There was no way around it. On Wednesday, the chairman and CEO of Wells Fargo (NYSE:WFC), John Stumpf, stepped down from his positions at the nation's third biggest bank by assets. It marks an unfortunate end to what was otherwise a legendary career.
"John Stumpf has dedicated his professional life to banking, successfully leading Wells Fargo through the financial crisis and the largest merger in banking history, and helping to create one of the strongest and most well-known financial services companies in the world," said lead director Stephen Sanger in prepared remarks. "However, he believes new leadership at this time is appropriate to guide Wells Fargo through its current challenges and take the company forward."
President and Chief Operating Officer Tim Sloan will assume the helm at Wells Fargo. Sanger will serve as the non-executive chairman of the board.
An once-unthinkable outcome
Had anyone said one year ago that this would happen, analysts and commentators across the bank industry would have thought the person were crazy. As Sanger alluded to, under Stumpf's watch Wells Fargo passed the greatest test that any bank can pass: Not only did it survive the financial crisis; it thrived because of it.
Stumpf presented a calm and reassuring demeanor during the most harrowing times in the bank industry since the Great Depression. His dedication to running a lean and prudent operation, particularly when it came to managing credit risk, a rare and far too unappreciated skill, allowed Wells Fargo to acquire Wachovia at the nadir of the crisis. The deal halted what could have otherwise been the biggest bank failure in the history of the United States.
The 34-year veteran also gained the respect and admiration of his colleagues. The chairman and CEO of JPMorgan Chase, Jamie Dimon, called him a friend and expressed deep admiration for Stumpf. Wells Fargo's biggest shareholder, Warren Buffett, did too. And I've talked to other CEOs of major banks who felt the same way.
But Stumpf's position atop one of our most revered institutions for over 160 years grew untenable after it was revealed last month that a massive fraud was perpetrated by thousands of Wells Fargo employees under his watch. We're still learning the extent of the fraud, but it transpired for somewhere between the past five and 18 years -- possibly dating as far back as 1998, the year Stumpf's predecessor, Richard Kovacevich, took the helm of Wells Fargo by way of its merger with Norwest Bank.
Overly aggressive sales targets from Stumpf and Kovacevich before him essentially forced employees in Wells Fargo's branches to create untold millions of fake deposit and credit card accounts for customers. And then, when Stumpf was called before Congress to answer for the bank's actions, he blamed its lowest-paid employees.
It was an incomprehensible response from a man who made untold tens, perhaps hundreds, of millions of dollars from the efforts of these very same people he called "teammates." And to add insult to injury, we've since learned that many Wells Fargo employees who blew the whistle on the unfolding scam, some of whom emailed Stumpf directly about it years ago, were fired under pretexts in such a way that made it essentially impossible for them to ever work in the bank industry again.
An unfortunate bookend
Speaking for myself, as someone who's followed Wells Fargo closely over the past five years, perhaps writing more positive words about it than anyone else in the United States, I'm saddened by how this has turned out.
The bank industry is so incredibly important to the health of our economy. And good bankers are few and far between. The skill and intellectual dexterity it takes to run a bank like Wells Fargo through the unforgiving vicissitudes of the credit cycle is something that can't be easily replicated. And Stumpf seemed to have the whole package.
Why he squandered it on this, we'll probably never know.
But either way, Stumpf's decision to blame the most vulnerable of his company's employees for a companywide fraud that made him a very wealthy man left Wells Fargo's board of directors with few options. In this day and age, companies and executives can no longer passively or actively condone the systemic mistreat of their customers or employees with impunity.
"There was no other way for the board to go," longtime industry analyst Nancy Bush wrote to me on Twitter. "Sad at an inglorious end to an otherwise fine career."