Wells Fargo Fined $185 Million for Opening Phony Customer Accounts, Charging Fees Without Consent; Executives Go Scot Free

The Consumer Financial Services Protection Bureau, the Los Angeles City Attorney, and Office of the Comptroller of the Currency fined Well Fargo a total of $185 million for opening unauthorized customer accounts, which the bank then used to charge fees. The bank has also agreed to make restitution to the defrauded customers. As the New York Times reports:

Wells Fargo employees opened roughly 1.5 million bank accounts and applied for 565,000 credit cards that may not have been authorized by customers, the regulators said in a news conference. The bank has 40 million retail customers.

This was an astonishingly brazen, large-scale effort, clearly a systematic, institutionalized campaign. It is virtually impossible for senior executives not to have known what was going on. The big reason that Wells has managed to cultivate the myth that it is better managed than other large banks is that it is largely a traditional bank, as in it is not seriously involved in free-wheeling, high-risk, hard to manage investment banking activities.

But traditional banks, and above all retail banking operations, are extremely routinized. Customer-facing staff have virtually no discretion. For decades, bank branches have been operated as retail stores, with employees offering standard products. Similarly, the activities of call center staff are similarly highly circumscribed, set forth in clearly defined routines, which includes strict scripting for some interactions.

In other words, there is no way to defend the lack of punishment of executives in a fraud of this scale that extended over five years. Either they were in on it, or somehow lower level employees cooked this up and were able to hide it from the top brass. The latter would represent a massive control failure. Under Sarbanes Oxley, the CEO and CFO are required to certify the adequacy of financial and operational controls. There is no way the Wells Fargo’s can have it both ways. Either they were in on the ripoff or they were not even remotely on top of what was happening. But, in keeping with the half-hearted enforcement culture that has become normal in the US, the executives were allowed to get away with crooked conduct that unquestionably was their responsibility, whether by omission or commission.

Even worse, regulators are allowing Wells to obscure the level of managers that were sanctioned, when even the weasel-wordig of public statements makes it clear that it was only low-level supervisory staff that were booted. And to add insult to injury, Wells is getting away with bogus accounting by stating it fired 5,300 employees as part of rooting out this misconduct. The wee problem with this claim? The terminations in question took place over five years. Yet the timelines presented in media reports suggest that the heat on Wells didn’t get serious until 2015, when the Los Angeles city attorney filed suit against the bank. The city would not have found it necessary to file a claim if Wells had been serious about rooting out the grifting as of then. But it is too easy for casual readers to miss the significance of this section from the Wall Street Journal’s report:

In detailing the widespread nature of the bank’s alleged missteps, CFPB said Wells Fargo, has “terminated roughly 5,300 employees for engaging in improper sales practices.” The bank, the nation’s largest by market value, would not comment on the “levels of leadership” involved in the firings, but bank spokeswoman Mary Eshet said “both managers and team members were affected.”
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She said the firings should be seen in the context of the bank’s size—it had 268,000 employees at the end of June—and that they happened over five years.

So the general public is supposed to take comfort that 98% of Wells Fargo’s employees are not now acknowledged to be crooks? And if we are to believe the bank’s claim that it’s been addressing this, ahem, impropriety over the last five years? That means either the regulators had nothing to do with the terminations, or they are perversely giving Wells a break by letting them take full credit.

Wells attempted to minimize the scale of this ripoff as, in the words of the New York Times, it “stressed that the refunds have been relatively small — averaging about $25.” First, the monetary loss doesn’t begin to capture the amount of harm. As various media reports indicate, some consumers suffered damage to their credit scores as a result of incurring charges on these bogus accounts. That not only hurts anyone who might be seeking to borrow but is also a demerit in the eyes of prospective employers. And it takes time and energy to clear up error on a credit report, which is likely to be worth more than the “average” $25 phony charge.

Second, the small typical invalid charge is what likely made this the perfect crime in the eyes of Wells employees and managers. In the days of defanged class action attorneys, who would stop them? Reading between the lines, it appears the Los Angeles City Attorney, which imposed $50 million of the total $185 million of fines, led this charge, which would mean the financial regulators were Johnny-come-latelys. From Bloomberg:

Los Angeles City Attorney Mike Feuer sued Wells Fargo last year and accused the bank of high-pressure quotas for workers that encouraged them to skirt the rules.

