Wells Fargo’s Management by Magical Thinking Comes Up Short in the Cover-Up Category

As the Wells Fargo fake accounts scandal escalates, it has been delicious to see a full-blown corporate pathology on display. With impressive speed, the press has eviscerated the pious mythology that Wells has peddled over the years. Somehow, no one in the top brass was alert enough to realize that creating a boiler room that churned employees, both the ones fired and the one disgusted with the culture, would leave a lot of eye witnesses who’d be delighted to tell their stories. And even by the standards of corporate misconduct, they are wowsers.

The media reports paint Wells as having leaders with their brains rotted by too many TED talks, leadership gurus, motivation coaches, and management information experts. They seemed to believe that boring old banking could become the next Apple….without any iPhone, that the mere force of corporate will could get the American public to buy more Wells banking services, in the absence of any evidence of customer appetite or Wells having better financial mousetraps. It was unadulterated “trees grow to the sky” thinking. We’ve managed to cross sell better than anyone else! Why shouldn’t we be able to stuff more products down customers’ throats? And the delusion started from the top. From the Wall Street Journal:

In the 2010 annual report, Mr. Stumpf said he often was asked why Wells Fargo had set a cross-selling goal of eight. “The answer is, it rhymed with ‘great,’ he wrote. “Perhaps our new cheer should be: ‘Let’s go again, for ten!’

This sounds like a inept parody of managerial hopium meeting Soviet Stakhanovite goal setting. But the worst was that analysts and the media ate it up.

So how were Wells Fargo employees supposed to make Stumpf’s lame imitations of Muhammad Ali’s poetry happen? Did Wells train them how to go out on the street, tackle and hog-tie hapless prospects, drag them into the branch, um, store, force feed them credit cards, and then attach ankle bracelets so they’d get electrical shocks if they didn’t use the products often enough? No, the bank’s bright ideas seemed to come straight of of multi-level marketing scams: sign up your all your relatives and harass everyone you meet. And these suggestions, um, requirements, suggest that the San Francisco bank may also have pressured employees to work unpaid, during off hours, to meet the relentless pressure to hit sales targets. Again from the Journal:

Managers suggested to employees that they hunt for sales prospects at bus stops and retirement homes, according to Mr. [Scott] Trainor and other former Wells Fargo employees….Managers asked employees who had fallen short of the targets if they could open accounts for their mother, siblings or friends, according to Mr. [Steven] Schrodt and other former employees…Mr. [Randy] Holbrook says missing targets meant working extra hours when the branch was closed to make more calls.

And while CEO John Stumpf has tried blaming supposedly greedy employees for gaming the system, the anecdotal evidence is overwhelming that employees were hounded constantly, often multiple times within a day, to meet daily goals. And the threat of firing was live, a corporatized version of Glengarry Glen Ross (see here, though 1:20)

Even the New York Times’ Dealbook, which tries averting its eyes when bank misconduct is so…unseemly, did point to the underlying threat, “Deliver the numbers or you’re out,” in its headline over the weekend, Wells Fargo Warned Workers Against Sham Accounts, but ‘They Needed a Paycheck’. And it served up some choice examples. For instance:

Mr. [Sharif] Kellogg said he was constantly being hounded by his supervisor to increase his sales, or “solutions,” as they were known.

“I was always getting written up for failing to bump my solutions numbers up,” he said.

Some of his co-workers, facing the same pressure, bent the rules, said Mr. Kellogg, who was making $11.75 an hour when he left the bank in 2012. They would ask local business owners whom they knew well to open additional accounts as favors, saying they could close them later.

“It seems as though you’d have to be willfully ignorant to believe that these goals are achievable through any other means,” Mr. Kellogg said.

The Journal’s story, based on over three dozen interviews, including managers and former area presidents, is far more confident and detailed in profiling the single-minded push for more sales. For instance:

They say many branch managers routinely monitored employees’ progress toward meeting sales goals, sometimes hourly, and sales numbers at the branch level were reported to higher-ranking managers as many as seven times a day. Tension about how to meet the sales targets was common.

“If somebody said: ‘This doesn’t make sense. Where are you getting these sales goals?’ then [the response] was: ‘No, you can do it’ or ‘You’re negative’ or ‘Oh, you’re not a team player,’” says Ruth Landaverde, a former Wells Fargo credit manager in Palmdale, Calif…

Former branch manager Rasheeda Kamar says her Wells Fargo office in New Milford, N.J., had a goal of selling about 15 new products or services a day. If the branch didn’t hit the goal, the shortfall would be added to the next day’s goal, she says.

