The End of the Beginning at Wells Fargo

By Lambert Strether of Corrente.

Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

–Winston Churchill

The old reprobate got that one right, didn’t he? This post will be absurdly short (for Naked Capitalism) and absurdly sweet (for Naked Capitalism). I like to stick to simple topics, like ObamaCare, so I’m not going to get into the institutional and financial weeds of Wells Fargo’s “cross-selling” [snort] scam at all. Rather, I want to make a very, very simple point: The good guys are still in the game. It is true that we tested the bloodstream of the body politic for a tenacious financial infection, and found white blood cells. The good news is, there are white blood cells, and they are still working to do what they should do.

Gretchen Morgenson’s current column is titled:

In Wells Fargo’s Bogus Accounts, Echoes of Foreclosure Abuses

And Morgenson writes:

There were enough problematic foreclosure cases involving Wells Fargo moving through the courts that the bank’s dubious practices seemed as pervasive then as the questionable account-opening scheme does now. And some of the elements of both scandals — improper fees and forgeries — are the same.

The only difference: Mr. Stumpf, who was named Wells’s chief executive in 2007, has apologized to the customers his bank harmed with its account opening charade. Lawyers who represented troubled borrowers say no such apology came from Mr. Stumpf during the foreclosure mess.

The only difference? Not exactly. Surely Elizabeth Warren ripping Wells Fargo CEO John Stumpf a new one (along with Sherrod Brown) counts as a difference? And why did they do that? Aside from the sheer fun and entertainment value? Well, my guess is that most voters have been waiting eight long years from the great financial crash for a bankster CEO — or any CEO — to be held responsible for anything, and that a second difference is that the better sort of politician finally understands that, and sees unrigging the system[1] as a road to political power. That’s a difference, too.

And then there’s what is the same: The institutional setting[2] that produced the forgeries and improper fees: A toxic sales culture[3], whether for liar’s loans or NINJA mortgages. The blowback from that culture — whether by uncorrupt employees, or harmed customers — produced, in the larger political and judicial setting, good guys: Both whistleblowers and activists who in self-defense networked to became subject matter experts, lawyers to bring cases on their behalf, and even disinterested judges and regulators willing to uphold the law. And the odd crusading journalist. People playing those roles, and in some cases the same individuals — I’m amazed to see Max Gardner, a foreclosure lawyer, cited in both Morgenson’s article and at Naked Capitalism in 2011 — are still in there punching today.

It is true that we didn’t see bankster CEOs in orange jumpsuits doing the perp walk after the great financial crash. That can lead to a sense of failure by the good guys. Yves quotes one such good guy in 2010:

A 15 year veteran of Wall Street who put us on to Magnetar disappeared unexpectedly, much to our concern. He resurfaced recently and gave us a bulletin:

Sorry I’ve been out of touch so long.

It’s just that I’ve become quite disappointed/disaffected by the whole thing. We have failed and “they” have won. All the good that could have come out of the debacle has been lost… and it has broken my heart. The Powers That Be have no inclination to learn anything or correct any of the imbalances. What is even more soul crushing? They are actively and desperately attempting to wrench things back to the way they were. That would be “Mission Accomplished” and it disgusts me.

But at most, “they” won a battle, not the war. NC has had occasion to quote Richard Kline before:

The nut of the matter is this: you lose, you lose, you lose, you lose, they give up. As someone who has protested, and studied the process, it’s plain that one spends most of one’s time begin defeated. That’s painful, humiliating, and intimidating. One can’t expect typically, as in a battle, to get a clean shot at a clear win. What you do with protest is just what Hari discusses, you change the context, and that change moves the goalposts on your opponent, grounds out the current in their machine. The nonviolent resistance in Hungary in the 1860s (yes, that’s in the 19th century) is an excellent example. Communist rule in Russia and its dependencies didn’t fail because protestors ‘won’ but because most simply withdrew their cooperation to the point it suffocated.

