Thanks, Wells Fargo.
On behalf of all consumers, allow me to express gratitude for your living down to our sadly low expectations for bankers.
Without your attempt to fleece millions of customers with bogus accounts, and the $185 million fine you just got slapped with, and your cowardly move to blame the whole mess on wayward employees, it’s entirely possible that the banking industry and conservative lawmakers would have succeeded in overturning financial reforms put in place after the last time banks screwed over the public.
Thanks to you, however, legislation aimed at killing the Dodd-Frank Wall Street Reform and Consumer Protection Act is now on life support. The bill’s proponents still insist that banks be freed from burdensome regulations. But you’ve shown that, if anything, banks probably should be on an even shorter leash.
“The scope of the misconduct at Wells Fargo is breathtaking and demonstrates why our new consumer watchdog, the Consumer Financial Protection Bureau, is essential,” said Lisa Gilbert, director of Public Citizen’s Congress Watch division.
“The agency played a key role in uncovering the fraud, and that’s why it is outrageous that Republicans in Congress at this very moment are advancing legislation that would dismantle the agency’s regulatory and enforcement powers.”
If I may: Yes, the bureau played a key role in holding Wells’ feet to the regulatory fire. But that was after the Los Angeles Times first reported the bank’s sneaky practices in 2013 and after Los Angeles City Attorney Mike Feuer filed a lawsuit last year.
Now, the U.S. Justice Department is getting involved, investigating whether Wells Fargo’s sales practices broke any laws. Sen. Elizabeth Warren, for one, accused the bank of “staggering fraud.”
At issue – and Wells Fargo doesn’t dispute this – is bank employees’ having opened as many as 2 million accounts without customers’ knowledge in an effort to boost sales numbers and reap bonuses from managers. That resulted in the Consumer Financial Protection Bureau levying its largest fine ever, which it said reflects “the breadth of the unfair and abusive practices.”
Wells Fargo admitted no wrongdoing as part of the settlement, which would have been par for the corporate course if the bank had left it at that.
CEO blames workers
But it subsequently decided to make a play for the moral high ground. The company’s chief executive, John Stumpf, told the Wall Street Journal this week that the problem wasn’t the company setting unrealistic sales goals and creating a pressure-cooker environment in which underlings felt compelled to lie and cheat to impress their bosses.
Rather, the problem was that about 5,300 bank workers failed to “honor” the bank’s culture of treating customers with respect. So those thousands of maverick, loose-cannon workers, selfishly trying to improve Wells Fargo’s balance sheet, have been given the sack.
“If they’re not going to do the thing that we ask them to do – put customers first, honor our vision and values – I don’t want them here,” Stumpf declared. “I really don’t.”
Oh, and Stumpf, who received $19.3 million in compensation last year, was untroubled that the woman who ran the division involved with all the hinky accounts, Carrie Tolstedt, recently walked away with a reported $125 million severance package. He said she “decided to retire” after 27 years with the company.
I tried to get Stumpf on the phone, but a Wells Fargo spokesman said he wouldn’t have any time for me this week. Probably not next week, either.
House bill could undermine consumer protection
Anyhow, enter stage right, Rep. Jeb Hensarling, the Texas Republican who heads the House Financial Services Committee. His Financial Choice Act was approved this week by Republicans comprising the committee’s majority. It now moves on to a possible vote by the full House.
Hensarling’s 500-page bill is a real piece of work. Among other things, it would eliminate the so-called Volcker Rule that prevents banks from gambling with customers’ money via risky investments. It would end regulators’ authority to dismantle “too big to fail” financial firms and would significantly increase fees for debit card transactions.
It also would cripple the Consumer Financial Protection Bureau, which has been a target of Republican and financial-industry ire since it opened its doors in 2011. To date, the bureau has cracked down on payday lenders, introduced new rules for mortgages and provided almost $12 billion in relief to consumers harmed by questionable business practices.
The chances of the bill becoming law with President Obama in power are pretty much nil. But consumer advocates are worried that it could set a policy template for a possible administration under Donald Trump, the GOP nominee, or keep popping up like the Republicans’ votes to repeal Obamacare.
Hensarling said before this week’s committee passage that his bill “substitutes market discipline for government control.”
And there’s the rub. His Financial Choice Act would gut consumer safeguards put in place after the Great Recession and restore the do-as-you-please approach that allowed financial firms to get us into so much trouble in the first place. “Market discipline” is code for “Relax, no one’s looking.”
It took Republicans on the Financial Services Committee less than two hours of debate to pass Hensarling’s bill because Democrats didn’t bother submitting any amendments.
“This bill is so bad that it simply cannot be fixed,” said Rep. Maxine Waters, D-Los Angeles. She called it a “highly partisan, damaging piece of legislation.”
Gilbert at Public Citizen was even more succinct. She said that, in light of Wells Fargo’s issues, legislative efforts to roll back Dodd-Frank and the Consumer Financial Protection Bureau are “almost a joke.”
The Republican-led Senate Banking Committee isn’t laughing. It’s summoned Stumpf to testify on Tuesday – an appearance at which he'll undoubtedly reiterate how he and other senior executives weren’t to blame for thousands of employees taking advantage of customers.
The reality is that he and other managers are indisputably responsible for creating a climate in which such atrocious behavior was possible or for being stunningly negligent in their oversight of the bank’s day-to-day operations.
Either way, Wells Fargo has made a powerful case for why regulatory oversight is crucial and why the banking industry remains unworthy of the public’s trust.
For that, thank you.