Yves here. Reader It’s about time identified some senior executives at Wells Fargo who had significant responsibility for the policies and operations at the heart of a fraud that led to over 2 million accounts being created with no customer consent. As both media accounts and comments on our post yesterday stressed, a hyper-aggressive cross selling culture, with insufficient quality and compliance controls was one of the big causes.
No doubt other executives played a meaningful roles in an abuse that Wells claimed led to the firing of 5,300 employees. But the public information that It’s about time cited does give good reason to believe that these two officials were important figures. If we lived in a society where highly-paid individuals were held responsible for their actions, they would at a minimum have been included in an investigation to determine who should be held to account and what punishment should be meted out. Note that both are retired, one less than two months ago. But that hardly absolves them from decision and actions that took place on their watch.
Needless to say, the speed with which members of the NC commentariat were able to identify leads at Wells Fargo confirms that the failure to name and fine any executives was a gross dereliction of regulatory duty.
This has been going on for some time across the Wells Fargo Bank (and Norwest) footprint. Many in the banking industry have heard the stories from former employees of Wells Fargo.
If you are looking for the people to be held accountable, the nearest to this is Carrie Tolstedt who until her announced retirement 7/13/2016 (effective 7/31/2016) was Senior EVP of Community Banking for Wells Fargo Bank. In that capacity she oversaw 6,200 branches (“stores”) and 105,000 employees. A profile of her can be found here http://fortune.com/most-powerful-women/2014/carrie-tolstedt-34/
However, the real culprit has been safely retired from Wells Fargo Bank for some years now. It is former senior Citibank executive Dick Kovacevich who came up with the bumper sticker performance metric for his bank – “The Great Eight”. Eight cross sells per customer.What a horribly failed metric he chose as a proxy for “success” in banking. Unfortunately, the fawning attention from the media and people like Buffett ensured that the banking industry would be swept up in his love for cramming product down the throats of customers. Let’s hope Kovacevich (Theranos board of directors) gets deeply linked to this scandal and the cult around him goes the way of Welch and Greenspan.
For some early history read http://archive.fortune.com/magazines/fortune/fortune_archive/1998/07/06/244842/index.htm that includes the following paragraph:
“Another of Kovacevich’s key accomplishments is “cross-selling”–getting customers to buy more than one product. It’s the rationale for many of the recent megamergers, like the Citicorp-Travelers deal, but for most banks, it’s been more hope than reality. “Cross-sell is like the Loch Ness monster–always talked about but never seen,” says Kovacevich. Except at Norwest. Today the average Norwest customer buys nearly four products, vs. the industry average of two, which generates $113 per customer in profits for Norwest, about triple the amount a two-product purchase yields. Doubling the average product purchase to eight–Kovacevich’s current obsession–would again triple productivity, but Norwest still has a ways to go. “On a scale from zero to 100, we’re about 30,” Kovacevich admits. For example, under 3% of Norwest’s 3.5 million banking households have a relationship with the company’s brokerage.”