The good guys are still in the game (and not just Warren and Brown (and Sanders) at the top of the food chain, but countless good guys you’ve never heard of and never will). So let’s think of the last eight years as the end of the beginning. Getting finance into its proper (and small) proportion with the whole of society isn’t a battle. It’s a war.


[1] Many would unrig the system far more than Warren. But Rome wasn’t burnt in a day. (Perhaps “derig” would be better than “unrig.” Then we could make jokes about “derigulation”!)

[2] Although the Wells Fargo scam is structurally accounting control fraud, it does not conform to Black’s recipe, because the Wells Fargo executives didn’t try to maximize their looting, so their scheme didn’t blow up. financially, but institutionally.

[3] The Big Short gets plenty wrong (see Yves here), but the movie gets the sales culture exactly right:

Mark Baum: I don’t get it. Why are they confessing?

Danny Moses: They’re not confessing.

Porter Collins: They’re bragging.

Granted, the sales culture at Wells Fargo was toxic in a different way. But toxic it was (Financial Times, “No bank will escape fallout from Wells Fargo scandal.”)

Print Friendly, PDF & Email
This entry was posted in Banking industry, Guest Post on by .

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. Synoia

    the Wells Fargo executives didn’t try to maximize their looting

    Inflating the value of stock, and thus stock options does not count as maximizing looting, why?

        1. YankeeFrank

          When you’re bleeding a guy you don’t squeeze him dry right away. Contrarily, you let him do his bidding suavely. So you can bleed him next week and the week after at minimum.

          -Christopher Moltisante, the Sopranos

    1. MichaelC

      Indeed. One could argue ( as Liz Warren did, beautifully) that this parasitic looting was just a more elegant (and time tested) variant of the no doc lending/robosigning orgy designed to enrich bankers at the expense of their valued customers.
      The Wells IBGYBG stock option looting model didn’t threaten the institutions survival. That was the ‘beauty’ of it. This scam is as old as the hills. Wells now has the dubious honor of perfecting and institutionalizing it, apparently with the blessing of its patron saint, Warren Buffett (although we won’t know for sure until November, at which time I’m betting he’ll reveal he exited post election at a June stock price)
      So much the better to inflate your stock price on the back of nickel and dime customer thefts to pocket executive looting bonus than jeapordize the entire institution trying to inflate the stock based on massive lending frauds as Countrywide (and Wells) did.
      It’s much more capital efficient to transform ficticious retail growth into huge growth multiples that inflate the stock price payout for execs. Kudos to them for that ingenious, albeit devious capital efficiency.
      By now there should be no doubt in anyone’s mind that the business of banking is to maximize stock price to enable execs to make timely exits.
      I’m sure Wells ‘8 is great’strategy was envied by all its peers who didn’t enjoy the beneficence of Buffet’s Teflon armor. It will be a overdue bonus if this event sheds some sunshine on that Emperors New Clothes and incites scrutiny of his mythic powers before he exits this worldly stage.
      But Elizabeth Warren nailed it when she linked Stumpfs 200 mill personal gain directly to this tawdry and massive fraud on Wells retail customers.
      Now every Wells (and every bank’s) customer ( or more precisely, every US citizen) knows that every ‘mistake’ charge that hits their account results in an exponential bonus payment all the way up the chain of the bank.
      Hopefully the CFPB uses this win to mobilize account holders (read us citizens) to demand to be treated fairly.

      1. apber

        What many don’t realize is the entire housing collapse/foreclosure fraud thingey was part of a purposeful agenda to be orchestrated first by corrupted politicians (think Barney Frank) and then implemented by the TBTFs. The proof is that MERS was established in 1995, long before any inkling of a crisis. MERS was the vehicle that essentially destroyed the US property title system, defrauded courthouses (nationally) by eliminating proper transfer and title fees (probably $1 billion in Florida alone), and allowed the securitization of pools of mortgages that were criminally rated AAA despite a default probability as high as 30%, and sold to unsuspecting sovereign wealth, and normally conservative pension funds.

