Wells Fargo has a long rap sheet. It paid a fine and returned $2.6 million in 2002 after improperly moving customers from one mutual fund to another. In 2005 it was fined $3 million for illegal sales practices, also in mutual funds.
"Some rob you with a six-gun," sang Woody Guthrie, "some rob you with a fountain pen."
"But," added Guthrie, "you'll never meet an outlaw drive a family from its home." True to the old troubadour's ballad, Wells Fargo has acted illegally to drive families from their homes. Its foreclosure contractors have even been accused of illegally breaking and entering into a family's home and stealing precious heirlooms, including some that had been rescued from the threat of Nazi looters.
A former Wells Fargo employee says that he was fired for challenging the bank's practice of misleading government authorities and foreclosing on homes without the proper documentation.
Just last month, Wells Fargo was ordered to pay $3.6 million for misleading student loan borrowers and fraudulently charging them late fees that were not owed.
The bank was fined $1.2 billion earlier this year for foreclosure fraud conducted in the run-up to the 2008 financial crisis. The charges included "reckless" misconduct in generating loans and concealing information from federal authorities.
A Justice Department press release noted that, "To maximize its loan volume (and profits), Wells Fargo elected to hire temporary staff to churn out and approve an ever-increasing quantity of FHA loans ...
"At the same time, Wells Fargo's management applied pressure on its underwriters to approve more and more FHA loans. The bank also imposed short turnaround times ... employed lax underwriting standards and controls and paid bonuses to underwriters and other staff based on the number of loans approved."
In other words, Wells Fargo systematically pressured and incentivized its employees in a way that put them under enormous pressure to cheat -- at a time when it already knew that cheating was taking place.
The settlement notes that the bank's senior management was "repeatedly advised by its own quality assurance reviews of serious problems," but "disregarded the findings and failed to implement proper and effective corrective measures, leaving HUD to pay hundreds of millions of dollars in claims for defaulted loans."
No criminal action was taken against those unnamed members of "senior management."
In response to last week's fraud settlement, Wells Fargo revealed that it had fired 5,300 low-level employees for this conduct -- about 1 percent of its workforce -- over the past five years. That proves that it knew about this cheating for some time, and yet did nothing to change the incentives that encouraged it.
Sound familiar?
In fact, senior bank executives kept getting rich from off the cheating. The executive who ran the unit in question just retired with a $125 million payout and high praise from John Stumpf. He called her "a standard-bearer of (Wells Fargo's) culture," a statement which is almost certainly true.
For that matter, so is Stumpf. He once said, "I think my primary job here is to be the keeper and the advocate of (Wells Fargo's) culture."
Like Al Capone, Wells Fargo and its fellow Wall Street lawbreakers have long enjoyed a cozy relationship with politicians and law enforcement. That may be about to change. Senators Sherrod Brown, Jeff Merkley, Jack Reed, and Elizabeth Warren, want Stumpf to appear before the Senate as part of a broader investigation of this incident.
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