“When I worked at Wells Fargo, I faced the threat of being fired if I didn’t meet their unreasonable sales quotes every day, and it’s high time that Wells Fargo pays for preying on consumers’ financial livelihoods,” Khalid Taha, a former employee, said in a statement.

In addition, we’ve repeatedly pointed out that the sanctimonious claims by Wells executives and spokesmen over the years that it was a better run, more upstanding concern that its TBTF counterparts were bunk. During the 2010 to 2014 period, when we followed mortgage chain of title and foreclosure abuses in extensive detail, Wells was consistently one of the very worst actors, yet had the temerity to carry on as if it was better behaved than its peers.

But the regulators and the financial press that is dutifully amplifying their self-serving public relations would have you believe that yet another refusal to hold the ultimate perps accountable has banksters shaking in their boots. This insult to reader intelligence comes from the Financial Times:

The aggressive regulatory stance is also likely to concern others in the industry, which is under political scrutiny in the run-up to the presidential election as well as financial pressure from rock-bottom interest rates to boost profits.

And Elizabeth Warren engaged in flag-waving, evidently because at $100 million, the Consumer Financial Protection Bureau’s biggest fine to date. Again from the Financial Times:

The CFPB’s move was welcomed by Elizabeth Warren, a bank-bashing Democratic senator who was instrumental in creating the agency.

“Wells Fargo cheated its customers out of millions of dollars in fees by opening new accounts and transferring customers’ money without permission,” Ms Warren told the FT in a statement.

“Thanks to the CFPB, those customers are getting their money back and the bank is paying a record-breaking fine that will cause the next bank to think again before engaging in this kind of misconduct. The consumer agency continues to deliver for working families.”

Warren apparently views a toothless tiger as better than no tiger at all. And the worst is she might actually believe this part: “…the bank is paying a record-breaking fine that will cause the next bank to think again before engaging in this kind of misconduct.” This “record breaking fine” is a rounding error compared to Well’s Fargo’s second quarter profits of $5.6 billion. Not surprisingly, investors shrugged off the fines. The bank’s stock traded up by 13 cents on Thursday, closing at $49.90. In other words, to the extent bank execs do “think again” before permitting fraud to take place on their watch, the lack of any impact on sacrosanct share prices and on the officials personally says they should see if they can get away with it, since the downside is inconsequential.

This sorry incident is yet another proof that we live in the best of all possible worlds for the top 1%, where no unseemly questions about who knew what when are pursued seriously. It’s routine for CEOs, as justification for their stratospheric pay, to claim they are responsible for every aspect of corporate success yet are never challenged when they descend into the ritual “I know nothing” denials over misconduct that took place on their watch. If anyone wants to understand why non-traditional candidates like Bernie Sanders and Donald Trump are getting traction, it’s the refusal of the elites to police their own ranks. Even in a year when the Democrats are under pressure and there have been more and more calls for individual bank executives to be punished, the powers that be can’t bring themselves to do the right thing.

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61 comments

  1. Marco

    My body spasmed into a skin-crawling shudder when I saw the $100 million heralded on NY times last night. Like everyone else I was hopeful the CFPB would be a new kind of regulator but this latest settlement is peanuts in proportion to the wrong-doing and damning of the agency and its creator. Not to keep beating the Bernie / Overton horse but we should be optimistic that expectations have changed such that Weak Tea Warren just ain’t gonna bring home the bacon anymore. Break’em up!!!

    1. Marco

      More succinctly is there anything different in terms of economic policy from Warren TODAY and a typical northeastern Republican from the 1960s? Do we need mid-century Republicans pretending to be Democrats?

      1. pretzelattack

        try typical northeastern republican till the 90’s. at some point around there she switched from republican to democrat.

  2. Kevin

    Feel good story of the week. Wells Fargo hired a consultant to uncover the wrongdoing. And fired the bad people who did this. And are going to give the five million dollars back! WF is really both the victim and hero of all this. Happy ending, good to know the system is working.

  3. Phil

    It’s time to start naming the banking executives when these settlements are made.

