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.
| FROM THE PRINT EDITION |
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 firstname.lastname@example.org.