The executives at Wells Fargo & Co., nation’s third-largest bank, should send a nice sympathy card and a big bouquet of flowers to former president George H.W. Bush.
Were it not for the death last week of Bush’s beloved wife Barbara, the latest installment in the ongoing scandals that have rocked Wells Fargo would have commanded more news coverage.
And deservedly so.
On Friday, two federal regulatory agencies announced that the company has agreed to pay an eye-popping $1 billion to settle misconduct charges involving the bank’s mortgage lending and auto loan practices.
This isn’t a first-time foul-up by the company that is known for its iconic stage coaches and for the peppy song “Wells Fargo Wagon” in Iowa native Meredith Willson’s “The Music Man.”
Two years ago, government regulators found that Wells Fargo managers pressured front-line bankers to fraudulently open millions of bank and credit card accounts without the customers’ permission.
Five thousand employees were fired for their involvement in the scheme. The company’s chief executive officer and the senior vice president who headed the community banking division both were forced out.
All of this is a big deal in Iowa, putting aside the Meredith Willson connection.
The company is the largest bank in Iowa. It is one of the state’s largest private employers, with 16,000 people on the payroll. And the company’s mortgage division has its headquarters in West Des Moines.
The scandals are an embarrassing case study — in corporate greed, in a compensation system that rewards top executives with tens of millions of dollars in cash and company stock while lawsuits and investigations pile up, and in a good-old-boy corporate governance system that lacks meaningful oversight by the board of directors (whose members are paid $300,000 to $480,000 each for their service).
Wells Fargo executives have destroyed the reputation of one of the storied brands in American business history.
The company was founded in 1852 by Henry Wells and William Fargo. Their banking and express delivery company served the American West as the nation filled in the vast territory between the Mississippi River and the Pacific Ocean. Its stage coaches and delivery wagons carried passengers, mail, money and merchandise — including the grey mackinaws and those cross-cut saws from Meredith Willson’s song.
A hundred years after Wells and Fargo put their names on the company, it was well on its way to becoming a banking powerhouse.
When the nation’s economy tanked during the great recession of 2008, many of the nation’s largest banks and investment houses were struggling. Americans rightly worried where the recession might lead.
But Wells Fargo weathered the storm with its reputation intact. Somewhere along the line, however, executives forgot what built the corporate brand.
That foundation was not those phony accounts customers did not know were opened in their names.
That foundation was not built on forcing its car loan customers to buy unnecessary and expensive auto insurance policies from the bank.
That foundation was not built on forcing mortgage applicants to pay fees to extend the so-called interest rate locks on their applications when the bank itself was to blame for delays in processing loan documents.
That foundation was not the corporate culture of rule-breaking and customer abuse that these scandals illustrate.
The $1 billion in fines announced last week come all too soon after other financial penalties levied against Wells Fargo for its business sins in the past two years.
Government regulators and prosecutors have already punished Wells Fargo with nearly $1.5 billion in other fines and penalties — for opening the millions of unauthorized accounts, for punishing employees who blew the whistle on questionable business practices, and for unlawfully repossessing the cars of customers in the military.
A U.S. senator with a familiar name, John Kennedy, a Republican from Louisiana, spoke for a lot of people during a Senate Banking Committee hearing when he told Timothy Sloan, Wells Fargo’s chief executive, “I am not against big, but with all due respect, I am against dumb.”
A final note, and regular readers of these columns should sit down so they don’t hurt themselves when they faint:
President Donald Trump has been criticized by opponents for his administration’s zealous attitude toward easing government regulations. But this time, the president deserves applause for going after the shysters at Wells Fargo with the same enthusiasm he has for a big, beautiful piece of chocolate cake.
by Randy Evans