    The media headlines need to clearly indicate fraud; the direct (and multiplier) harm(s) done to consumers; the names *and* photos of all senior suite executives and Board members who were incharge at the time (starting with the CEO and Chair) attached to the article. In fact, NK might even start doing this as a “service” to those who wold like to know the people behind various corporate frauds.

    If corporations are “people”;the implication is that they are synonymous with the people who are charged with running them. Identifying senior executives and Board members in this way does not enter libel territory; it can be written as simple reportage – e.g. “Wells Fargo Fined $185 Million for Opening Phony Customer Accounts, Charging Fees Without Consent; Executives Go Scot Free. Following are names and photos of the executives and Board of Directors who were in charge at Wells Fargo when this fraud was perpetrated”.

    Maybe we can’t jail them, but by direct implication (without stepping into libelous territory) we can shame them.

          1. polecat

            Drop-lift them ALL …. to Surtsey Island … with No provisions !

            If they try to swim or sail to Iceland … let those fine, upstanding folk pick the bastards off … one by one.

  4. Paul Tioxon

    This is the result of sales expectations that is not unlike the deal from the drug cartels, take the silver or the lead. At the retail bank level, you are always closing. Whether teller, loan specialist, or financial specialist with some SEC and Insurance licenses to hawk mutual funds and annuities. The pressure is tremendous. You go through customer accounts and look for cash in non interest bearing demand deposit accounts and then call them up and sell them on a CD or Money Market or if licensed, an annuity or mutual fund.

    It’s not too hard to figure out that the involuntary signups on the part of rogue employees is really too systemic to be just rogue employees but the extortionate result of the corporate culture of punishment for lack of sales. Risking your career by being blacklisted as a financial crook, makes it impossible to get hired somewhere else in the nation for mortgages, brokerage sales, insurance peddling, anything at all in the FIRE sector. The new national data base is the equivalent of being a registered sex offender, you simply can’t work in the industry you used to earn a living and all of the studying and work for licensing is now useless. Do the execs know? Who do you think shows up to give you the Alex Baldwin steak knives speech that let’s you know, silver or lead. Produce or else!

    It may not be a criminogenic environment, it just produces desperate people who will risk a lot for the reward of maintaining a paycheck with decent benefits. And the execs who twist arms and emotionally abuse their sales force to put up or get put out, of course they do not pay the same penalty if any at all. They didn’t want you to break the law, they just want you to sell or get fired. It’s a rip off economy.

    1. Clive

      Your said it better than I could Paul. The tell in the various judgements and victory laps is that there’s nary a mention of forcing change in compensation system design — for the rank-and-file or the C-level. Bad incentives lead to bad outcomes.

      And while the market shrugged it all off, these occurrences are canary in the coal mine events. They’re the first to show up. But almost always they are followed later by other, worse “surprises”.

    2. Ignacio

      I really like your comment. My wife works in a bank here in Spain and your narrative sounds familiar to me. Traditional banking is boring, mature, automated bussiness with little room for innovation and it is simply stupid for execs to push so hard for increasing revenues without offering real advantages to their clients. They could instead worry about customer satisfaction, facilitate them control their finances instead of increasing their opacity, offer bomb-proof confidence, nice risk assesspent instead of malinvesting their pension funds. They could also increase benefits by investing sensibly in company energy saving, employees could be bonused if they manage to keep their clients loyal and satisfied…

      But no. The execs ostensibly think that their function is to extract as much as they can without offering more, resulting in such almost-criminogenic environment. They think on their companies just as milk cows. Mediocrity? The triumph of greed? A combination of both that does not justify their stratospheric pays as Yves wrote.

      But you know, this is what they learn in their business schools.

      1. trent

        banking needs to be a public utility if you aren’t going to pull charters and put people in jail while they are private companies

    3. leslie C

      I worked in government (foreign trusts!) and in banks. My soul could not survive. I now have a low level job with insurance and worked as a teacher in between–I used to tell my students who questioned my choice to teach “well, at least here I have never been asked to do anything illegal, immoral, or unethical!”

    4. Punxsutawney

      I worked in retail banking back in the early 90’s and the sales pressure had become heavy back then. I can only imagine what it is like now 25 years later.

      Rule # 1 in Banking: The closer you are to the actual customer or physical $, the less you make. And the less say you have over your job or what you can do for your customers.

