In what The New York Times called, “The brazen scam no one noticed,” Wells Fargo Bank has admitted to scamming thousands of customers by surreptitiously opening an estimated two million bogus credit card, checking and savings accounts. Acknowledging this fraudulent activity, Wells Fargo has agreed to pay a fine of $185 million dollars.
Of course, from the CEO down, Wells Fargo management has denied any knowledge of this activity and have placed the blame on the lowest levels of employees; announcing that over 5,000 employees have been terminated for their involvement. (The New York Post is reporting that hundreds of current and former Wells Fargo employees have taken to social media asserting that the fraud was an “open secret known by all at the bank.” Many cited being penalized by management for not going along with the scam.)
The final story has yet to be told, but it strains the credibility of common sense to believe that a scam of this magnitude could go on for so long (5 years) and be so pervasive within the Wells culture without management at all levels being aware of it. (The New York Times reported that the senior executive who oversaw this group of “rogue employees” announced her retirement and walked away with a $124.6 million dollar severance package.) It might even say more about Wells Fargo management if they didn’t know about this fraudulent activity carried on for so long by so many people.
If one is to believe that the Wells Fargo CEO and all his minions had no idea the scam was being perpetrated on thousands of customers it is proof-positive evidence of stupidity, incompetence and non-existent corporate governance. How can over 5,000 employees independently and systematically dupe thousands of customers for years, without some evidence of this activity coming to the attention of management? It means that management is either dumber than gold fish or they condoned it by turning a blind-eye to it in the name of personal bonuses and corporate profit.
Wells Fargo is not Alone
If the actions of Wells Fargo were an outlier of typical big bank stupidity, incompetence, dishonesty and greed it could be passed off, but unfortunately it is further validation of the fundamental flawed DNA of bankers. But it would not be fair to lump all bankers into this category; there are good bankers. Unfortunately, the actions of 99 percent of the bankers give a bad name to the others.
The Wells Fargo is just another example of a history of the banker’s attitude of deceit, greed and dishonesty when it comes to dealing with customers, but it goes further than that. A quick review of every national financial crisis in the past 200 years will show that the greedy and foolish acts of banks were the spark that set the crisis in motion.
Wild stock speculation by banks brought on The Great Depression of 1929. The very first act of Franklin Roosevelt when he became president was to close all the banks in the country. This led to Roosevelt’s famous quote, “The only thing we have to fear are bankers who run-a-muck.” Soon after that the Glass-Steagall act limiting and controlling the size and activities of banks was passed. It is interesting to note that from the time Glass-Steagall was passed in in 1933, until it was repealed in 1999, not one single large bank failed and the country did not suffer a serious financial crisis.
The 1999 repeal of Glass-Steagall allowed the banks to consolidate into huge national institutions and put their capital at risk in insurance, investments and investment banking. Armed with this new-found freedom, it took less than a decade for the decisions of incompetent, greedy, deceitful bankers to become the catalyst for the greatest financial crisis since The Great Depression.
Learning the lesson again of just how greedy and stupid bankers can be if left to their own devices, in 2010 Congress passed the Dodd-Frank law. Although not perfect, the primary objective of Dodd-Frank is to rein in the size and laissez faire actions of banks. The intent is to prevent banks (and any other financial institution) from becoming “to big to fail;” so that the failure of any one bank would not take down the entire economy with it.
Even Bankers are Upset with Wells Fargo
Exposure of the deceptive practices at Wells Fargo comes at a particularly bad time for banks, because the banking industry is right in the middle of an expensive, lobbyist-led effort to repeal Dodd-Frank so they can once again revel in the unrestrained freedom they enjoyed after the repeal of Glass-Steagall. The big banks are upset with Wells Fargo, not for what they were doing, but because this incident draws attention to just how greedy, deceitful and stupid bankers are as a group. They are worried that the actions of Wells Fargo will make it even more difficult to repeal Dodd-Frank.
At the same time, even the smaller banks – ones that tend to be more connected with their communities and customers – are furious with Wells Fargo. They fear that the actions of Wells Fargo could result in even more regulations that significantly increase the cost of doing business.
We should not be surprised (and shame on us if we are) by the deceiving actions of Wells Fargo, but it should remind us that big banks are too incompetent, greedy, deceitful and stupid to be left on their own; especially when the size of their mistakes can damage the entire economy.
Just as Ulysses, the Greek king of Ithaca, had himself bound to the mast of his ship so he would not follow the seductive song of the sirens, bankers should be bound to only be bankers, lest they succumb to their own stupidity and the siren songs of greed, deceit and avarice; taking us down with them.