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Wells Fargo & Company: The Teflon Bank?


Wells Fargo & Company, with $1.7 trillion in assets, as of September 30, is currently the second largest bank in the U.S., and one of the world’s most valuable banks by market capitalization ($223 billion).

Its history is long. Founded in 1852 in San Francisco, the institution known for its iconic stagecoach logo, provides banking, insurance, investments, mortgage, and consumer and commercial financial services through more than 8,600 locations, 13,000 ATMs, online (wellsfargo.com), and mobile devices. Wells boasts some 70 million customers and one in three U.S. households who are served by their estimated 268,000 “team members” in 36 countries and territories across more than 90 businesses. In 2015, Wells Fargo was named “Most Admired” among the world’s largest banks by Fortune magazine, and “Best U.S. Bank” by The Banker magazine.

The Consumer Financial Protection Bureau hit the bank with a record $185 million penalty for its sales practices.

But right now, the spotlight is on Wells Fargo for a scandal that threatens to topple the giant. Wells has been in the headlines for excessive cross-selling to customers, and the roughly two million sham deposit and credit card accounts employees (driven by incentives) arranged for customers who didn’t need, understand or ask for them. The Consumer Financial Protection Bureau hit the bank with a record $185 million penalty for its sales practices. Outcries from Elizabeth Warren, Pat Toomey, and many others put pressure on the bank to make the top guns accountable, and not just low level employees. Published reports say that CEO John Stumpf will forfeit much of this year’s salary, including his bonus and $41 million in stock awards as the bank investigates the fake accounts ordeal. Heads are already rolling. Carrie Tolstedt, who was in charge of the division that created the fake accounts, recently left the company. She was reportedly planning to retire at year-end, but is gone and will not receive a bonus or severance.

So what does all this portend for Wells? Only time will tell. Wells has managed to come through major hurdles, like game-changing mergers in 1998 with Norwest, and the mother of all mergers in 2008 with Wachovia (which had its own set of issues). Wells was among the banks that took TARP money. While it repaid the $25 billion government bailout it received during the financial crisis, it was among the last of the largest banks to do so. The Corporate Research Project, a non-profit center that assists community, environmental and labor organizations in researching and analyzing companies and industries has a “corporate rap sheet” on Wells Fargo that’s none too pretty. “Wells Fargo like its larger counterparts has been embroiled in a series of scandals involving reckless lending practices and customer deception,” says the report by Philip Mattera.

Wells was among the banks that took TARP money. While it repaid the $25 billion government bailout it received during the financial crisis, it was among the last of the largest banks to do so.

The shame list is long, Mattera points out that in 1992, Wells agreed to pay $43 million to settle a lawsuit alleging that it conspired to fix the interest rates on millions of credit card accounts. He reports that Wells also ran into problems with regulators. In 2002 it agreed to pay a penalty of $150,000 to settle SEC charges of improperly switching customers among mutual funds. In 2005 the NASD (now FINRA) fined Wells Fargo $3 million for improper sales of mutual funds. Two years later the NASD fined Wells Fargo Securities $250,000 for the failure of one of its analysts to disclose that he had accepted a job at the company he was writing about.

The current improprieties though, are a different animal. The outrage runs deep, and wide, and includes, regular Joes and Janes, politicians, regulators, pretty much everybody. Will folks remember Wells Fargo’s indelible footprint on society? In 1967, Wells and three other banks introduced MasterCard. In 1995, it was the first U.S. bank to offer secure accounts on the internet. In 2015 alone, it invested $7.6 billion in community development projects in low and moderate-income neighborhoods, provided $1.4 million in disaster recovery and relief, provided $18.8 billion in new loan commitments to U.S. small businesses, and the list goes on and on.

After all, Wells Fargo is the seventh largest public company in the world, the 27th biggest company by revenue in the U.S. and named the most valuable bank brand in the world for years 2013-2015 by Brand Finance. It is noted for having the largest workplace employee giving campaign in the U.S. for the seventh consecutive year, based on 2015 donations (2016) United Way Worldwide, and the #3 Most Generous Cash Donor (U.S.) (2016) by The Chronicle of Philanthropy. The Points of Light Civic 50 named it the Most “Community–Minded” Companies in the U.S. (2016).

But all that may not matter much. Memories can be short. The power of the present cannot be underestimated. It’s about today, today, today -- and that can’t be a good thing for Wells Fargo.