    5. Lambert Strether

      The dynamic is also reminiscent of the “cheating” “scandals” from the high-stakes testing regime–

      Set up a metric to measure the performance of a system. Ensure that people in the system cannot perform to the metric while remaining ethical. Stand back, and watch the cheating. Bonus points: System optimizes for people who cheat successfully, i.e. without getting caught. Now promote those people to run the system, then the country. (That’s why I put “cheating” and “scandals” in irony quotes….) Same dynamic in the CIA with lie detectors; optimizes for sociopaths who lie successfully, indeed that is the optimization best for elites. Who wants an intelligence service optimized for truth tellers?

    6. Bob Stapp

      Yes, indeed…

      Besides the fact that the execs were rewarded for pumped up and totally bogus sales numbers, there’s the sweat-shop environment created by those same execs that resulted in those pumped up numbers.

      I spent quite a bit of time in my career working for corporate America in org. devel. where I maintained the sad delusion that the top tier of management was basically a well-intended albeit unenlightened lot who, once they understood the benefits, would jump enthusiastically on efforts to empower employees and, by extension, the organization, to reach full potential. Back in the 80s and early 90s it actually seemed like things might move in that direction. No more. Squeezing blood out of turnips has been fully embraced by the overlords and if you can’t deliver strictly according to their specifications, you’re very quickly out on your ass, trying to make a living in over-the-road trucking or in the new “gig” economy driving for Uber. Meanwhile, the major truck lines and Uber are busily developing driverless vehicles.

      Is this a great country or what…?.

  5. ArkansasAngie

    Quite Frankly … every one of these fired employees needs to be frog marched down to jail — fingerprinted, mug shot taken and their dad gum records dinged.

    And … since this happen because of a lack of control by management the fine should be taken from management. Clawed back works for me. Buffett … looking at you.

    I had an employee a few years ago who got stopped by the cops right after a bank a couple of blocks from my office was robbed because he sorta … kinda looked like the description of the guy who did it.

    They searched him … nothing. Oooops he didn’t have car insurance … so they gave him a ticket.

    Well … the reason he didn’t have insurance is that he didn’t have any money.

    And … guess what … he didn’t have any money to pay his fine either. So 2-3 month later he is arrested, taken to jail and given a $1,100 fine or 30 days.

    He didn’t steal anything. He was on his way to work. There was no intent.

    and … And … AND … these yahoo’s who intentionally defrauded people are fired? That’s it?

    Nope. Doesn’t cut it.

  6. allan

    Several million cases of identity theft (using someone’s ID to open an account without their knowledge)
    and wire fraud (transferring assets to the new account without the owner’s knowledge) and no one goes to jail?
    If a young Arab-American man did this once, he would be perp-walked to the slammer.

    Wells Fargo was shrewd in its choice of largest shareholder.
    As he likes to say, there’s class warfare and his side is winning.

  7. Carla

    Every individual currently imprisoned for theft in the United States should be let free and thievery no longer prosecuted until the Wells Fargo executives are tried, convicted and given sentences commensurate with their crimes. Then maybe we will be able to rebuild a legal system worthy of the name.

  8. mk

    Yesterday KNX 1070 am radio Los Angeles reported on this story and the reporter asked “why isn’t anyone going to jail” which was never answered. At least the reporter asked for a change.

  9. Schofield

    Kindness never gets much of a hearing in a Neo-Liberal society. It would, of course, be an act of kindness to society for these executives to go to jail for their fraudulent greed.

  10. Toshiro Mifune

    If I were to remove, say, $25 from your wallet without your approval that would usually be called theft even if I only moved it to somewhere else in your house.
    Is the only reason these un-authorized transfers not being called ‘theft’ to prevent Wells C level execs from possible prosecution under RICO laws?

    1. bob k

      Grifters pulling the long con! Racketeers involved in a conspiracy to commit crimes. RICO would seem to apply.

  11. Timmy

    There IS data that can link this activity to individual executives, namely the specific nature of the sales incentive programs and who authored, implemented and then used them to reward or punish. The other useful data is the structure of management reporting on these sales initiatives. Again, who drove the reporting system and generated the feedback down the line to those that were either above or below the target level of sales productivity. I think you those two areas of activity will lead you to the executive that really drove this activity.