  2. Paid Minion


    Note to self: Gotta remember that one……. :)

    I’d copyright it if I were you..

  3. Paid Minion

    One gets the feeling that there are a lot of people who work in the system, who would get their pitchforks and torches out to help clean up the mess, given some inspired and honest leadership.

    But you got to hand it to the kleptocrats/oligarchs. They realized early on that the only entity that had enough muscle to oppose them was the Federal Government.

    Staffed by political appointees and senior bureacrats worried about putting little Johnny thru college and retiring on a (thanks to the “government is evil” rhetoric) continuously shrinking pension plan. IOW, people who can be “bought”

    A more sophisticated way of presenting the drug cartels “Gold or Lead” plan.

  4. rd

    I think that one of the things that resonates with the masses on this one was the firings of the people caught in the sales culture trap. A lot of people work or have worked in corporations that produce such buzzword-filled goals and “initiatives”. This scandal also explains the endless efforts of hapless salespeople to get us to open up accounts we don’t want wherever we turn: e.g. try to complete a purchase at a modern cash register without somebody wanting you to open up a credit account.

    So the annoying bullshit that we have often encountered in our own lives suddenly got put into perspective as the potential first step into a massive fraud by senior management. The little people who put up a fight or weren’t effective in their bullshit-laden world got run over by a coordinated management steamroller that brooks no dissent. We can all empathize with the 5,300. Maybe they will be our equivalent of the 300 Spartans at Thermopylae.

  5. Bob Stapp

    I had a business account with Wells for a short while about 5 years ago but they put so much pressure on me to do lots of other stuff with them, I finally shut it down in disgust.

    On a slightly different subject, I once thought having an offshore account with HSBC in the Channel Islands would be a smart way to shield my (very) limited wealth. HA…! After having to practically beg them to take my money and then discovering just how much they carved off for every single little service, I bid them adieu about the time it became mandatory to disclose foreign accounts as part of tax reporting.

    Now, I’m all in with Credit Unions, at least until NIRP kicks in. Meanwhile, I’m shopping home safes at Home Depot.

    1. BecauseTradition

      Meanwhile, I’m shopping home safes at Home Depot. Bobb Stapp

      You should have another option but can’t – because tradition. This will be extremely obvious if/when cash is abolished..

  6. Timmy

    Perhaps a weak point to target in an unethical corporate culture is the ethics hotline and the (HR) facilitators of retaliation of those that report wrongdoing. This is a vulnerability because these labor practices are regulated and require thorough documentation. Regulators finding instances of retaliation and holding both executives and HR facilitators accountable will raise employee confidence and willingness to report violations and it will make it more likely that corporations act against the unethical behavior rather than the employee that called to report it.

    1. rd

      If the CNN story is correct, then the Feds will have to investigate and prosecute under Sarbanes-Oxley and Dodd- Frank. If they don’t, then every Ethics Hotline in the country, including ones for defense contractors, will go silent. Ultimately, I think it is more likely to have prosecution for the ethics hotline issue than the actual false accounts, as it would position companies to do fraud ethically (its ok as long as it is not egregious enough for employees to complain) such as the mortgage fraud.

  7. Spencer

    We should nationalize the banks. But no one should be a party to the sanctioning the pseudo-economic Chicago Plan, viz., “separating the deposit function in banking from investment” or (separating the assets held by the banks against demand deposits from those held against time deposits). This financial legerdemain cannot be accomplished since neither demand or time deposits are the source of bank earning assets

  8. Arizona Slim

    I’ve been visiting family in PA. And, wouldn’t you know it, there’s a zombie foreclosure that’s within easy walking distance.

    House was originally built by the richest man in the neighborhood. Nice place. It was a real treat to be invited inside.

    You wouldn’t know that by looking at it today. Subsequent owners walked away from it back in 2014.

