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Wells Fargo CEO John Stumpf talks with CNBC's Cramer: 'I'm accountable'

Last week, Jim Cramer sat down with embattled Wells Fargo chief John Stumpf in the wake of allegations the bank took advantage of customers. The mega bank is now facing a Congressional inquiry.

Stumpf told Cramer that the number of accounts affected was relatively small, but that ultimately he took responsibility for the scandal. In case you missed it, here's the full transcript:





JIM CRAMER: Last week we got some stunning news about Wells Fargo, a company that's long been viewed as one of the best run banks in the world and a stock we own for my charitable trust. But since last Thursday, their reputation has been seriously tarnished, as Wells got hit with a $185 million sanction from a number of regulators, including the Consumer Financial Protection Bureau involving 5300 employees an untold number of accounts. That may sound like a small amount of money for such a gigantic bank, yet the stock is down big since the beginning of last week precisely because the nature of the scandal really calls into question what the heck is going on at a company that prides itself on the way it treats its customers.

On top of that, Wells Fargo's going to have to change some of its practices going forward and we don't know how badly that will hurt the numbers. This is a serious issue that raises a lot of questions. So let's go right to the top and speak to John Stumpf, the chairman and CEO of Wells Fargo, to get some answers. Mr. Stumpf, thanks for coming on the show in the middle of this controversy.

JOHN STUMPF: Jim, thank you for having me.

CRAMER: Okay.

STUMPF: And-- and frankly, if I could just-- before we start or as we start, I want to tell you, your audience and our customers that we are sorry. We deeply regret any situation where a customer got a product they did not request. That has never - there is nothing in our culture, nothing in our vision and values that would support that. It's just the opposite. Our goal is to make it right by a customer every time, 100%. And we don't do that, we feel accountable.

CRAMER: Okay. But I look at these headlines, John, be candid. I have backed you and your bank and particularly you because I think that you're a leader-- a community bank leader. You started all the way-- going all the way up. But I see-- you know, I see things tell Wells Fargo to be sanctioned for allegedly aggressive sales tax. Wells Fargo to pay $185 million settlement for outrageous sales, pervasive sham from our own Andrew Ross Sorkin that deals-- that no one noticed.

And then today I see Wells Fargo CEO defends bank culture, lays blame with bad employees. That's not you. You don't leave blame with bad. You're the head coach. You told 'em you're the Vince Lombardi. Vince Lombardi never blamed the linemen.

STUMPF: Abs-- you know, let me tell you-- say one more time, we take accountability for not getting it right 100% of the time. Let me tell you a little bit about our business. We have at any one time 100,000 team members in our branch and retail bank network. And we hire people and people turn over, of those 100,000 the vast majority do the right thing, they come to work. Their life's work and mission is to help people. And I love these people. Every year-- on average for the last five years 1,000 did not do the right thing. And they--

CRAMER: Now, look at the numbers. 1,000 out of how many?

STUMPF: Out of 100,000. Now-- but that's still 1,000 too many. And it's-- and it's over a five-year period, so that's how you get to the 5,300. And we've actually increased our investment in compliance and different tools to help make sure that this becomes a smaller and smaller number. But we all-- all levels of management feel responsible to make sure that we do it right every time.

CRAMER: Okay. I'm looking at your code of ethics. We have a responsibility to always act with honesty, integrity. When we do so, we earn the trust of our customers. We have to earn that trust every day by behaving ethically, rewarding open, honest communications and holding ourselves accountable for our decisions and actions.

There are a lot of people who tell me that you have to hold yourself accountable and that you have to hold Carrie Tolstedt, who collected apparently 124 million-- dollars in shares, we're not sure when she retired. And to do that, it may mean, some people say, that you have to resign.

STUMPF: Well, Jim, I think the best thing I could do right now is lead this company and lead this company forward. In fact, today we made actually an announcement about product sales goals. You know, we never intended for product sales and any dynamic or any part of a performance management system to be misinterpreted.

And I'm-- and again, the vast majority do the right thing. So we took that off the table because even one instance of a sale or a product that a customer didn't want is one too many. So we took it off. But also it has a good business purpose. We still love cross sell. We still love depth of relationship. And-- but one of the tools of getting there, we think today doesn't make sense anymore. And also the business is changing. You know, 85% of our customers-- 100% of our customers in the past bought things in the store. Today it's only 85%. So we're seeing that grow.

CRAMER: But at the same time, John, you're a buck-stops-here guy. Didn't the buck stop with you in this?

