Final Analysis: The Wells Fargo Mess

If you rob a bank and get caught, you go to jail; if the bank robs you and gets caught, well, never mind.
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We are all responsible for maintaining the highest possible ethical standards in how we conduct our business and serve customers. After all, our culture is centered on relationships, and those relationships are built on trust. Our customers have high expectations of us, and we have even higher expectations of ourselves.”
 
These are the words of John Stumpf, former chairman and CEO of Wells Fargo & Co.
 
If you just squirted a caramel macchiato out your nose, sorry for the mess — which is pretty much what Stumpf should have said years ago, and what he should have said in his resignation letter.
 
The juxtaposition of Stumpf’s name with a paragraph on Wells Fargo’s “ethical standards” is, admittedly, a knee slapper. As you’re no doubt aware, Wells Fargo  defrauded millions of its own customers during Stumpf’s watch. Thousands of Wells Fargo employees opened new savings accounts in the names of existing customers — without the customers’ knowledge. They also applied for credit cards in these customers’ names, again on the sly.
 
Wells Fargo bankers were expected to create eight accounts per household — savings, checking, credit cards, home equity, etc. — and they were penalized if they fell short. As the pressure mounted, so did the fake accounts. 
 
 
 
When the unwitting customers were hit with fees — for not having enough funds in accounts that required minimum balances or simply for owning credit cards that came with annual fees — they started asking questions. And when millions of people ask the same questions about a ginormous bank engaging in creepy, criminal behavior, someone finally listens. Wells Fargo has been fined $100 million by the Consumer Financial Protection Bureau, $50 million by the City and County of Los Angeles, and $35 million by the federal Office of the Comptroller of the Currency. It has agreed to refund to its customers about $2.6 million in fees that should never have been charged.
 
A little perspective: Wells Fargo’s profit last year was $23 billion, so the fines represent eight-tenths of one percent of the bank’s profit — less than a penny on the dollar. Let us all shed a tear here.
 
To demonstrate that it’s on top of things and won’t put up with such unethical nonsense, Wells Fargo fired more than 5,000 low-level people who engaged in the scam that Stumpf insists was not a scam. (It also apparently fired some people who tried to blow the whistle on the scam, and so now it’s being sued by people from both camps. What fun!)
 
Stumpf, meanwhile, was thoroughly embarrassed in front of the U.S. Senate Banking Committee, where he gave what may be the all-time-best sketch-comedy impersonation of an ill-prepared, tone-deaf CEO. Rather belatedly, the Wells Fargo board of directors, not to be confused with the country music group Asleep at the Wheel, told Stumpf he won’t be getting $41 million in stock awards that were due him. Take that, you naughty CEO!
 
State and municipal governments are now  severing ties with Wells Fargo. Seattle gave Wells Fargo the boot on a deal to finance $100 million in Seattle City Light bonds. The city of Chicago and the state of California have suspended relations with the bank.
 
In Washington, Wells Fargo is the second-largest bank in total deposits (see page 12). While the state does little business with Wells, county and city governments have hundreds of millions of dollars in Wells Fargo accounts.
Wells Fargo should pay dearly for treating its customers like chumps. But it probably won’t. Severe repercussions don’t seem to happen anymore when big companies abuse their “relationships.”
 
And that’s the real outrage. 
 
John Levesque is the managing editor of Seattle Business magazine. Reach him at john.levesque@tigeroak.com.

Final Analysis: The Sporting Life in 2017

Final Analysis: The Sporting Life in 2017

Three predictions for the coming year on a new arena, an old arena and the Mariners.
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As every first-year business student knows, a city’s economy is not considered “world class” until said city has erected at least four shrines to professional sports and these shrines remain empty and unused most days of the year. Seattle is knocking on the door of world classiness because it already has KeyArena, Safeco Field and CenturyLink Field up and running. Occasionally. Just one more monument to appease the great mass of athletic supporters and we’re there. Hallelujah!
 
It’s only a matter of time because Chris Hansen, the San Francisco rich guy who wants to build a new arena on First Avenue South and bring pro basketball and pro hockey to Seattle, is this close to getting his way. In October, Hansen revealed that he and his investors are now willing to pay the whole honkin’ bill for plopping a new arena into the SoDo neighborhood a block from Safeco Field. He still wants a piece of Occidental Way vacated and also expects some tax breaks from the city, but that’s how rich guys are. (See: Trump, Donald.) Besides, the people who believe we’re not world class until the NBA returns to Seattle are salivating over this deal because it’s the best deal we’re ever going to get
 
Of course, these same people said Hansen’s previous offer, which would have required that $200 million in public money be plowed into a new arena, was also the best deal we were ever going to get. 
 
Hansen’s decision to pay more for his arena places the sports economy clearly in the local spotlight this year. Heaven knows we could use more opportunities to pay $9 for a beer and see millionaire athletes selling Jaguars and BMWs on TV. It’s the kind of economic shot in the arm that only comes around whenever a sports league is in a coercive mood. 
 
And so, in the spirit of this January issue’s “looking ahead” theme, we offer three predictions relating to the regional economy as the Hansen arena intrigue continues to unfold.
 
Prediction 1: Hansen, who has already spent more than $120 million buying up property in the area of his proposed arena, will persuade the Port of Seattle, his arch nemesis in this melodrama, to fold up its tent and send all cargo-handling operations to Tacoma. That decision will pave the way for so many trendy bars and restaurants with names like Kale & Kumquat or Cobblestone & Wingtip that Hansen will be persuaded to create a private streetcar system to connect Pioneer Square with the burgeoning Stadium District. 
 
Prediction 2: The city-owned KeyArena, whose very future is clouded by the Hansen proposal, will announce plans to house up to 10,000 homeless persons every day. Even on days when the Seattle Storm and Seattle University basketball teams need the building, the city believes the Storm and the Redhawks could use the attendance boost, so it becomes a classic win-win.
 
Prediction 3: The Seattle Mariners, who still don’t like the arena proposal, will channel their hostility onto the field of play — and still not win the World Series. (This is called pattern-recognition analysis.) However, always mindful of improving the fan experience — because it’s not whether your team wins or loses, but whether you’re inclined not to press charges for being gouged by a vendor — the Mariners will introduce several new fan-friendly food items, plus mani/pedi stations in the pricey seats and roving loan officers to assist anyone trying to finance the purchase of hot dogs and sodas for a family of four. 
 
JOHN LEVESQUE is the managing editor of Seattle Business magazine. Reach him at john.levesque@tigeroak.com.