From Our Future
The Wells Fargo phony-account scandal may be worse that we've [been]led to believe, even after a $185 million fine and the CEO's resignation. And this isn't Wells Fargo's first scandal. Its past exploits include discriminatory lending, exploitative payday loans, and a lucrative sideline in for-profit prisons.
Meanwhile, Hillary Clinton's Wall Street speeches are casting a pall over her potential victory and weakening her political capital before she even assumes office. She should make a pledge now: to take immediate action in her first 100 days that will address Wells Fargo's scandals and the systemic problems behind them. We have nine suggested actions, and there will undoubtedly be others.
But first, some background.
Taken for a stagecoach ride.
The Wells Fargo brand resonates with the mythology of the American West, but this lawless town needs a new marshal. CEO John Stumpf's resignation just isn't going to cut it.
It's not that the evidence exonerates him. Far from it: Whistleblowers began complaining to Wells Fargo's management back as 2005, the year Stumpf was named president. (He became CEO in 2007 and chairman of the board in 2010.)
The bank says it has fired 5,300 employees for opening more than 2 million fraudulent accounts over the last five years. But John Stumpf -- President, CEO, Chairman -- claims he had no knowledge of these events. The bank's employee incentive system, low pay, corporate culture, and sales guidelines were all designed to encourage this kind of fraud -- but Stumpf was shocked, shocked, to learn that this kind of behavior was going on in his establishment.
The problem isn't that Stumpf is leaving. It's who's staying. As the Los Angeles Times' Michael Hiltzik reports, Stumpf's replacement as board chair is Stephen W. Sanger, the former CEO of General Mills. Sanger's been a member of the Wells Fargo board since 2003. Sanger has received $1.7 million in payments from the bank since 2011, for which he (like any director) is expected to be ensurer that the bank is run well -- and legally. As Jim Hightower notes, all the bank's board members bear responsibility for its long-term culture of fraud.
A thorough housecleaning would have meant the removal of all the bank's senior officers. As a former employee told the New York Times:
"They all created the bank's culture of leading by fear and intimidation."
But the new CEO, Timothy J. Sloan, is a 29-year Wells Fargo veteran who will have been deeply steeped in its poisonous culture. And Wells Fargo heaped encomiums on its disgraced outgoing CEO, Stumpf, where apologies to customers and shareholders would have been more appropriate.
It all reeks of "crisis management," that form of corporate damage control that emphasizes rapid-response showmanship and glitzy PR moves over the assumption of responsibility and the implementation of meaningful change.
As economist and white-collar criminologist William K. Black Jr. explained recently, we only know what Wells Fargo has chosen to tell us about this latest epidemic of fraud. This response isn't a confidence-builder.
Neither is the recent revelation that Stumpf sold $61 million in stock in the month before the $185 million settlement was announced. That looks a lot like "insider trading." As a well-known securities lawyer told CBS News, "I would be shocked if the Securities and Exchange Commission doesn't look heavily into this."