Michael P. Regan is a Bloomberg Gadfly columnist covering equities and financial services. He has covered stocks for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

Wells Fargo executives appear to have a battle plan when it comes to defending themselves from the outcry of criticism over the fake-accounts scandal that has rocked the bank.

The problem with their battle plan? It's severely undermining their strength when it comes to fighting a larger war: the conflict over whether giant universal banks like Wells Fargo are not just too big to fail, but also simply too big to manage effectively. And, ultimately, whether they're too big to exist in their current bloated states. 

Wells Fargo's Chairman and Chief Executive Officer John Stumpf took center stage on Tuesday, not only at a hearing by the Senate Banking Committee, where firebrand Senator Elizabeth Warren called for him to resign and face a criminal investigation, but also on Hillary Clinton's enemies' list

"We need to make sure that no financial institution is too big to manage," Clinton wrote on her website. "I’ll put additional safeguards in place to address the risks that the big banks continue to pose to our system. And if any bank can’t be managed effectively, it should be broken up."

Wobbly Wheels
Wells Fargo's stock has dropped 12% since it disclosed it was fined by the CFPB
Source: Bloomberg

Again and again, Stumpf and the bank have fallen back on the talking point that only about 1 percent of Wells Fargo's approximately 100,000 retail branch employees were fired each year since 2011 for ginning up fake accounts. 

That may be a foolish route to take. That 1 percent for five years adds up to 5,300 employees and somewhere in the neighborhood of 2 million accounts, so by highlighting how small of a percentage it is also highlights how huge and unwieldy the bank has become after its mergers with Wachovia, Norwest and others.

Stumpf didn't do himself any favors by testifying Tuesday that "in a retail business, where you have a hundred thousand people in seats at any one time, in our 6,200 branches, there is a lot of turnover."

He also didn't help himself by trying to walk back the bank's emphasis on cross-selling. Stumpf tried repeatedly to tell the panel that selling multiple accounts was about deepening the bank's relationships with its customers. Warren hammered him about gloating on earnings calls about the rising number of accounts per customer and the goal of eight, because it rhymes with "great."     

'Eight Is Great'
Wells Fargo's goal of having customers sign up for eight products per household has turned into an emblem of the bank's too-aggressive sales culture
Source: Wells Fargo annual reports

And about those 2 million fake accounts. Wells Fargo can't even say how many fake accounts there truly were, despite what Stumpf called an assortment of "triangulations around how to understand when there might be improper behavior." 

Wells Fargo brought in PWC to help figure it out, and it really can't say either. The more than 2 million accounts were flagged by the consultant as those that "may have been unauthorized," as Stumpf testified on Tuesday. 

Indeed, Stumpf couldn't even say whether he or other executives had fake accounts opened in their names. When asked about that, he responded: "I don't know that. I've not seen a letter on mine, and I was not refunded any of the dollars." And Stumpf, whose banking career has spanned nearly 35 years, didn't seem to know what sort of problems the fake accounts are causing his customers when it comes to their credit scores: "I don't know the algorithms." 

Neither can the bank tell us when the fraudulent account activity began to snowball. The settlement announced on Sept. 8 involves conduct starting in 2011, but Stumpf said the bank was going back to 2009 and 2010 when Wachovia was being absorbed to determine whether the misbehavior was taking place then.

One thing Stumpf was clear about was his compensation for last year: "$19.3 million," he said in response to a question from Senator Bob Menendez. "Now that's good money," the senator responded dryly. 

Stumpf repeatedly tried to fall back on his talking points. "Trust is the core element of any relationship, surely in the financial services business," he told the committee. 

He's right, of course, and the trust between Wells Fargo and its customers has been left shredded like an old credit card that's been closed out.

The bigger question now is how much trust is left between the American people and the executives who manage financial enterprises as big and sprawling as Wells Fargo. Stumpf did not do his fellow too-big-to-fail chieftains any favors during his time in the hot seat.

Warren to Stumpf: You Should Resign, Face Prosecution


This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Michael P. Regan in New York at

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Daniel Niemi at