As covered here in the blog last week, executives at Wells Fargo Bank have — or at least ought to have — a major scandal on their hands. But so far they’re gliding through it pretty much unscathed.
A quick reminder of how the scam worked:
To drive up the number of bank accounts, credit cards, consumer loans and other accounts held by their customers, and thus drive up the amount of revenue the bank could squeeze from those customers, Wells Fargo management created and enforced an ambitious quota system for their lower-level employees.
If those employees didn’t “cross-sell” their customers hard enough to create additional accounts, they would not be eligible for bonuses or could even be fired. Wells Fargo CEO John Stumpf set a goal of creating eight accounts per customer, far above the industry average of three accounts, and he and his management team drove his people hard to meet that goal.
As Stumpf liked to spin it, the bank was “deepening its relationship” with its customers, but in fact it was merely reaching deeper into the customers’ pockets. And he and his top executives didn’t seem to care much about whether those customers actually needed or wanted those additional accounts. In fact, over a period of several years, to meet the numbers demanded by their bosses, Wells Fargo employees created almost 2 million false accounts, home equity lines and credit cards.
Bank regulators — led by the Consumer Finance Protection Bureau, which congressional Republicans continue to try to kill at the behest of Wall Street — eventually caught on to the problem. Wells Fargo recently agreed to pay $185 million in fines, which as I noted earlier, amounts to 3 percent of its second-quarter profit. In addition, more than 5,000 bank employees have been fired, but none of them have been top executives. In fact, the person who ran the division where most of the problems occurred was recently allowed to retire with glowing remarks from Stumpf, taking with her a $125 million golden parachute.
At a Senate Banking Committee meeting Tuesday, U.S. Sen. Elizabeth Warren finally got the chance to publicly question Stumpf about the scandal. And rather than try to describe it to you, I’ll let you watch it, because it is quite an evisceration:
As Warren later pointed out, though, a scathing public evisceration is a small and insufficient price for the $200 million that Stumpf received in stock options alone, a figure which doesn’t include Stumpf’s salary and other bonuses. She also pointed out that if Carrie Tolstedt, the head of the community banking division, had been fired instead of allowed to retire, she would have forfeited some $45 million of that golden parachute.
Instead, the bank arranged to announce her retirement two months before news broke of the scandal and settlement, ensuring that she left with her millions before public pressure could grow to fire her.
“Wall Street won’t change until we make it change,” Warren concluded. And in a political system where big money is allowed to speak very very loudly, we won’t make it change.