    My personal experience is that these campaigns take on the character of “loyalty tests” of employees relative to their bosses. The standard staff meeting line is: “Ramping up our cards outstanding is really important to Jim (Head of Division) and he’s going to be watching that we share his priorities. This is really important to me, too, and I’m going to be watching that you share my priorities. Get it done.”

    As so it goes down the line.

    1. shinola

      Typically, the top exec(s) who come up with a program & set goals will lay it out to the underlings with something to the effect of: “These are the perfectly reasonable goals I expect you to meet etc. etc … and I better not hear of anything improper going on.” (The operative word in that last part is “hear”). And, voila, instant CYA, plausible deniability.

  12. NotTimothyGeithner

    So why is the CPB handling a criminal case a day criminal conspiracy? Is the FBI, SEC, and Treasury just too busy?

  13. Anonymous

    Yves, one thing you might want to add: 5,300 employees fired is already a huge number, but this almost certainly significantly understates the number of employees engaged in this fraud, because I suspect these WF branch jobs have high turnover (as is common for retail jobs, which these are). An employee who already quit before this “investigation” caught them can’t be fired and wouldn’t be included in this accounting.

  14. allan

    Bloomberg’s house bank apologist writes this:

    …But obviously no one in senior management wanted this. Signing customers up for online banking without telling them about it doesn’t help Wells Fargo at all. No one feels extra loyalty because they have a banking product that they don’t use or know about. Even signing them up for a credit card without telling them about it generally doesn’t help Wells Fargo, because people don’t use credit cards that they don’t know about. Cards with an annual fee are a different story — at least you can charge them the fee! — but it seems like customers weren’t signed up for many of those. This isn’t a case of management pushing for something profitable and getting what they asked for, albeit in a regrettable and illegal way. This is a case of management pushing for something profitable but difficult, and the workers pushing back with something worthless but easy….

    Obviously. Insert standard Upton Sinclair quote.

  15. PQS

    I bet a lot of those people fired are wondering why they were let go…they were probably the star performers!

    No perp walks = Revolution futures

  16. The Derivative Project

    Yves, so well-done. I think this post should and will gain traction.

    Sidebar: Many years ago, John Stumpf, current Wells CEO, left US Bank, when US Bank placed women into their commercial bank training program, over him. John headed to Wells (then Norwest Bank) to start his Wells career. Can’t recall –think he was either in correspondent banking or doing car repos, when he headed to Wells.

  17. Ivy

    So Wells Fargo got Buffetted by the recent events. It could have been worse. After all, they could have been cross-selling Clayton mobile homes to be repossessed, and then the hapless customers would have to apply for jobs at Dairy Queen. /s

    1. polecat

      And you’ll hear ‘crickets’ …… because Warren’s ‘with HERRRRRRRRRRRR !

      ….. as is Lloyd, apparently ……

  18. Punxsutawney

    Where the heck was the Internal Audit/Security department on this? Are they that lax? Who called them off? I can’t imagine something like this flying under the radar at the regional bank I once worked at long ago.

    1. jdw

      If there are 1.5 million accounts that were allegedly opened to game sales numbers and Wells had such poor controls that they were blind to it I pretty much guarantee that there were 20,000 or 100,000 or something huge that were specifically opened to commit real fraud/money laundering which I think is probably the more interesting story.

      1. Punxsutawney

        And certainly something that the bank would be happy to use the current story to distract us from.

        I’ve known people in Internal Audit, actually have done some Internal Auditing and a fair amount of Operational Auditing in my life and wouldn’t expect the auditors to be happy with this. Can’t imagine anyone I known not having a fit about something like it so I wonder what pressure may have been applied, But maybe with so many of us in the Precariat nowadays you just have to go along to keep food on the table.

  19. Fraud Guy-Also

    About five years ago, I opened a Wells Fargo checking account for my father with about $75,000 of his money that he was going to spend on a construction project. I had a long conversation with the Wells employee who I dealt with about how the account would be largely drawn down over the next six months to pay construction costs. I also specifically asked about fees associated with the account and was told that there were none.

    About six months later, I noticed that the account had started incurring a $25 /month maintenance fee. I went into the branch to inquire and was told that the account “plan” that my father was signed up for had a $25,000 minimum balance to be fee-free, and now that the construction project was complete, the balance was well below that threshold.