Ms. Kamar says laggards were threatened with termination and sometimes criticized in conference calls. In February 2011, she wrote to Mr. Stumpf in an email: “For the most part funds are moved to new accounts to ‘show’ growth when in actuality there is no net gain to the company’s deposit base.” She says she got no reply.

After working for Wells Fargo and its predecessor banks for 22 years, she was let go in 2011 for failing to meet sales targets, she says.

In other words, this was grinding, unremitting harassment of staff to meet targets regardless of whether there was any factual basis for believing the actual or potential customers for that office could deliver them. The desires of President Stumpf must be met!

A lawsuit describes some of the predictable outcomes. From Bloomberg:

Three Utah customers sued the bank Friday in federal court, blaming the scandal on the lender’s push to increase the number of accounts held by clients to an average of eight — its “gr-eight” initiative. That strategy led to customers’ money being transferred without their authorization to accounts created without their knowledge, and then the bank charging fees on those accounts.

“Wells Fargo quotas are difficult for many bankers to meet without resorting to the abusive and fraudulent tactics,” the customers said in their complaint. “Those failing to meet daily sales quotas are approached by management, and often reprimanded and/or told to ‘do whatever it takes’ to meet their individual sales quotas.”…

The bank is also accused in the suit of misleading customers to force them to open new accounts, sometimes falsely stating that they would face penalties without additional products.

Even though these articles dutifully present Wells’ defenses, anyone with an operating brain cell can see they aren’t remotely credible. If you put together the timetable, the abuses started in 2009 and 2010, as some executives started seeing red flags. The bank did a limited investigation in response to rising customer complaints and fired 200 people, mainly in the hyper-aggressive Los Angeles area, rattling some managers in other areas of the country. But the convenient internal view was that this was just a few rogue actors.

The Los Angeles Times broke the story of the misconduct in late December 2013. The Los Angeles City Attorney opened its investigation sometime in 2014. In a predictable pattern, not wanting to be show up by an intrepid state probe, the Office of the Comptroller of the Currency pushed Wells to investigate. The reason to take this with a fistful of salt is that Wells hired law firm Skadden Arps. When an institution wants to hide dirty laundry, rather than come clean, it engages a law firm so that the work is protected by attorney-client privilege. If they want to make it clear they really want to get to the bottom of the matter, they turn to a consultant or an accounting firm.

The priceless part is that Wells Fargo expects the chump public to believe that it was serious about stopping the account fakery….because it started giving ethics classes to staff. Help me. Better yet, they appear to have been implemented in 2014, meaning only after the Los Angeles City Attorney put the San Francisco bank in its crosshairs.

Like those human resources bromides that no one reads, courses like these are eyewash designed only to serve as liability shields for top executives. All insider accounts say that nothing changed on a day-to-day basis. And what message are you going to believe, the one from some folks who parachute in with PowerPoint and are never to be seen again, or what your immediate boss demands that you do repeatedly during the day? One manager had the bad taste to call out the charade for what it was. From the Journal:

At a sales meeting in Florida in 2014, Wells Fargo & Co. regional executives scolded lower-level managers about an obvious problem that kept cropping up at the bank. Managers were told that their employees should never open accounts for people who don’t exist, people familiar with the meeting recall.

One manager in the room saw things differently. In an email peppered with exclamation points and capital letters, she urged her employees to ignore the bosses and get sales up at any cost, says someone who saw the email.

The pressure on Wells is rising. The Senate Banking Committee has a hearing set for this Tuesday. The House Financial Services Committee has requested documents from Wells as part of an investigation and in advance of a hearing later this month. And the reaction from the Congresscritters that have weighed in is that they aren’t buying the tripe that Stumpf is hawking, that there’s nothing amiss with the bank and he and it were victimized by rogue employees. The Department of Justice, if it is at all serious about its investigation, isn’t likely to find that excuse too persuasive either.

It will be interesting to see how Elizabeth Warren handles the Senate Banking Committee hearing. She’s boxed herself in by praising the Consumer Finance Protection Bureau lavishly for what now looks like a weak settlement, particularly given the lack of clawbacks or any punishment of executives. If she had any evidence that pointed in that direction, a line of attack that would be deadly and would also exculpate the CFPB was if Wells misled regulators in the investigation. Remember, coverups are always worse than the crime.