    Instead of being the nicest house in the neighborhood, it’s abandoned and falling apart. There’s an improperly tarped roof, a fallen tree in the driveway, a swimming pool with a weedy island growing in the center of the pool cover, and a busted out door in the back. Want to go inside and trash this place? Steal some copper piping? Well, there’s nothing stopping you.

    Front door has a notice of code violations that was posted by the township. On that notice, you’ll see the owner of the property listed as …

    … Wells Fargo.

  9. Blurtman

    Will The Donald attack Hillary for her bankster lust? He’s certainly no Bernie, but she is plenty vulnerable.

  10. LA Mike

    There’s something to this that makes me sad.

    I think this issue is taking root even better than subprime because it’s so easy for the lay person to understand. “Open a fake account and charge fees.” It’s fraud and stealing.

    All of the liars loans were more complex during subprime. Many fell for the BS line, “What they did was awful, but not illegal.” Of course liars loans are illegal.

    Subprime was far more massive and enriched its players infinitely beyond this grand larceny fraud of Wells Fargo which was so immaterial from a dollar standpoint. Subprime and the bailout of major banks is one of the worst financial crimes in world history.

    So isn’t it ironic that something on a dramatically smaller scale might yield greater results? Is it really as simple as, “I can understand someone stealing $20 a lot better than a ARM liar’s loan?”

    1. Yves Smith

      I’ve said this sort of thing from the very first post on the Wells settlement.

      And one of the reasons this story took hold but not subprime was that the banks did a great job of demonizing borrowers. They were deadbeats, right? Didn’t matter if they lost jobs or had hours cut as a result of the crisis (as in the fact they were late on their mortgage was a direct result of bank recklessness) or that many were never even delinquent (we documented cases of a single disputed late fee being pyramided into a foreclosure, of banks foreclosing on houses with paid off mortgages, and of banks foreclosing on houses that had burned down, where the owner had fire insurance, and the insurer made repeated efforts to pay off the servicer as the insurance agreement required but the servicer refused payment!).

      1. aab

        Don’t you also think that the ever decreasing level of trust is also a factor? Trust in the banks, trust in the media outlets that would be used to excuse the banks, trust in the political class protecting the banks?

      2. LA Mike

        Hi Yves,

        Well said with, “demonizing borrowers”. I’ve always said about subprime, “In a liar’s loan, who are you going to hold more accountable, the poor strawberry picker who doesn’t know any better or the lender who’s aware of the rules and is supposed to have underwriting standards?” It’s appalling on the face of it. But an enormous portion of the population still blames the debtors for personal irresponsibility.

        Interestingly enough, it would appear that Stumpf shares our feelings of irony with the new crisis. He seemed to have a look on his face that read, “Gee, us major bankers have all done far worse things than this and for way more money. What am I being attacked so harshly over this little thing?”

        1. BecauseTradition

          To not borrow is, typically, to be forever priced out of the housing market.

          Quite a perverse set of incentives we have – to the effect that people are driven into debt.

      3. Lee

        Chase began foreclosure proceedings on my house although I never missed a payment. Evidently, my initiating a formal request for a mortgage modification triggered this somehow. I never did get an explanation as to how or why they were disappearing my payments. I contacted my then congressman Pete Stark’s office and they were very helpful in straightening this out. It was this horrible experience that motivated me to learn more about the financial system, hence my regular visits to this website.

  11. Spencer

    Banking laws should be homogenous – not subject to the heterogeneous dictates of overlapping state laws (but not like the OCC).

    As Bernanke and others have pointed out, regulations and regulators have historical and fragmented origins (OCC during the Civil War), (FED because of the panic of 1907), (FDIC, failed FSLIC, SEC during the Great Depression), (CFTC as futures exchanges proliferated), (failed OTS 1990’s S&L crisis), etc.

