Wells Fargo was flowing with regrets on Friday, taking out ads in nearly a dozen newspapers saying the bank took “full responsibility” for creating sham bank accounts without its customers’ permission.
The bank’s chief executive officer, John Stumpf, even called one prominent Democrat in Congress to express his willingness to assume personal responsibility for the mess. The bank fired at least 5,300 employees and refunded millions of dollars to customers.
But with its banking regulators, Wells Fargo was not as contrite. The bank agreed to pay $185 million in fines and hire an independent consultant to review its sales practices, but it was able to settle the investigation into the questionable accounts without officially admitting to any of the suspected misconduct.
It was classic Wall Street. Since the financial crisis, regulators have brought dozens of cases against banks and other financial firms, hitting them with tens of billions of dollars in fines and requiring the companies to overhaul their business practices. But frequently, regulatory cases are settled without a bank having to admit doing anything wrong.
Some Congressional officials and governmental watchdog groups say regulators may be too eager to extract a headline-grabbing fine and to settle a case quickly than to prove a bank’s guilt in court. It could take years of court battles for regulators to prove that every one of the 1.5 million accounts that Wells said may have been unauthorized was indeed phony.
“It’s very troubling,” Senator Jeff Merkley, an Oregon Democrat and member of the Banking Committee, said in a telephone interview Friday. “Wells Fargo is saying they take responsibility, but they aren’t actually taking responsibility in the official sense.”
Mr. Merkley said he wants the leadership of the Banking Committee to hold hearings on the Wells Fargo scandal. He hopes to hear testimony not only from bank executives, but from regulators on why they agreed to the settlement terms without an admission of wrongdoing from the bank.
Republican staff members of the banking committee were briefed by Wells Fargo executives on Friday. The staff is still collecting information from the bank to help committee members decide whether the scandal warrants hearings, people briefed on the matter said.
A Wells Fargo spokeswoman said that while the bank readily admits that it created questionable accounts, it does not agree with other findings by its banking regulators, namely that the bank’s culture and business model fostered such behavior.
“We recognize that these instances occurred, and we want to be very open about that and make sure they don’t happen again,” said Mary Eshet, the Wells Fargo spokeswoman. “But this was not part of an intentional strategy.”
Legal experts say that not admitting wrongdoing may have another benefit for Wells Fargo: helping the bank defend itself against lawsuits from aggrieved customers.
“It ends up being a win-win,”’ said Robert Hockett, a professor at Cornell Law School. “The regulator gets some kind of payment from the accused, and the accused gets to ease the risk of private plaintiff litigation by not admitting to guilt.”
Wells has already been hit with a number of lawsuits over the phony accounts. In addition to the 1.5 million sham bank accounts that regulators say may have been opened, there were an additional 565,000 credit card accounts that bank employees may have applied for without customer consent.
In some cases, bank employees would move money from a customer’s existing deposit account to open up another one. The unauthorized account was then quickly closed, but the bank employee got credit for drumming up new business.
Regulators said employees were given financial incentives to open up as many new accounts as they could, as part of a hard-driving bank culture to grow business.
Much of the illegal activity took place in California, including in and around Los Angeles, where the city attorney filed a lawsuit against the bank last year over the questionable accounts. The Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency then joined the investigation, which broadened to encompass several other states.
As part of the settlement, Wells agreed to pay $100 million to the consumer protection bureau, the largest fine ever levied by that agency.
Still, the fine pales next to the multibillion-dollar penalties that banks like JPMorgan Chase and Bank of America paid to settle civil investigations into soured mortgage securities sold in the lead-up to the financial crisis.
“Wells is paying what amounts to a couple of parking tickets for each of the 1.5 million accounts,” Mr. Hockett said.
Regulators say that the Wells Fargo fine may look small by comparison, but that the amount of financial harm to the consumer is relatively small. Wells said that the average refund to consumers was $25.
Some regulators have vowed to push more financial firms to officially own up to their misdeeds. In a speech in 2013, Mary Jo White, the chairwoman of the Securities and Exchange Commission, noted that in criminal court, judges will not accept a guilty plea unless the accused admits to the unlawful conduct. Ms. White said in the financial industry, pushing companies to officially admit to their actions was important to public accountability.
“Anyone who has witnessed a guilty plea understands the power of such admissions,” Ms. White said in her speech. “It creates an unambiguous record of the conduct and demonstrates unequivocally the defendant’s responsibility for his or her acts.”
That said, there will still be times that the securities agency would settle cases without such admissions.
Just this week, the S.E.C. settled a case with the investment firm Raymond James over trading commissions.
The firm settled the case “without admitting or denying the findings” by the agency.
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