Wells’ next line of defense, prefigured in the press stories over the weekend, is “Whocoulddanode?” in the form of “This is a really big bank, we observed only spotty signs of misbehavior, and we acted promptly when we saw it.” The problem with this tidy story is that sprawling retail banks are run like large factories, with intensive monitoring. And that can be accomplished readily because any meaningful employee activity is reflected in records, like new account openings or transactions. So there are no mysteries or secrets.

And as our resident bank IT expert Clive pointed out in an earlier post, any retail bank worth its salt has plenty of metrics in place to catch the sort of misconduct that became rampant as Wells:

Opening up fake products to claim a sale is a trick which goes back to when a TBTF tried to sell Noah Ark insurance. When I started in retail at a TBTF nearly 30 years ago, senior management (as a minimum the VP or equivalent in charge of a geographical area) would get reporting from the internal compliance or risk function about the number of accounts opened which had low turnover. A low turnover account is a serious red flag for either mis-selling or even (as was the case that has been exposed at Wells’) the salesforce boosting their figures by robo-applications….

Of course, it all comes out in the wash eventually — the customer didn’t want the product in the first place and if they didn’t want it, they almost certainly won’t use it. This will result in a low (or no) activity account.

Simplistic attempts are generally made in the bank’s operations to prevent this kind of sales practice. The most common is that if within in a certain timeframe (a month or 6 weeks is usual) there hasn’t been a transaction on the account or the card hasn’t been activated, the account will be closed and this low activity account sale will be clawed back from the salesforce. But of course, this is widely known in the bank employees, so the standard ruse is to diarise a follow-up customer service call, tell the customer some cock-and-bull story about how the bank employee has noticed a potential security issue with one of their cards and could they phone the security team just to confirm the card is still in their possession. Or another variation is to tell the customer If they want to call into the branch, they can sort the “problem” out, while in the branch they get the customer to phone the activation line, then “check” everything is okay by doing a cash advance at the counter on the card (they’ll even refund the fee, how kind!).

These are just some tricks, readers can get the gist of how it works and probably even think of their own alternatives.

But there’s still a trail of evidence which the bank should be following — accounts which are very light in transactions after 6 months or dormant in a year. These are always investigated, not for the customer’s benefit but because it costs the bank money to maintain the account. They are invariably force-closed due to low activity (this will be in the product’s standard Terms and Conditions, to give the bank the ability to do this). This management information is collated and picked over endlessly by the P&L accountants. Too many customers attracted to the brand, sold product to, but who then walk away are value-destructive. Senior management (one part of the senior management team, anyway) are all over this metric like a rash.

Of course, another “arm” of senior management — those who’s bonus is simply determined by sales volume, not long-term profitability — don’t care and unless the one at the top (and I do mean the top, the CEO is the only one who can wield the big stick in this sort of management turf war) has his or her finger on the pulse and determines to stop the rot, the rot will go on and get rottener and rottner until the stench (the stinkyness being the Average Revenue Per Customer declines) becomes too obvious to ignore.

To recap: there is no way Wells’ top management could not have seen what was going on, given the evidence in the form of low or no activity accounts and “solutions”. Those six or “gr-eight” products per customer are meaningless if three of them are dormant. But Stumpf for years has made clear what his priorities are, and had them telegraphed with brutal effectiveness to the lowliest customer-facing staffer: more sales, more products, no matter how you get them, and no questions will be asked as to whether anyone wanted them, which means where anyone actually would use them. This is a prescription for fraud. The only surprise here is that it took as long as it did to become visible to the public at large.

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  1. diptherio

    As I’m getting a little tired of telling my friends and family: if you do business with criminals, expect to get robbed. Also, if you work for a criminal enterprise, expect to be exploited. And if you think the regulatory agencies of this country exist to protect your interests as a citizen, I have some lovely oceanfront property in Eastern Montana that I’ll give you a real good deal on….

    A tongue-lashing from Warren isn’t going to be nearly enough to satisfy me or anyone else. Orange jumpsuits on Stumpf and Co., or this is all just kayfabe.

