concept in the political arena would provide incredible sales of defibrillators. I’d order one and possibly two.
Why Warren is the grandmother of the occupy movement so this is right in her sweet spot. But the reality is much of the message is rather accurate, but the messenger? Someone who appropriates a false history for their own advancement? And the left fawns over this fraud? Listening to Warren is enough for me to have me be sympathetic to Wells Fargo.
Wait a minute…This is about the biggest, most obvious, most unambiguous business scandal since the 2008 meltdown. And you choose to focus on the Messenger?
I’m not saying you’re wrong about Pocahontas: but I am saying that your choice of topic is itself a judgment, and in this case, it is a choice that is wildly out of proportion with the issues.
You want an ethics violation? Look at the leadership of Wells Fargo. Where’s the outrage from Ethics Alarm on the absence of ethical leadership, the incompetent management of incentives, the colossal arrogance of management in disavowing the effect of their policies, and the insistence on maintaining their ill-gotten gains.
I once had the chance to observe the CEO of Accenture when he was asked the question, by a senior manager, whether he would be revising the incentives to encourage compliance with a particular new initiative.
The CEO was visibly upset; he got up out of his chair and said, “I never want to hear that question again. If there’s EVER a conflict between the financial incentives and doing the right thing, you do the right thing, and then go fix the incentives. Are we clear?”
THAT is what real leadership looks like. Nothing remotely like what happened at Wells Fargo. There he and his ilk intentionally chose to manage solely by absurd incentives, refusing to hear talk of what’s ‘right,’ but continually stressed the need to meet the incentives of cross-selling until each customer got eight separate services from Wells Fargo. (Do you need eight serfvices from your bank?)
Listen I’m not trying to argue that low level people shouldn’t be dinged for doing the wrong thing. But honestly in the face of hundreds of millions of dollars going to the CEO and the head of consumer banking who designed and continued to tweak the system – it is completely out of whack to focus on the mice in the maze, instead of the maze designers.
Or so it seems to me.
I think I adequately expressed how serious the scandal was, Charles, when I wrote in the previous post that the bank could not be trusted and should be put out of business. I’ve done my part by pulling our family’s multiple accounts from the bank, which is five minutes from our home. We’ve banked at the locale for 30 years. No?
And I said that Stumpf should be fired and give back any ill-gotten gains. But Democrats always want to criminalize mistakes and bad management when Republicans and corporations are involved. That’s worth noting…especially when there isn’t much to more to say about the scandal itself.
Mea culpa, the egg is on my face. I had forgotten you had written the previous post, and violated my usual practice of not checking before unloading. Certainly that does equalize the balance, as you say.
Sorry! Hope you’ll cut me some slack.
Oh, heavens, Charles, I’m just grateful every time you comment.
aw shucks… 🙂
and i have seen people post her video and call her a national treasure! ugh i am so discouraged.
Maybe that explains the light sentences that Felipe Santiago Peralez and Brock Turner got.
the judges thought they two were not getting their fair share of sex.
To the Elizabeth Warrens of the world, all executives are Ebeneezer Scrooge and all rank and file employees are Bob Crachit. Why didn’t Crachit just get another job?
Many of Elizabeth Warren’s views are based on fiction.
Not this one, though. This one is quite real.
The idea that the workers should be excused for stealing because they are not being paid enough? That “to the breaking point so they would cheat customers”?
All business executives are in fact Ebeneezer Scrooge? Or?
Although Warren is a dishonest ideologue, I do accept that some things she says may be correct. For example: “It’s raining” could be a true statement from her, assuming she was able to stop there and not add, “And this is conclusive, scientific evidence of man-made climate change that can only be fixed by implementing 100-year-old socialist policies that we just happen to have right here!”
So, which one of her views is quite real?
It’s true that “following orders” is not considered an excuse by the military if the orders are illegal. But the the Nuremberg trials didn’t put every German soldier on trial, either.
The analogy here would be the Nazi generals blaming the troops for having followed orders–out of line in any army, and deservedly out of line in business too.
Yet that’s what WF’s CEO was claiming, and Warren was quite rightly calling him out in scathing terms.
SOMEBODY should have done so! Give her credit for being one of the few elected officials with the cojones to speak the truth.
Nazi generals? You want to go with that as an analogy?
Whatever ‘calling out’ Warren did was clouded and rendered ineffective by her inability to do so clearly, without pandering to her leftist base with a bunch of anti-capitalist cant. Somewhere in the mud puddle of her bloviating misconceptions about business there may have been a nugget of truth, too bad she didn’t focus on it, and instead chose to put on a “Look at me! I’m tough on this banker!” show for the cameras.
Wait—there is no evidence at all that any executives gave orders to establish fake accounts, is there? They were “ordered” to sell products, not to steal fees. Those can’t be called the same thing; one is completely ethical, and the other isn’t.