Pressure Mounts on Wells Fargo CEO John Stumpf--Update

By Kate Davidson, Shayndi Raice and Yuka Hayashi 

Democratic senators stepped up pressure on Wells Fargo & Co., urging the Federal Reserve Bank of San Francisco to reject the reappointment of Chief Executive John Stumpf to an advisory council and separately requesting an investigation of the bank's labor practices.

The San Francisco Fed said later Thursday that Mr. Stumpf had stepped down as a representative to the Federal Advisory Council, a group of 12 bankers that meets four times a year to discuss economic and banking matters with the Fed's board of governors in Washington.

"John made a personal decision to resign," a Wells Fargo spokesman said. "His top priority is leading Wells Fargo."

The embattled chief executive and his bank have been at the center of a public and political storm following disclosures that thousands of Wells Fargo employees in recent years created as many as two million accounts without customers' knowledge. Wells Fargo this month agreed to pay a $185 million fine and entered into an enforcement action with regulators and a local official.

Mr. Stumpf had appeared Tuesday before the Senate Banking Committee and was subjected to harsh questioning from both Democrats and Republicans. Some of the sharpest exchanges were with Sen. Elizabeth Warren (D., Mass.), who was among the signatories of the letters to the San Francisco Fed and Labor Department.

"It would be ironic if the Federal Reserve, a key federal banking regulator tasked in part with ensuring the fair and equitable treatment of consumers in financial transactions, continued to receive special insights and recommendations from senior management of a financial institution that just paid a record-breaking fine to the Consumer Financial Protection Bureau for 'unfair' and 'abusive' practices that placed consumers at financial risk," the senators wrote to the San Francisco Fed.

In the letter to the Labor Department, senators asked its Wage and Hour Division to make an inquiry into whether Wells Fargo "aggressively skirted" overtime laws and failed to compensate properly bank tellers and associates who worked long hours to meet sales quotas, or salaried bank associates misclassified as overtime-exempt officers.

Former and current Wells Fargo employees have told The Wall Street Journal that intense pressure to meet sales quotas helped fuel improper sales practices at the bank. Wells Fargo said last week that it would eliminate sales quotas for retail-bank employees beginning next year.

A Wells Fargo spokeswoman said the bank prides itself on "creating a positive environment for our team members, including market competitive compensation, career-development opportunities, a broad array of benefits, and a strong offering of work-life programs."

Labor Department officials weren't immediately available for comment.

Write to Kate Davidson at [e-mail], Shayndi Raice at [e-mail] and Yuka Hayashi at [e-mail]

(END) Dow Jones Newswires

September 22, 2016 18:54 ET (22:54 GMT)

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