    I was shocked to hear this, as I had inquired closely about fees in opening the account and had been extensively reassured that there were none. I demanded to speak to the branch manager, since the person I was talking to seemed indifferent to my complaint, only to be told that that the person I was talking to WAS the branch manager. He offered no refund of the charges already incurred, implying strongly that I was at-fault for not understanding the account terms.

    I left grumbling and feeling powerless.

  20. Lambert Strether

    If Obama wanted to win the election for Clinton tomorrow, he would have Lynch file criminal charges against the CEOs* (despite the pearl-clutching and cries of “Populism bad!”)

    That this isn’t on the table shows elite priorities with crystalline clarity.

    * And somebody should corner both Sanders and Warren on this point as well. I mean, if one person at a tiny branch bank did this with two accounts, they could end up in court. But if 5,000 people do it with two million accounts, with the tacit approval of executives, everything’s jake with the angels (modulo the chump change fine).

  21. Fool

    This is just an outrage. Only in a technocracy in which Hillary Clinton is on the verge of inheriting the presidency can this happen, and only under that circumstance, perhaps, can it get any worse. It really makes you weigh the alternatives.

  22. Mike

    This really is a joke, when I saw it this morning I looked forward to the coverage here. Speaking of jokes, the embedded ad at the bottom of the post was an offer for a free credit report from Credit Karma. I don’t know if that is sly commentary from the NC staff, a coincidence, or a sign that our artificial intelligence overlords have learned how to mock us.

    1. Yves Smith Post author

      We don’t control the ads, which are in the hands of our ad service. And the ad you saw sounds as if it was a “remnant” ad, which is an ad served up by a Google Adsense type process (as in based on either cookies in your browser or words in the post, usually the former).

      We suggest you view this with the proper irony. Advertisers are supporting content hostile to their business objectives.

  23. Jim Haygood

    Wells Fargo’s large-scale theft by deception echoes the notorious Equity Funding “fraud parties,” which also occurred in Los Angeles:

    [Equity Funding] collapsed in scandal in 1973 after ex-employee Ronald Secrist and securities analyst Ray Dirks blew the whistle on massive accounting fraud, including a computer system dedicated exclusively to creating and maintaining fictitious insurance policies.

    Investigation found that from 1964 onward, as many as 100 company employees had engaged in organized deception of investors, auditors, reinsurers and regulatory authorities.

    https://en.wikipedia.org/wiki/Equity_Funding

    “As many as 100 employees” — shocking. Whereas Wells Fargo could only muster a feeble 5,300 troops for its scheme.

    Is this a problem for Wells Fargo’s stock (symbol WFC)? Why, no. It’s down 1.4% today, same as the Dow. Jim Cramer should be issuing a “strong buy” soon.

    1. Jim Haygood

      In case you thought I was joking …

      “The fine is a rounding error, and I don’t see any unintended consequences.”

      So said FBR analyst Paul Miller, describing the $185 million in fines and penalties, plus another $5 million for “customer remediation,” that Wells Fargo agreed to pay.

      Wells Fargo’s punishment comes to only 0.9% of the $22.9 billion that the bank earned last year.

      Miller said Wells Fargo had “done a good job accepting responsibility.”

      Miller pointed out that Wells Fargo has the highest valuation among the “big four” U.S. banks, which also include J.P. Morgan Chase, Bank of America and Citigroup Inc.

      This reflects higher returns on equity, but also that Wells Fargo “does not have the broker/dealer volatility” of the other members of the big four club, according to Miller.

      http://www.marketwatch.com/story/its-business-as-usual-at-wells-fargo-after-record-fine-2016-09-09

      So there’s your investment case — unlike JP Morgan, B of A and Citi, which are up to their necks in dealing, trading and derivatives, staid old Wells Fargo is a “pure banking” play.

      And with the bad news behind it, WFC has nowhere to go but up. ;-)

  24. Patrick

    “Firings”? It really frustrates me that they’re not sending anyone to jail for this. They need to treat it like a racketeering or drug case. Prosecute the low level offenders, stack up gigantic jail time, force them to make a deal for testimony, move up the ladder to the next offender. Work their way up to the CEO.