    1. Terrie C

      Im in the process of a Fraud Lawsuit since 2011 against Wells – I have amassed hundreds of documents that demonstrates percisely how Wells committed fraud and monetized the Making Home Affordable program as a trap for unkowning homeowners to lose their homes – it was very simple on four occasions- they entered incorrect data in the loan software – and concurrently they made false statements to fannie mae on several fronts- and on that basis collected on default insurance while i was current on the mortgage by telling Fannie mae they were foreclosing – fannie mae approved for a mod from one side 9apparently twice)- while wells was collect on false representations on the other – How many Homeowners did they do this to? I suspect many – could be millions – that lost their homes because they trusted that Wells was being honest about the process of modification -The unknowing Homeowner mistakenly took the word of Wells when they said “you failed to meet investor guidelined” – trusting that was a true and accurate statment Between the default insurance from the taxpayer subsidized AIG and the Derivatives they collected on after foreclosure – I am sure the former “repo-man Stumpf” had knowlege – you bet he did – stripping people their assets is what this man specialized for his entire career. Hopefully the American Public will finally awaken – and so will our Justice System –

      1. diptherio

        Unfortunately, what we have is a legal system, not a justice system. Sometimes though, the good guys win a couple. I hope that happens in your case. Best of luck.

      2. Herk

        Similar but not the same here Terrie, I bought a house in 2008 AFTER the crash and got a good deal, but in May 2009 AllState sent my auto insurance premium payment through twice and overdrew my checking account. I had been banking with WaMu but that was the weekend that Chase took over my old bank and the branches were closed, the online banker was down for a few days for the change over. By the time I could access my new chase account I was nearly $1,000 overdrawn and all but about $19 of that was fees Chase granted itself.

        Well Chase held my mortgage for $132k and when they simply refused to discuss the matter of the unauthorized withdrawal and subsequent fees I told them that they would not get another payment on the mortgage till they worked with me on it. I am a 100% disabled vet, I had not generated bank fees with WaMu, and I have not since I left Chase for a Credit union. The Chase fees represent almost all fees I ever paid in 58 years of life.

        So of course I gave in and called the bank and asked about restarting payments and also wanted information about the new HAMP government program for refi. They told me that they were not even allowed to discuss HAMP till borrowers were at least 90 days in arrears. Hint hint wink nod, take a three month break from your house payments then call us back. So I did. When I called back in 90 days I was flat out told I make too much money to qualify. In the first 3 minutes of conversation. They knew that all along. But now with 3 months of late fees and fees for allowing fees to go more than 48 hours and fee fees, I did not really see much hope of keeping the house and they had never yet discussed the fees they took before that they were not entitled to. I had filed a complaint with the OCC about that, NEVER got a reply.

        Mid October I decided that I could not go homeless so I called Chase to workout a way to save my mortgage. They told me they could arrange to place the arrears onto the end of the mortgage so I appear current but I have to resume making the regular house payments on the first starting with November, they said that it would take a few weeks to draw up the workout agreement and get it to me for signature, but I still have to send in the payments. So I did pay on November first, only to find out a couple weeks later that they applied NONE of it to principal and interest or the escrow account but took the entire payment in fees for themselves. That HAS TO BE ILLEGAL, to take money destined for the escrow account and simply stick it in their own pockets.

        At that point they told me I could not possible have had a workout deal with them since my mortgage was USDA backed and any agreement would have to be approved by them as well, that takes 6 months at least.

        I gave up, they were never going to speak truth, they were always just going to rip me off deeper and harder, there was nobody I could get help from, no watchdog, and at the time MILLIONS of others were in the same boat.

        First week of January they slapped a foreclosure notice on my house and I moved out at the end of the month. They then sat on the place for four and a half years finally selling it in May 2015. Credit repair cannot even start till the lien is satisfied. Now pushing 60 I will never again own a house, never again have a credit card. I also will never again do business with a money center or regional commercial bank.

        If your bank has not robbed you and screwed you yet then just wait, they will, and the government allows it because the government is now indentured to policy makers at the Fed.

        I am already packing to put my best possessions into storage, I will vote in November then leave the USA permanently. It has failed. It is now among the most corrupt places on the planet, they have some slick marketing to make you think you are free, but trust me you are not.

    2. Herk

      Good for you Diptherio, if you are going to dream DREAM BIG!

      LOL, while we are at it how about we dream that congress take back fiscal and economic policy making from the Fed too.