    A good example is when “The U.S. Supreme Court held unanimously in the 1978 Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp. case that the National Banking Act of 1863 allowed nationally chartered banks to charge the legal rate of interest in their state regardless of the borrower’s state of residence” – Wikipedia

  12. Spencer

    The oligarchs not only can be beaten, but they will be beaten. I cracked the economic code in July 1979.
    You can’t stop something that sells itself.

  13. Richard Davet

    What bothers me here is we have to question where CFPB was when the LA Times brought this situation to light of day? The settlement seems minuscule in light of fraud by the mischief of management.

    Despite all the ramping up of the regulatory regime post Enron, things have gotten worse instead of better. In fact is the government the problem and not the resolution?

    Most of this stuff could be seen by a blind man eg simple frauds. It is obvious the banksters have gamed the system. We have to recognize what exactly will address the problems now apparent to us. Congress, prosecutors, regulatory, judiciary, executive has all failed us. What do we do now knowing our protocol has failed?

    In Ohio, is ORC 2935.09 a mechanism for remedy? If the officials tasked with compliance with the law—–do citizens have a remedy?

    1. griffen

      You make a good point. I caught a quote by Harvey Pitt commenting on this WF debacle & want to recall that he got it. It was easily obvious after enron, worldcom, et al..

      Something that occurs to me now is this account chicanery takes place after the GFC and “tougher regs” are in place. Regulators are often chasing last year’s news and bad stuff being done, sadly.

      Rules. No stinking rules, I am important and highly paid !! Worth every darn million too.

  14. Yata

    Years back I had my final encounter with WF. Brought nine hundred in cash to a branch – in one hundred dollar demonination – counted out the same to a teller, received a receipt for cash deposit in that amount and left.
    When i got home that evening and started my online banking I noticed they had only credited my account for an eight hundred dollar cash deposit. Looking at my cash receipt for nine hundred dollars I made a call to that branch and spoke with the manager who confirmed the till, and credited my account to the correct amount.
    The next day TPTB at WF central had reverted the credit back to eight hundred dollars.
    I was then told by the branch that I would have to call the 1-800 number and speak with TPTB, who told me they would only give me provisional credit for my deposit claim. Took nearly a week for them to finally get their head out of their…
    This was around ’00 at which time I moved my account to another bank, never to return.
    It was only a one hundred dollar error, and many people have fared much worse with banks, but then quite a few of the recently affected customers only faced $30 overdraft charges.

    We love our customers!

  15. Fool

    Boy was it nice to watch Warren whoop Stumpf’s ass. I confess I watched the hearing multiple times. Warren needs to do more of these — if at the very least because political facetime today is a function of its entertainment value.

  16. just me

    Question Lambert or anyone: I’m looking for a story I thought I read here on NC (I’m mostly offline, think it was something I found a week ago, not sure of post date though) by David Dayen where he posted e-mails from a private investigator named Bill Paatalo that showed Paatalo being solicited to supply fraudulent documents for JPMorgan Chase, I think, for a specific defunct WaMu mortgage or trust. I think it was a recent story that DDay posted while Yves was on vacation. It was kind of fantastic but it checked out. Do you know what I’m talking about and is it still up? I can’t find it. Listened to a Neil Garfield podcast afterward with Paatalo and my jaw dropped. Don’t know how to judge, though, and Garfield said he brought this up 10 years ago. I never heard it. Thx, jm

      1. just me

        Hi Yves, don’t know if you’ll see this: Thank you, yes that’s it–it’s from a year ago! I thought it was current.

        Would it be useful/okay/possible to post a transcript of the Garfield show here in comments? I heard amazing things (to my ears) and wonder if you’d like to look over and opine. I don’t know if it was just me that didn’t think robosigning through all the way to the logical conclusion of no trusts at all and what that looked like, or if that’s always been understood. My train of thought always stopped at the fraud of robosigning and didn’t keep going to where that track could lead.

        Thx, jm

Comments are closed.