Anonymous | | Comment #1
Good information, however you missed the rest of the story.
Wells Fargo is involved in billions upon billions of municipal money issues and tax free bonds that do not meet the SEC regulations. Also they hold over a $1 trillions of questionable derivatives and if one of the big banks like Deutsche Banks fails, WF is out of business, furthermore,
Wells Fargo will be banned from underwriting the sales of California bonds and in many other states as well.
Is there an honest bank left in USA?
Anonymous | | Comment #11
The ban for Wells is for 1 year only per John Chiang CA treasurer. This is all a show. Wells HQ is in CA and has thousands of employees. They payed their fine,. Had a congressional show trail and will pay some suits so it goes away.
Anonymous | | Comment #2
Too big to fail. The government (us) would have to bail them out. My mortgage is with Wells when they took over Wahcovia. Poor customer service. Would never do any other business with them.
Anonymous | | Comment #16
There will be no more bail outs; the government can not afford it any longer. Every household now owes the government $165,575, good luck ever collecting that amount.
Anonymous | | Comment #3
This time it is different -- yes people will remember to take their money to any other FDIC bank to avoid working with an institution which secretly condones cheating to meet goals.
In public, now they merely are buying time and saying sorry, only for so long before they are at it again.
Fool me once, shame on you, fool me twice shame on me; remember?
Anonymous | | Comment #4
They have my mortgage. It would cost me to move it. If they go under someone else will take it over. I doubt many people will change banks. I stay with Chase with my checking as it would be hard work to change everything. In a couple of weeks this will be out of the news. You think Wells is the only bank that plays games?
Anonymous | | Comment #15
Why not a credit union?
Anonymous | | Comment #5
I think it's just a matter of time before this corrupt bank goes out of business. May take 5 to 10 years, but it will likely go down in flames.
Anonymous | | Comment #6
I doubt it. If this bank fails the FDIC would not be able to pay out. They are too big to be merged or bought out. They are a big company with lawyers and and have highly paid lobbyists in. DC. It's all a show in Congress. They will be making contributions to Congress. This will be out of the news cycle in a couple of months. California is where Wells is headquartered. They can just move out and take the jobs with them and even get tax breaks. GM is making cars killing people and they are in business. Wells will be around for a long time.
Anonymous | | Comment #7
Top executives need to go to jail
Anonymous | | Comment #8
Everyone who was involved in this scheme stealing private data should go to jail. Yes, they might be just pawns in the game, but it's a quite weak argument that "my boss told me to" in defense of committing federal crimes.
Anonymous | | Comment #9
Yes but won't happen. How many were sent to jail for the mortgage crisis or Lehman.
Anonymous | | Comment #10
I wish that will be true, but no such luck for the law breakers.
This is the problem:
They have been doing this for at least a decade, they pocketed two ways a sum of over $180 billions. First they issue a credit card with $10k limit and $10 processing fee on it, but never mail it to the person of record and start charging late fees for many months and sending demand letters to the clients. If the client refuses to pay they report him./her to the credit bureau and then they subtract $10k from the profit line on their ledgers but at same time they reported it to SEC as booked revenue. Now imagine millions of transactions like that.
Also they would open a checking or saving account, age it a year earlier as the account has been open and start charging dormant fees and book them as revenue.
These are just two examples, but they did also mortgage fraud, small business loan frauds, personal loans fraud and many more scams.
And what they will pay as penalty, just $185 millions or 10% of the money they pocketed.
lou | | Comment #12
They should be forced to disgorge Wachovia. They were a much better bank to deal with. The govt forced that merger even though Wachovia could have survived as a standalone entity.
Anonymous | | Comment #13
Wahcovia took over Golden West Finacial in 2006 at the top of the housing bubble which was their downfall. Citibank almost got Wahcovia. I had my mortgage with Wahcovia and was happy with them. Not so when I refinanced with Wells.
Anonymous | | Comment #17
Wachovia was issuing loans to illegal aliens who took the money and skip to their own countries, never to be find or seen again. Over $1 billions in such loans was given to such people by Wachovia.
I remember a case in So. California when a person sold his own small house worth $50K to his brother for $500K without any verification of income, appraised value or a real SS number.
They took the money and disappeared few days later.
lou | | Comment #18
A house worth $50,000 in So. California? Was it a 10-sq-ft closet in the desert?
Anonymous | | Comment #20
lou, that was in East LA, built in the backyard of another small house, one bedroom 10x10 feet, 1 bath 5x7 feet and 5x8 feet kitchen. True story, in was on the local news too about 10 years ago.
Bozo | | Comment #14
The Sandler/World Bank/Wachovia story could fill volumes. A good snapshot is here: https://en.wikipedia.org/wiki/Golden_West_Financial

Ironically enough, to this day, the Wells Fargo folks operate two branches in Lafayette, CA. One is the branch Wells always had across from the post office; the other is the former Home Savings branch. Just a bit of trivia.
darkdreamer4u | | Comment #21
The Feds should revoke WF's banking license, split it up into manageable units and sell them off.
Stumpf and Co. should see some jail time, preferably in the general population so that they will learn how it feels to have to take it up theirs like they did to their customers.