      1. OpenThePodBayDoorsHAL

        “When the world around the IMF goes downhill, we thrive. We become extremely active because we lend money, we earn interest and charges and all the rest of it, and the institution does well. When the world goes well and we’ve had years of growth, as was the case back in 2006 and 2007, the IMF doesn’t do so well both financially and otherwise.” — Christine Lagarde

        “The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” — The Rothschild brothers of London writing to associates in New York, 1863

        “Whoever controls the volume of money in our country is absolute master of all industry and commerce, and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.” — President James A. Garfield, two weeks before he was assassinated

    3. Enquiring Mind

      A tongue-lashing from Warren isn’t going to be nearly enough to satisfy me or anyone else. Orange jumpsuits on Stumpf and Co., or this is all just kayfabe.

      I’d prefer a tongue-lashing of big stockholder Warren Buffett. His enterprise hides many nasty elements in all that efficient equity return extracting. Perhaps Wells can double down on a financing plan with Clayton Homes to drag more people into debt peonage?

      1. Tom Skowronski

        Maybe this fraud is what Warren Buffett is talking about when he says he looks for businesses with a “Moat around them”.

  2. Paid Minion

    LOL……everybody is “shocked” that the ethics training didn’t stick. Just like every other scrap of evidence that the scuzzball owners and managers are the ones turning the whole country into a giant s##tpile, not the wretched refuse.

    It’s a “Management 101” course……….mandate the serfs attend the training on the ethics cause-du-jour, and make sure that they sign the paper at the end, saying they are responsible for any violations of the policy. Absolving upper management from any violations of said policy. Which is the point of the whole exercise.

    Talk (as always) is cheap.

  3. Ignacio

    What is the next line of defense: free market is above all? Something about hyenas and antelopes, and fostering evolution?

  4. der

    Atlas Shrugged, or Trumpian Economics.

    “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.

    “You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”

    Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

    Greenspan is back and still held in high regard.

    Did you hear Eddie Lampert is “rescuing” the company he drove into a ditch?

    Here comes Eddie Lampert to Sears Holdings’ rescue again.

    Our Best & Brightest.

  5. DolleyMadison

    So with all of the rampant, unapologetic cheating in every single area of the bank, why are the courts still allowing the Fraudclosure Fraud Manual to be used to steal homes WF doesn’t even own? When is any of this evil gonna trickle down and wash away the scales on the judges eyes? Its like fraud has become normalized.

  6. flora

    This sounds like a inept parody of managerial hopium meeting Soviet Stakhanovite goal setting.
    Yes, it does.
    Interesting that the fake accounts were opened with $25.00. Anything below $100.00 does not set off the bank’s internal fraud monitoring system. I’m sure that’s just a coincidence.

    “And while CEO John Stumpf has tried blaming supposedly greedy employees for gaming the system, the anecdotal evidence is overwhelming that employees were hounded constantly, often multiple times within a day, to meet daily goals.”

    Stumpf pushing his employees to rob (while claiming not to) sounds like the Charles Dickens character Fagin. From wikipedia:

    “In the preface to the novel [Fagin] is described as a “receiver of stolen goods”, …. He is the leader of a group of children (the Artful Dodger and Charley Bates among them) whom he teaches to make their livings by pickpocketing and other criminal activities, in exchange for shelter. …he is shown (when talking to himself) that he cares less for their welfare, than that they do not “peach” (inform) on him and the other children.”

    Thanks for this post.

    1. flora

      “The priceless part is that Wells Fargo expects the chump public to believe that it was serious about stopping the account fakery….because it started giving ethics classes to staff. “

      Fagin operated his pickpocket ring before the advent of plausible deniability. If he was operating today he’d have the Artful Dodger give ethics seminars before sending the kids out to pick pockets, (and beating the kids who returned without enough loot).

      1. Harry

        I dont know what prompted me to make this observation, but Dickens made it very clear in his text that Fagin’s ring did not only pick pockets. I read an estimate that 1 in 7 londoners were prostitutes, and it would be silly to exclude the kids from that estimate. While it was unacceptable to spell it out, it was ok to hint at it.

        I guess my real point is that just because you can identify one clear horror, you would be silly to assume that there isnt something much worse to be discovered. Those managers who could not see that this was wrong were likely to be equally blind to other wrong things.

    1. scraping_by

      That’s the system. Part of the neoliberal faith is decriminalization, making acts that were criminal matters simple civil matters.

