New Wells Fargo CEO: Jesse James
To be upfront with the public, Wells Fargo& Company should change its name to Jesse James& Company.
The bank, which got caught creating thousands of fake accounts to drive up customer fees, clearly has gone over to the wrong side of the law. And although Wells Fargo executives have expressed pro-forma sorrow, such apologies are cheap. U.S. senators have been pressing for those who personally profited fromthe bank’s long-running scams to forfeit the millions in bonuses they raked in.
Even that doesn’t go far enough. Firings, resignations and criminal charges would seem to be in order. But forcing a pay clawback at the top executive levels would at least look like the beginnings of justice.
Wells Fargo has done so many despicable things in this instance that it’s hard to know where to begin a list of outrages. But we’ll focus on this one: Top bank executives are trying to pin the blame on underlings.
The tactic revives one of the most infuriating perceptions of the 2008 economic meltdown. Tens of thousands of financial sector employees lost jobs— and so did millions of Americans devastated by the aftershocks — while the people who created the crisis made out like … well … bandits. Even when bigwigs got hit in the pocketbook, they didn’t end up where many belonged — in prison.
What Wells Fargo did this time isn’t anywhere near the scale of that debacle. But it has the same taint of arrogance and irresponsibility. The institution set sales goals that forced employees to pressure customers into opening multiple accounts. Those accounts— for example for credit cards or savings accounts— generate fees and also make it less likely customers will go through the hassle required to change banks.
To meet impossible sales goals, employees opened accounts without customers’ knowledge, creating as many as 1.5 million accounts and applying for more than half a million credit cards.
As the widespread scam was coming to light, the bank fired 5,300 employees, agreed to pay $185 million in fines and refunded about $2.5 million to customers. Many of the fired employees earned about $12 an hour.
Wells Fargo’s pretense that this scandal does not reflect fatal flaws in top management more than justifies the shellacking Sen. Elizabeth Warren gave Wells Fargo CEO John Stumpf during a hearing on Tuesday.
Of course Stumpf expressed remorse and attempted to look like hewas truly sorry. But this exchange with Warren, D-Mass., cuts to the chase:
“Have you returned one nickel of the money that you earned while this scam was going on?” Warren demanded. “Have you fired any senior management, the people who actually over saw this fraud?”
When Stumpf dodged the answer, Warren excoriated him for “gutless leadership.”
Stumpf— with compensation of about $200 million — isn’t the only Wells Fargo manager to be richly rewarded while the scam was ongoing. Carrie Tolstedt also is the target of justifiable anger. Shewas the executive in charge of the rotten division within which the massive fraud was perpetrated. Yet Tolstedt was allowed to retire over the summer with the benefit of a golden parachute worth a reported $125 million.
Whether Wells Fargo executives could be forced to give back any of the money is a tricky legal question. But, as Warren and several other senators suggested, it is an avenue that should be explored. Certainly prosecutors need to look carefully at whether any Wells Fargo executives should be facing criminal charges.
Even as this latest scandal continues, some in Congress are eager to gut the Dodd-Frank regulations passed in the wake of the 2008 financial crisis. We agree Dodd-Frank must be revisited— but to make regulation more effective, not to roll back oversight of banks.
There is, unfortunately, no consensus in Congress about howmuch or how little to regulate banks. That failure of leadership is muchworse than the failure exhibited at Wells Fargo. Jesse James still has far too manyways to pull off inside bank jobs.
Tens of thousands of financial sector employees lost jobs — and so did millions of Americans devastated by the aftershocks — while the people who created the crisis made out like … well … bandits. Even when bigwigs got hit in the pocketbook, they didn’t end up where many belonged — in prison.