It keeps getting worse for Wells Fargo

Wells Fargo is facing down a tidal wave of bad news.

The bank has a mounting series of problems stemming from the fraudulent opening of retail and credit card accounts by employees starting in 2011.

In addition to the settlement, Wells has been hit with backlash over executive compensation, questions over its debt, and more.

The crux of it all

The catalyst for all the bad news is the opening of fraudulent accounts on behalf of customers.

Starting in 2011, 2 million accounts for debt and credit card were opened by Wells Fargo employees in customers' names without their knowledge. The goal was to generate fees for the company and also hit aggressive sales target for employees.

After an investigation, the bank was accused by the Consumer Financial Protection Bureau, the Office of the Comptroller of the Correct, and the Los Angeles prosecutor of fraud and settled on Thursday for $185 million.

In addition to the fine, 5,300 employees were fired in connection with the fraud. This is roughly 1% of Wells' entire workforce.

The fallout

Since the announcement of the settlement, Wells Fargo has not only had to deal with the financial fallout but also a public relations disaster.

On Monday, five US Senators on the Senate Banking Committee wrote a letter to Richard Shelby, head of the committee, asking for an investigation and hearings to address the matter.

"The magnitude of this situation deserves a thorough and comprehensive review," said the letter. "As members of the Senate committe of jurisdiction, we should undertake prompt action to fully investigate the cause, scope, and impact of this event, as well as understand and consider implementing any lessons learned."

The hearing is set to take place on September 20, and according to Compass Point Isaac Boltansky will likely evoke memories of the 2013 London Whale hearing, where the bank's top brass were dragged up in front of lawmakers.

"Our sense is that lawmaker questioning - particularly from Senators Brown (D-OH), Warren (D-MA),and Merkley (D-OR) - will focus on establishing a narrative that Wells Fargo is either "too big to manage" or its management was willfully complicit in the fraud," Boltansky said.

Outspoken Democratic Senator Elizabeth Warren, who signed the letter to Shelby, told CNN that Wells had committed a "staggering fraud." Democratic Presidential candidate Hillary Clinton commented on the settlement by Wells calling the account openings "outrageous behavior."

Moody's, a credit rating agency, issued a warning that the settlement may have a negative impact on Wells' debt due to image concerns calling the incident "highly disturbing."

"We do expect some immediate damage to Wells Fargo's reputation from this embarrassing episode," said the Moody's report.

On Tuesday, Treasury Secretary Jack Lew told CNBC that from what he had seen Wells Fargo had participated in "bad behavior," and that the fraud accusations showed by bank regulation should not be rolled back.

"What I can tell you is there's a lot of talk in Washington these days about rolling back Dodd-Frank, about rolling back the law, changing the law that created the agency that uncovered and took action against this," he said. "This ought to be a moment when people stop and remember how dangerous the system is when you don't have the proper protections in place."

Wells' response

In addition to the settlement, Wells announced that it was elminating its sales goals for retail employees. The thinking is that targeted goals for opening accounts and generating fees lead employees to cur corners and open the account fradualently.

"We are eliminating product sales goals because we want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers," said CEO John Stumpf in a statement about the change.

Despite the shift, Stumpf said in an interview with the Wall Street Journal on Tuesday that there "was no incentive to do bad things" at Wells and laid the blame on the employees rather than the culture of the firm.

Speaking at Barclay's Global Financial Services Conference, Wells Fargo CFO John Shrewsberry said the fraudulent accounts were not opened in order to generate revenue for the bank but rather by a few low-performance employees.

"It was really more at the lower end of the performance scale where people apparently were making bad choices to hang on to their job," said Shrewsberry.

$125 million

Also drawing the ire of lawmakers and pundits is the $125 million retirement payment going to Carrie Tolstedt upon her retirement at the end of the year.

This has drawn criticism since Tolstedt heads up the Community Banking division, which in part oversees the retail banking and credit card operations of the company responsible for the fradualent accounts.

Toldstedt is scheduled to step down at the end of the year, receiving roughly $125 million in stock and other compensation from the bank.

The retirement is not a result of the findings, according to Wells. Tolstedt originally announced the move in July. Additionally, these compenstion packages are usually set well in advance. Still, in a time of public relations struggles, it is another headache for the bank.

Going forward

Wells' stock has taken a bit of a hit since the news became public, dropping roughly $3 per share in the past week, just shy of 6%.

Obviously the investigation by the Senate still looms, and the public relations mess will nag the company, but outside of the settlement cost it is unclear what impact the past week will have on Wells Fargo.

So far, at least according to the company, it hasn't mattered too much.

At the Barclay's confeence Shrewsberry reported that there has been little impact so far on customer behavior at Wells, but only time will tell if that remains the case.