      Sen Warren is actually a true believer. Her CFPB performs regulatory settlements instead of the lapdogs formerly known as the FBI conducting an investigation into forgery, fraud, and conspiracy. The WF shareholders take a ding rather than the C level corporate officers get prison time. The corporation, which was invented to shield people from civil liability (mostly debt) now shields them from criminal liability.

      It’s all the approach to government, and it’s pervasive.

      1. Rick

        Deregulation is a conservative mindset not a neoliberal one. By the way neoliberalism died with Hubert Humphrey.

        1. Yves Smith Post author

          You have just made it obvious that you don’t know what the term “neoliberalism” means. I suggest you spend some time with Google before commenting again.

          1. Vatch

            Of course you’re correct, Yves. I suspect that the average U.S. citizen does not know what “neoliberalism” means, and they do not realize that the word is completely different from “liberalism”. I don’t see that changing any time soon. This can lead to some major miscommunications! Sometimes I wonder whether people should just avoid using the word “neoliberalism”.

  7. IHateBanks

    Well, at least I finally know the story about the unsolicited $15k credit line WF extended me a few years back, when we were considering a refi of our weekend cabin.

    I never used it, and they never shut if off.

    I REALLY need to move past the personal laziness that has kept me from moving all my accounts to the local credit union. Transferring 30 accounts to auto bill pay at another bank seems comparable to building another Great Wall of China to me.

    1. readerOfTeaLeaves

      I get it.
      It is ‘just one more thing…’
      It took me an afternoon, but wow did I have a huge sense of relief afterward…
      If you find a credit union that you like, it’s totally worth it.

      Make it fun; my spouse and I agreed to dinner out in celebration after I closed all our WF accounts and moved them to a credit union. Moving our money saved us at least $75 each and every month in what we had been paying in bank fees for our accounts. And that doesn’t even touch the lower interest rate savings at the credit union.

      Every month that you don’t switch over is costing you money.

  8. Darrell

    Just wondering but isn’t Wells in the other Warren’s portfolio still, you know Buffet?? Anyone familiar with Hathaway’s holdings?

  9. Nik

    The MLM parallels are really striking: endless peddling of useless products the customer for which the customer has no need, taking advantage of friends and family for business, cultish, out-of-touch fervor among the top brass, and the painting of any skepticism as mere negativity or the lack of sufficient commitment to the “team.”

    You’re Wells Fargo for crying out loud, and you’re reduced to doing a two-bit impression of Herbalife and Vemma?

  10. RC

    I’ve said this before, I’m saying it again, the higher up the corporate ladder you go, the more dependent you are on others for everything you know, do and say. Guiding this and other articles is an unexamined and unquestioned premise that corporate leaders can be responsible for and know what is taking place around them and under them. However, there is probably an inverse relationship between power and truth. Would it be well to examine the question of whether someone in a position of power or authority CAN know certan things? Is there a kind of corporate-specific epistemology in play, or an etiology of information or knowledge, when your role involves being lied to or mislead by large segments of those around you, where trust is at a premium?

    1. JerseyJeffersonian

      Ah, the counsel of despair. Give it a rest, Ace. This delegation of agency and moral/ethical responsibility away from the corporate leaders is total bullshit. The information available to leaders in comparison to that available to the underlings they oppress puts the lie to this formulation. Those in a position to know, who actively choose to not know are truly culpable. Unless, of course, your concept of a corporate structure is akin to that of a Mafia family, wherein the Capo is insulated from responsibility for the crimes that THEY set into motion.

    2. Mike G

      Bad managers choose to be lied to. They want to be told pretty little fantasies about how great everything is going and how awesome their numbers are, so they can ‘confidently’ repeat the same lies further up the chain. Liek a cult, they whole rotten systems relies on everyone working to perpetuate the fantasy.
      If any underlings should point out that the numbers are BS they are ignored, intimidated to shut up or fired.

      1. Harry

        I dont know about commercial banking but in investment banking its not about being lied to. Its about plausible deniability. Someone who keeps on sending around the kind of emails which erode managements plausible deniability isnt going to last very long.

    3. OpenThePodBayDoorsHAL

      Seems to me there were quite a few leaders swinging from posts after Nuremburg, it makes no difference as you posit whether they CAN know something, their position of power gives them the implicit responsibility for the actions of the companies they run regardless. If they somehow “could not” know then it was their job to make sure they *could* know. And for the record that is all just “plausible deniability” BS since it’s clear not only *could* they know but they *did* know and in fact had designed their entire employee incentives programs to get the behaviors they were seeking.
      So nice try.

