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Will Wells Fargo's CEO survive?

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Wells Fargo (WFC) CEO John Stumpf isn’t an attorney, an expert on compensation or even a credit counselor.

That’s what he said when asked if the bank’s phony account debacle constituted fraud, if any of the millions that top executives earned during the illegal behavior should be recouped and what Wells would do to fix consumers’ damaged credit ratings.

Stumpf’s appearance Tuesday before the Senate Banking Committee hurt Wells Fargo in the court of public opinion, increased the odds the bank would face further government scrutiny and likely ensures that proposals to lessen regulation of the financial industry go nowhere.

It also means the veteran banker’s job is on the line, and criminal charges could be in the works, given the heat from lawmakers, according to several Wall Street observers.

Elizabeth Warren rebukes Wells Fargo CEO 02:04

“Wells Fargo didn’t just harm Wells Fargo. Wells Fargo harmed every major bank in the U.S.,” Rafferty Capital’s Dick Bove told CBS MoneyWatch. “Every banking regulator has been given their marching orders by the Senate. This is not something Wells Fargo is going to walk away from.”

Jaret Seiberg, an analyst at Cowen and Co. holds a similar view.

“The Wells Fargo controversy embarrassed the regulators. And that generally means that regulators get tougher in their reviews and give banks less benefit of the doubt during exams,” Seiberg wrote in a note to clients. “That means more headaches and costs for the banks.”

Sen. Elizabeth Warren, D-Massachusetts, is “going to put enough pressure on the Justice Department to see if they can indict Stumpf for criminal activity,” predicted Bove. “The Justice Department and/or the SEC could bring charges against the bank or executives for fraudulent behavior,” wrote Seiberg. 

Vilified for thrusting the blame for Wells Fargo’s illicit behavior onto low-level and low-earning employees, Stumpf seemed only to frustrate lawmakers from both sides of the aisle with his explanations. “You have done something that’s never happened and united this committee on a major topic,” Sen. Jon Tester, D-Montana, told Stumpf. “And not in a good way.” 

Instead of reiterating Wells Fargo’s weeks-long stance that the creation of as many as 2 million bogus accounts was a rogue effort by a mere 5,300, or 1 percent of its workforce, Stumpf should have come to Congress ready with an olive branch in hand, said Bove.

Wells Fargo fined over fake accounts 02:17

“He could have walked in and said, the ideal thing for shareholders is we put Warren Buffett on the board of directors, or we hired McKinsey or someone else to take a thorough analysis of every aspect of our business, or we docked 10 percent of every salary of every top executive, or people with student loans don’t have to make payments for five years. Give something to somebody,” said Bove. “Instead, it was, ‘I made $200 million off this and I’m keeping all that money, and the guy who made$15 an hour, we fired him.’”

Bove likened Stumpf’s performance to a 2010 appearance by Goldman Sachs’s (GS) Lloyd Blankfein before the Senate Permanent Subcommittee on Investigations, at which the investment bank CEO denied that Goldman contributed to the 2008 financial crisis by betting against, or shorting, its own products.

Wells Fargo faces a long and costly overhaul to correct problems in hiring, monitoring and information technology, according to Bove. “Human Resources is hiring these people supposedly doing these inappropriate things and failing to monitor them.”

The handwriting on the wall can also be seen in JPMorgan Chase’s (JPMannouncement that Todd Combs, one of Buffett’s top investing officers, was joining its board. Buffett’s Berkshire Hathaway (BRK.A) doesn’t hold any shares of JPMorgan, but it does control a 10 percent stake in Wells Fargo.

“He just distanced himself massively from Wells Fargo,” said Bove of Buffett. “Wells Fargo is in trouble, and it’s going to stay in trouble for months and months.”

Shares of Wells Fargo’s rose as soon as Tuesday’s hearing ended, a reaction that may prove short-lived. Indeed, on Wednesday the stock was off 1.6 percent, or 73 cents, to $45.83.

Investors don’t fully appreciate the risk of Congress taking steps to restructure or break up the largest banks, wrote Sieberg.

“Investors believe the Senate is impotent, and none of the things senators want done will be done,” Bove said. “We’re going to see if that’s true or not.” 

The House Financial Services Committee has launched its own investigation into Wells Fargo, the committee’s chairman, Jeb Hensarling, Republican-Texas, said earlier this month in a statement. The panel has asked Stumpf to testify at a hearing, reportedly set for Sept. 29.  

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