Receiving Wide Coverage ...
Stumpf leaves: Wells Fargo chairman and CEO John Stumpf announced Wednesday he is retiring immediately, as was widely expected following the bank's phony accounts scandal. "The toppling of Mr. Stumpf, 63 years old and just shy of his 10th year as CEO, marks a stunning comedown for a firm that largely passed through the financial crisis unscathed and which was seen as a reliable Main Street lender," the Wall Street Journal commented.
Stumpf, who spent nearly 35 years at the bank, will be replaced as CEO by Timothy J. Sloan, currently the president and COO, who was widely seen as Stumpf's heir apparent, and as nonexecutive chairman by Stephen Sanger, the board's lead independent director. Splitting the CEO and chairman's job will make Wells only the second big U.S. bank to do so, joining Citigroup. Elizabeth Duke, a director and a former Federal Reserve governor, will become vice chairman.
Stumpf, who has already relinquished $41 million in unvested equity as a result of the scandal, "one of the biggest-ever forfeitures of pay by a bank chief," according to the Journal, won't receive a severance package. But he still retires with about $120 million in total compensation earned through his career at the bank. However, the paper said, the board could decide he should surrender even more pay, depending on the outcome of the investigation into the scandal.
Stumpf's replacement as CEO didn't satisfy everyone, especially not Maxine Waters, D-Calif., a member of the House Financial Services Committee, who has called for Wells to be broken up. "Tim Sloan is also culpable in the recent scandal, serving in a central role in the chain of command that ought to have stopped this misconduct from happening," she said. Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker
Stumpf's downfall is likely to have at least three big consequences for other big American banks, the Financial Times comments. One is the use of clawbacks, which "may send shivers down the spines of every senior executive at a big US bank." The second is the separation of the roles of chairman and chief executive, "which has long been a vexed question for the banks." Wells' decision to separate the two roles "seems to be a clear admission that governance was not as good as it should have been under the old model" and could put pressure on other banks that combine both roles, such as JPMorgan Chase and Bank of America, to follow suit. Finally, "if the banks were hoping that the question of break-ups was going away, they can forget it."
Stumpf's resignation is "an all-too-rare example of corporate governance working the way it should, someone at the top is being held accountable for Wells Fargo's multiyear abuse of its retail customers," writes James B. Stewart in the New York Times.
Stumpf "rose from the bottom of the banking industry to become leader of the world's largest bank by market value." The Wall Street Journal presents a timeline of his career at the bank, beginning in 1982 in the loan administration department.
Wall Street Journal
Internal bailouts: Banks are creating new holding-company structures that would allow their most important subsidiaries to keep functioning even if the parent company were to file for bankruptcy. Amendments to "living wills" recently filed with the Federal Reserve by several big banks, including JPMorgan, BofA and Citi, included "small structural changes" that include the creation of a holding company that would sit between the shareholder-owned parent company and its subsidiaries. "The new entities will be a sort of emergency backup bank within the bank, a vehicle for internal bailouts," the Journal said. However, it added, "the change could cause unease among regulators outside the U.S." because it "potentially could lead banks to keep less capital at overseas subsidiaries and make it less likely they would support all their global operations in times of trouble."
Low expectations: Expectations are low for third-quarter earnings reports to be released Friday by three of the nation's biggest banks: JPMorgan Chase, Wells Fargo and Citigroup. Analysts expect year-over-year earnings-per-share declines of 18%, 4%, and 15%, respectively at the three banks. But those results would have been worse had it not been for a rebound in trading activity in the quarter.