  11. readerOfTeaLeaves

    They seemed to believe that boring old banking could become the next Apple….without any iPhone, that the mere force of corporate will could get the American public to buy more Wells banking services, in the absence of any evidence of customer appetite or Wells having better financial mousetraps.

    Nailed it.

  12. John k

    WF not wall st so not Tbtf, but don’t see how activity actually increased earnings… Was it all to boost sales and stock price?

    1. Yves Smith Post author

      It was to goose metrics that Wall Street thought were drivers of later profits and proof of sustainability of Wells’ business model. More new account and increased products per account were taken as a matter of faith to improve earnings. And Wells has ways to manage earnings, like reversing excessive loss reserves. Regulators are supposed to prevent banks from stockpiling excessive loss reserves to as to game earnings, but I dimly recall seeing some analyst reports a few years back questioning both some of Wells’ actions, like its continued big push into mortgages (and regulators not curbing that) and their reserving policies.

      So it was at a minimum to support the stock price and potentially to increase it.

      1. Mike G

        Lazily reducing an operation down to numbers means you end up rewarding and promoting people who can produce the numbers you want, by hook or by crook. And those are rarely the people who are good for the business in the long term.

        It’s reminiscent of Robert McNamara’s MBA-driven management of the Vietnam war, turning it into an idiot-game of body counts and helicopter blade-hours. All the numbers looked great and pointed to victory — until reality could no longer be ignored.

  13. DolleyMadison

    The way it increased earnings was they transfer all your money to other accounts, then charge “low balance fees” to eat up all the money. My 17 year old daughter took 500 she earned and opened a fee-free savings account, (provided balnce was above 300) and just let it sit, cause you know, she was SAVING. She went back 3 months later to make another deposit and found they had transferred money from her savings to open two other checking accounts – including a BUSINESS account (she was still in high school). Now her savings account as well as these two accounts were all below the minimum balance requirements, incurring monthly fees — they told her SHE owed THEM 78.00! I must have trained her well because she came home with 50 more than she deposited plus a 25.00 visa gift card! (having a pretty young girl angrily crying and calling you a thief in the lobby of a very small, very busy “store” is apparently bad for business – especially when an old man wearing his VA cap, and a local cop rush over to ask what is going on) As she left she said she thanked them, then looked the manager right in the eye and said “You and I know this isn’t a “mistake” and you need to think about your life’s goals.” I love that girl she is going places.

    1. OpenThePodBayDoorsHAL

      Is it too late for her to file papers in the upcoming general election? Because what we need is quite simply a person, any person, with an actual functioning moral compass and a working idea of the difference between right and wrong.
      My compliments on your child-rearing acumen.

      1. DolleyMadison

        Thank you. Despite my pleading and attempted bribery for her to start college, she is instead taking a gap year to work in a very poor community in an after-school program, far from home in a state decimated by foreclosures resulting in a large homeless population comprised of families. Her only pay is room and board. I am proud but terrified.

  14. SteveB

    There is a copy of a letter( posted on the ZH site) sent by Bernie Sanders addressed to both Richard Cordray and Thomas Curry asking since they have both fined Wells Fargo for opening accounts without the persons knowledge, have they also sent criminal referrals to the DOJ.

    Wonder if he gets an affirmative response?

    1. Vatch

      Thanks. For more, see:


      Here’s the letter:


      Sanders should be the Democratic nominee for President. I hate the Democratic party for what they did in the primaries and at the convention. I also hate the Republican party for multiple reasons. I guess I have issues.

  15. readerOfTeaLeaves

    Later in the day, I landed on the news a Wells Fargo ‘top risk manager has taken a leave of absence on the eve of Chief Executive Officer John Stumpf’s testimony before the Senate Banking Committee…”


    ‘For personal reasons’.

    I swear, some days you just can’t make this sh^t up.
    O.M.G. craazyman, where are you when I need you?!!

    1. allan

      And Stumpf will testify that he is `deeply sorry’.

      The chief executive of Wells Fargo, John G. Stumpf, will say in testimony Tuesday morning that he is “deeply sorry” for selling customers unauthorized bank accounts and credit cards and that he takes “full responsibility” for the unethical activity, according to a copy of the remarks prepared for a Senate Banking Committee hearing. …

      Deeply sorry all the way to the bank.