STUMPF: Well, of course it stops with all of us, and especially me. I-- I'm-- no-- I'm the leader, I-- I get it. I'm-- I said right off the bat I-- when we don't meet our goals with 100% right, I'm accountable. And I'm leading this company and leading it forward through this. I wanna make sure that every customer knows when they come into one of our branches, deal with one of us on the internet, whatever the case is, we are 100% on their side. You know, Jim, an unwanted product or unused product doesn't help us, doesn't help customer, but just the opposite. Ones that are used and valued, they help all of us.

CRAMER: Okay, okay. I understand that. But I also want to know why if you have clawback provisions, if there are clawback provisions, why wouldn't someone like Carrie Tolstedt, who ran this-- the-- the consumer bank, why wouldn't you want to reclaim some of her stock, even if she worked there for many, many years? Because someone oversaw-- John, we can't just go after the low guys.

STUMPF: Well--

CRAMER: That's not how we work.

STUMPF: Of course not. To the extent that's a consideration-- to the extent that's a consideration, we have a board procesd process.

CRAMER: Okay. And--

STUMPF: So--

CRAMER: --has James Quigley from Deloitte, who's the head of the audit committee, has he looked at this? Has Federico Pena, the corporate responsibility committee head, have they looked at this?

STUMPF: Jim, to the extent that's a consideration, it is a board process.

CRAMER: Okay. Let's go through-- New Yorker says-- says 2 million customers are known to be explicitly defrauded, true or false?

STUMPF: That is absolutely false. That is--

STUMPF: --so we hired an independent, third-party accounting firm to look at all of the products that our customers opened from-- from 2011 through 2015. It was a four-year, four-month period. They reviewed 93 million accounts opened. And of that, 2 million accounts, they identified where they-- they was a possibly they could not rule out that they're either authorized or unauthorized. We didn't know. Either way, they couldn't tell from the data.

CRAMER: And they're third party, not beholden to you--

STUMPF: Third party.

CRAMER: --and they could not tell? 2 million that is not explicitly defrauded?

STUMPF: No.

CRAMER: It's-- it's-- so that's, it's-- it's just--

STUMPF: 2 million that they couldn't rule out whether it was authorized or un--

CRAMER: Couldn't tell?

STUMPF: --sometimes savings accounts are opened and closed within a 30-day period. Was that-- I mean, you know, it happened four years-- I don't know. And then we said to ourselves-- we said to ourselves we don't want one dime of income if we don't know if it's authorized or unauthorized.

So then they looked for that and we found $2.6 million of fees for 115,000 accounts averaging about $25 per account. We sent that money back. We apologized. And even though that's a small number in-- compared to everything, it's-- we don't want one dime of income that we don't earn. That is unacceptable.

CRAMER: And the 5,300 people were not fired after the LA Times did a 2013 piece, "Wells Fargo's pressure-cooker-sales culture comes at a cost?

STUMPF: Th-- th-- this-- no, no. We have had-- we know, running a business, that not everyone can do everything right every minute of every day. That's why you build compliance programs. That's why you do training. That's why you do coaching. And unfortunately 1,000-- 1% of-- of these 100,000 who are in a seat at any one time in the year, you know-- they didn't get it right. But-- but I-- I-- I have to say we've got the vast majority do the right thing every day.

CRAMER: Why did anyone risk their career with Wells Fargo for 25 bucks a throw, John?

STUMPF: That, I-- I can't-- you know, I don't know how to explain that. I don't know how to explain human behavior. But I know we own it also. But so-- so-- I mean we have--

CRAMER: We, meaning you? Or we, meaning Carrie Tolstedt, meaning the board? Who is we?

STUMPF: Let me tell-- let me start with me. To the extent that we don't get it right 100% of the time, 'cause that's our goal, if we don't make that plan, I'm responsible. I'm accountable. Anybody else-- you know, in the company, we all feel when we fall short of that plan, we feel accountable and responsible. And we're taking action. We're investing in more compliance-- in fact, we-- we have a couple new tools out there. We have a tool right now -- if a customer-- if an account's open for a customer, they get an email within 1 hour hour.

CRAMER: The-- okay, if that's the case, then th-- you did not -- this headline, you think, is misleading, Wall Street Journal, you did not lay blame with bad employees. You're taking responsibility for this?

STUMPF: Of course, of course. I-- I didn't say it--

CRAMER: And--

STUMPF: --w-- w-- we all are in this.

CRAMER: But if you did change your rules-- when I spoke to you last, you were obviously thinking you were doing everything for the customer. Why did you have to change the rules, then, on cross-sell if you were always doing what was right for the customer?

STUMPF: That's a great question. We are not abandoning cross-sell. We love cross-sell. Cross-sell is shorthand for deep-- you know, long term relationships. We love that. One of the tools is-- are changing, and that's the tool of product sales.

