Wells Fargo Had a Bad Day. That's a Start.

People who came looking for drama in Wells Fargo CEO John Stumpf's Senate testimony on Tuesday did not come away disappointed. Stumpf was called before the Senate Banking Committee after his bank was fined $185 million for opening more than two million accounts in customers' names, without their knowledge or consent, over a five-year period.

We now know that these two million phony accounts, and the 5,300 employees held responsible, may not reflect the full extent of the wrongdoing. Stumpf announced that the bank had agreed to extend its review of its misconduct to 2009 and 2010, and said he would consider reviewing earlier years as well.

Witness for the Prosecution

Stumpf squirmed, shifted and shuffled under the relentless questioning of Sen. Elizabeth Warren (D-Mass.), who asked, "Since this massive year's long scam came to light you have said 'I am accountable.' What have you done to hold yourself accountable? Have you returned one nickel of the money you earned while this scandal was going on?"

When Stumpf gave evasive answers, Warren said, "I'll take that as a no." Warren then admonished Stumpf for "gutless leadership" and said, "You should resign, you should give back the money you made while this scam was going on, and you should be criminally investigated by the Department of Justice and the Securities and Exchange Commission."

"The only way Wall Street will change is if executives face jail time after committing fraud," Warren concluded.

Other senators were also effective. Sen. Sherrod Brown (D-Ohio) worked Mr. Stumpf in a low-key but equally relentless manner, Gregory Peck in "To Kill A Mockingbird" to Warren as Spencer Tracy in "Inherit the Wind."

In one of the most newsworthy (yet underreported) exchanges of the day, Sen. Brown asked regulators Thomas Curry of the Office of the Comptroller of the Currency and Richard Cordray of the Consumer Financial Protection Bureau (CFPB) whether they had made any referrals to the Justice Department for criminal investigation.

Curry suggested that he is more interested in civil cases but Cordray, who made it clear he could not legally answer in the affirmative, implied strongly that the answer was "yes."

Brown also pressed Stumpf to reconsider the termination of employees for failing to meet cross-selling targets the bank now agrees were unreasonable. And in a "wonky" but very important point, Brown pressed Stumpf to waive the arbitration terms in Wells Fargo's customer service agreements. Stumpf was characteristically evasive on both questions.

Sen. Jeff Merkley (D-Ore.) also did well. Like Warren, Merkley called upon Stumpf to resign. He pressed Stumpf on reports of grueling conditions and high-pressure sales tactics at Wells Fargo, including hourly conferences on sales figures, bank managers coached on techniques for pressuring tellers and personal bankers, and homeless people pressed to accept checking accounts.

"You created a culture of cross-selling that pushed everybody to the maximum," said Merkley, "and the casualties are these folks that were going to be fired because they'd lose their jobs if they couldn't meet (their targets)."

Merkley also pressed Stumpf on his failure to disclose the existence of the fraudulent accounts to investors, tying it to Stumpf's legal obligations under the Sarbanes-Oxley Act. In return, he received the remarkable assertion that this massive fraud was "not a material event" - even though Wells Fargo's stock price is nearly 6 percent lower than it was before the recent fine was announced.

The Innocent Bystander

The CEO did not crack on the stand and admit everything like the villain in a Perry Mason episode. Instead Stumpf - who seems to lavish as much attention on his public image as Leona Helmsley did on her dog - traded his persona as a hands-on manager for that of a passive executive who rarely pays attention to detail. It was a portrait of the chief executive as innocent bystander. Excuses rolled down like water, and evasiveness like a never-ending stream.

Stumpf even insisted he had no opinion about "clawing back" the multimillion-dollar retirement package given to Carrie Tolstedt, the executive directly responsible for the employees who engaged in the epidemic of fake accounts that led to the $185 million fine.

"I will not opine on that," said Stumpf.

In a Marie Antoinette moment, Stumpf insisted that the employees who were fired had "good-paying jobs." The employees' pay fell in the $30,000-$60,000 range; that is, from well below to just above median household income.

Stumpf made $19.3 million last year.

What Stumpf's answers lacked in credibility was more than made up for in risibility. Stumpf insisted that there was no "orchestrated effort" or "scheme" behind this fraud, for example, but reluctantly acknowledged that there might have been some collusion at Wells Fargo -- among low-level employees conspiring among themselves.

But, paradoxically, Stumpf announced that all the things he insisted were not to blame - Wells Fargo's compensation plans, its employee sales targets, and the training materials that convey its culture to new employees - were being changed to fix the problem.

More Than Words

Senators from both parties condemned Wells Fargo, and the Democrats who called for this hearing collegially thanked Republican Chairman Sen. Richard Shelby (R-Ala.) for holding it.

That was commendable. Shelby did, however, use the hearing to mount an implicit, ineffectual defense of his anti-regulatory ideology when he chastised regulators for failing to catch Wells Fargo sooner. That's like telling the sheriff to move faster while you're trying to take away his horse.

Republican Sen. David Vitter of Louisiana acquitted himself honorably, suggesting that Wells Fargo's actions show that it is still too big to fail. But it will take more than words to fix Wall Street. If this to be more than a cathartic moment, Republicans will need to join their Democratic colleagues in expanding the CFPB and enacting tougher regulations.

And Warren is right: Senior executives who encourage or tolerate fraud, while enriching themselves from it, need to go to jail. That means appointing regulators and Justice Department officials who will uphold the law without fear or favor.

Wells Fargo's CEO faced a rough grilling today. That's a start. But John Stumpf is undoubtedly decompressing somewhere right now, waiting in comfort for the heat to die down. Wall Street's fraud won't end until its senior executives are held fully accountable for their actions - and not just for a day.