  16. YBNormal

    The root of the problem is partly cultural: how we perceive and choose our leaders. Stumpf at WF, Don Blankenship of Massey, Da Trumpster, M. Bachmann, Palin – all alpha types who sell unrealistic expectations or do whatever it takes to get to the top. A good lesson for humans is the baboon troop known as the Forest Troop, or Garbage Dump Troop. The dominant alpha males all died from eating poisoned meat which they had claimed for themselves. The troop’s culture changed from then on with the aggressive males and bullying behavior mostly gone. An additional, ahem, benefit for the surviving males is that there were roughly 2 females for every male, a ratio that remained. Perhaps we can invent a test for anyone with excessive alpha traits and have them drink some coolaid….

    1. JTMcPhee

      But those leaders, rulers actually, who in reality “we” do NOT choose, have ” security forces” of their very own, probably including tasters and poison sniffers, to save them from any tainted meat –which they, following form, then sell to the rest of us, for a handy profit.

      The story of that baboon is a nice wishful progressive fable, but not gonna happen.

  17. templar555510

    When I read comments like those above I think the inescapable truth is that fascism – the alignment of the corporation and the state – has become normalised in the US ; the inverted totalitarianism that is, as defined and described by Sheldon Wolin where the consumer is in effect enslaved by the corporation .

  18. Frank

    Until yesterday, any person who banks online with WF has been subjected to relentless marketing tactics. When you logged in you were immediately upsold with some new product that you didn’t ask for (credit card, new mortgage, home equity loan, savings account etc). You were given choices — no thanks, ask me later, or read more (or the like). For 10 years I have said no thanks, they never stopped asking at loggin. I called to complain numerous times “if I say no thanks that means i’m not interested, dont ask me again”. Never changed, until yesterday — gone. If there is one benefit from this latest scandal, maybe, just maybe, that crap will be gone for good.

    Fingers crossed.

  19. allan

    Sen. Merkley Calls on SEC to Investigate Wells Fargo for Failures of Internal Controls [press release]
    Also calls for “proven reformer” as next SEC Chair [hahahah – how’s it under the bus, Mary Jo?]

    In the wake of Wells Fargo’s scandal in which bank employees created millions of unauthorized accounts, Oregon’s Senator Jeff Merkley today called on the Securities and Exchange Commission (SEC) to open an investigation into whether the bank violated internal controls provisions of Sarbanes-Oxley by not recognizing and stopping the widespread fraud in its ranks. …

    In his speech, Merkley expressed his deep disappointment with the leadership of current SEC Chair Mary Jo White, saying that the agency has “slow-walked Wall Street reforms required by law and resisted any initiative to rein in abuses at the most powerful corporations.”

    “The next chair of the SEC must be a proven reformer,” said Merkley, “not another defender of the status quo.”

  20. Joe Jubb

    I recollect, back in 1973,when I was a young banker, and credit cards were just starting to hit the market, the bank I worked for decided to issue Chargex (precursor to Visa) credit cards to all of the branches’ customers, all at once, in one big mailout, without prior notification to the branches. What a fiasco. The branch I happened to work at, at the time, had, predominantly, an older/chinese clientele, and they inundated the branch, holding these cards and demanding to know what they were for, why they got them, etc.etc. It wasn’t too funny at first – these people were MAD – but after awhile, all we could do was laugh at the monumental ineptness of the ‘head office’ marketing people. Sadly, though, this was part of the leading wave of what was to be a fundamental change in the way the bank did business, as I was to discover a few years later. Marketing first, banking second. I didn’t stay.

  21. ekstase

    –In the 2010 annual report, Mr. Stumpf said he often was asked why Wells Fargo had set a cross-selling goal of eight. “The answer is, it rhymed with ‘great,’ he wrote. “Perhaps our new cheer should be: ‘Let’s go again, for ten.”–

    Oh, Mr. Strumpf. Perhaps poetry is not your strong suit. Here, maybe these can help:

    “Want food on your plate? You’d better hit eight.”
    “Don’t want me to berate? Where is your eight?”
    “Let’s celebrate! You lied and made eight!”
    “Carry my weight! I said give me eight!”
    “Truth is dead weight! Come on, fake an eight!”

    All better now?

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