We're gonna have no more product sale requirements any place in the retail bank because we never-- you know, some people might misinterpret those, even if it's a little-- a few people, that somehow that's our motivation, it is not. In fact, we've been migrating that way. We-- we-- we have things like customer service, customer loyalty, usage, all the things that customers value are some of the things, along with balance growth rate --

CRAMER: Why my charitable trust owns it, why firms like it is that you had you had ten per reach. You had ten account-- pieces of business, call it, per-- per retail banking. That's one of the reasons why Warren Buffett has always liked it. But Piper Jaffray, the only house who's come out today says that you may that-- be doing a material change that could hurt earnings. Do you expect this to hurt earnings? Do you expect Mr. Buffett to pull back from his ownership? He was trying to increase it above 10%.

STUMPF: I'm not gonna make any, you know-- proclamations or-- or-- or assumptions on the future, but I-- but I'll talk to you about earnings. Without giving you any guidance, I believe we're a growth company. We were a growth company yesterday. We're a growth company today. And we're gonna be a growth company tomorrow. This idea of deepening relationships and-- and doing more business with our customers who we just love is as firm today as it's ever been.

CRAMER: Okay. Now, Dick Kovacevich on-- August 24th of 2014, told Squawk that-- Squawk Box that-- that the government never goes after the actual wrongdoers 'cause that's too hard. He says it takes a long time to do so. Have you cooperated with the authorities to actually give up the people in br-- high branch levels who may have encouraged something you clearly don't want to have happen?

STUMPF: Well, first of all, of the 5,300 people who we terminated because they did not live up to our vision of values, it was bankers, branch managers and in some cases managers of those managers. So-- and-- and secondly, with respect to cooperation with our regulatory authorities, when we did this full review, every issue right-- you know, we shared that with our regulatory--

CRAMER: You did?

STUMPF: Absolutely.

CRAMER: So if they wanted to take action, you would've cooperated?

STUMPF: And-- and, in fact, we work-- we worked hard to-- to-- to share everything that we knew with them. And we worked hard to get to agreements that we had that were announced last Thursday.

CRAMER: Is there any way this is concentrated? Because L.A. got $50 million. Or there are other cities that are now going to go after Wells Fargo and were tip-of-the-iceberg moment rather than threw the so-called news cycle?

STUMPF: No-- well, again, if we go back to this independent review, nine-- 93 million, 2 million, hundred and 115,000 and-- and-- now, we'll continue to be vigilant. We'll continue to look, but-- but for that period of time, we think that is all settled.

CRAMER: Okay. I-- I think that y-- y-- I just literally-- because-- this is a social media generation, John, I just quizzed Twitter, okay. Was it ignorance? This is the question people wanted me to ask you over and over again. So I'm gonna ask you 'cause this is what people who watch the show want. Was it ignorance of the practice that was happening? Or was it your culture?

STUMPF: Well, I don't think it's either. I think we had been working on this for a long time. We're making investments in compliance, in training and so forth. We-- we've got new tools. We've actually seen the incidence-- come down. So-- so we're making-- and today, again, the announcement we're making today about taking product sales goals off the table, I think, is another way of taking some risk off the table.

CRAMER: Was your bonus ever tied to those product sales?

STUMPF: Look, okay all of my compensation is in the public record-- under-- under a proxy. And there's no-- anything tied to product sales goals in my compensation or for any of the named executive officers.

CRAMER: You're going to be front-- in front of Congress. It is a hostile environment for banks. John, will they give you this amount of time to discuss what happened at your bank?

STUMPF: Well, I don't know. But I will show up there next Tuesday, and I'm looking forward-- or I surely are gonna be prepared to answer their questions. And-- and that'll happen next Tuesday.

CRAMER: Have you gotten a call from Warren Buffett?

STUMPF: You know, I talk to a lot of our constituents.

CRAMER: But Warren, I mean, he would obviously be very important. If I knew that he backed you, I would personally feel better telling people to own the stock.

STUMPF: Jim, again, I'm not gonna talk about any conversation with any one investor. But I'm talking to a lot of constituents, and I'm working hard to lead our company through this.

CRAMER: Is 125 million the right amount for this Carrie Tolstedt, who quit, and what can be p-- taken back?

STUMPF: Well, again, as I said before, to the extent that's a consideration, it's a board order.

CRAMER: All right, John, I wanna think you for coming on. I have to tell you that it verifies that (MUSIC NOISE) you are the kinda guy I think you are to come on the show, even though I know this is not the kind of action that I expect from Wells Fargo.

STUMPF: Nor do I.

CRAMER: Thank you so much, John Stumpf. He is the chairman and CEO of Wells Fargo. Mad Money's back after the break.


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