  25. KYrocky

    Has anyone else noted that since Sanders’ exit from the Presidential race – no one – is talking about financial crimes that continue to occur, and the absolute immunity that continues to be provided to the leaders of these criminal enterprises that conduct these crimes.

    As Sanders predicted, nothing is going to change. No individuals responsible for conceiving and directing these crimes will ever face a jury.

    Obama and his AG’s have been thoroughly complicit in preventing criminal prosecutions for these financial crimes. That was the deal Obama made from day one, and it typifies who Obama really is and what the man truly believes.

    Sadly, Clinton will do nothing different, and in all likelihood the use of regulatory power of the CFPB will decline.

    If America were a true democracy our government would work to protect the vast majority of citizens against the few that would prey on others. Today, in the United States, the opposite is true, for those with money to spend on politicians. Our government works for them, and against us. We, anybody readings this, all know it. Obama knows it. Hillary and Bernie know it, as does every member of Congress. The AG’s know it, and you can believe Wall Street and the bankers know it. The press, and most people in the country too. The outrage is completely bipartisan among the public.

    Yet nothing will change. Not unless we elect a whole lot of people committed to making it change and then following through. But that bar has been set too high by our electoral process and compliant media.

    1. Elizabeth

      Well, early in her campaign, Hillary said she told the banks “to stop doing that.” I guess WF didn’t take her admonishment to heart. But she did try. /s I suppose it’s just too difficult for a prosecutor to get a case before a jury because it’s so complicated and a conviction would be uncertain.

      Another day in the exceptional nation.

  26. flora

    “Economic freedom is an essential requisite for political freedom. By enabling people to cooperate with one another without coercion or central direction, it reduces the area over which political power is exercised. In addition, by dispersing power, the free market provides an offset to whatever concentration of political power may arise. The combination of economic and political power in the same hands is a sure recipe for tyranny.”
    -Milton Friedman,
    ‘Free to Choose’, 1980

    Wells Fargo’s latest crime is another example showing the bankrupt nature of neoliberalism. Removing “coercive” govt regulations and letting the market “regulate itself” has created a crime wave of epic proportions. What we have now is economic and political power in the same market hands (thanks to campaign finance laws) – the TBTFs – and the tyranny of unregulated markets. Paying drop-in-the-bucket fines won’t stop the behaviors.

  27. It's about time

    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.”

  28. wombat

    Perfect opportunity for HRC to actually apply her stump speech line “no bank to big to fail, no individual too big to jail” …. Yea right.

  29. John Wright

    I am a Wells Fargo customer and went to their website, trying to find more information.

    https://www.wellsfargo.com/about/corporate/vision-and-values/index has a quote from John G. Strumpf
    ” Everything we do is built on trust. It doesn’t happen with one transaction, in one day on the job or in one quarter. It’s earned relationship by relationship. ”

    “Documents such as this are rare these days in corporate America. Most companies have a mission statement and a set of core values, but few for as long as we’ve had The Vision & Values of Wells Fargo. Even fewer have resisted fads and remained faithful to their founding principles. We have stayed true to our vision for more than two decades.”

    As Wells Fargo was founded 164 years ago, in 1852, remaining faithful to their founding principles for only about two decades is not encouraging.

    One has to click on the front page animation,”It’s our responsibility to make things right” to get to some information about the “reached settlement”.

    “Recently, we reached settlements with the City Attorney of Los Angeles, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency over allegations that some of our retail customers received products and services they did not want.”

    “We truly regret and take full responsibility for any such instances and have refunded those customers who incurred fees.”

    Note, no mention of the $185million fine or the 5300 employees let go, so no hints of the magnitude of the problem..

    See this at https://www.wellsfargo.com/commitment

    This suggests: “You can always see all of your Wells Fargo banking account relationships via our online banking services at http://www.wellsfargo.com.”

    But how would one know if an account had been opened and quickly closed between monitoring intervals?

    What confidence does a customer have that Wells’ inspection process detects all the improper fees?

    Note: Even the https://www.wellsfargo.com/commitment/faqs/ gives no idea of the scope of the issue.

    Perhaps it is unsurprising the Wells website was allowed to downplay the “agreement” with regulatory authorities.

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