Wells Fargo: Who Says Crime Doesn’t Pay!

Unless you’re one of the few people still watching CNN™,  you may have missed what can only be one of the most scandalous in-house criminal activities to be uncovered at a bank. And not just any bank. It happened at none other than Wells Fargo™, which, up until the scandal was revealed, was the number one bank (as measured via its market cap) in the U.S. The scandal? Here are just a few highlights as reported. To wit:

“On Thursday, federal regulators said Wells Fargo (WFC) employees secretly created millions of unauthorized bank and credit card accounts — without their customers knowing it — since 2011.
The phony accounts earned the bank unwarranted fees and allowed Wells Fargo employees to boost their sales figures and make more money.
“Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses,” Richard Cordray, director of the Consumer Financial Protection Bureau, said in a statement.”

And to use CNN’s own words to describe it: “The scope of the scandal is shocking.”

How shocking you may ask? Fair enough, here’s a little more from their reporting…

“The way it worked was that employees moved funds from customers’ existing accounts into newly-created ones without their knowledge or consent, regulators say. The CFPB described this practice as “widespread.” Customers were being charged for insufficient funds or overdraft fees — because there wasn’t enough money in their original accounts.
Additionally, Wells Fargo employees also submitted applications for 565,443 credit card accounts without their customers’ knowledge or consent. Roughly 14,000 of those accounts incurred over $400,000 in fees, including annual fees, interest charges and overdraft-protection fees.”

As scandalous as all the above is, what is far more insidious, is the damage it inflicts (once again) upon the very fabric of free market capitalism, trust in laws, and last but not least: trust and belief in actual contrition. i.e., “No we’ve really changed, really!”

As I implied, that “trust” has just been obliterated by the very people and institutions that created the last crisis in the first place. e.g., Banks, bankers, boards, and the very CEOs that run them.

Yes, I said it: i.e., Not some intimate object such as “bank.” But the very people who work there; from low-level staff, all the way up to the top as made evident in this latest banking scandal.

Again, as egregious as these revelations may be. What has been far worse (in my opinion) is the way the bank (Wells Fargo) handled this whole sordid affair both during, as well as after the fact.

As reported by the WSJ™, CEO John Stumpf defended his firm with this gem of damage control retort. To wit:

“There was no incentive to do bad things,” Mr. Stumpf said in an interview with The Wall Street Journal. He called the conduct that led to last week’s settlement with federal and local authorities “not acceptable,” adding that the bank doesn’t “want one dime of income that’s not earned properly.”

Here’s a tip for Mr. Stumpf, (after all, it is what I do) if that’s the best you could come up with at that time, not only should your PR team be fired along with the 5300 others you’ve dispatched. But so should you. Immediately.

Not only did you not show a minuscule of righteous indignation – you seemed to bend-over-backwards as to defend the payment of (wait for it…) $125,000,000.00 as a parting gift to Carrie Tolstedt, who has been reported to have been the executive in charge of the unit where all this fraud took place. You know, the division where “sandbagging” customers continued long enough to have created its own internal moniker. Absolutely disgusting and shameful. Period.

It has been said that Ms. Tolstedt’s timing to exit was a result of “personal decision to retire after 27 years” with the bank. Geez, I wonder why. Yep, nothing to see here, move along. Just pathetic.

When asked about clawing it back? (Insert non-committal, illogical, double speak here) But if you need to hear what Mr. Stumpf thought about her back in July:

“Tolstedt’s team is a leader in building and deepening customer loyalty and team member engagement across the business, which today serves more than 20 million retail checking households and 3 million small business owners, and employs 94,000 team members.”

It would appear “sandbagging” pays, no?

I suppose everyone was rewarded, even those at the top by the “added shareholder value” produced by such a “team player.” Everyone that is – except the poor customers who trusted one of the largest banks in the U.S. to be watchful stewards of their money, and personal identities. No, it would appear they were preyed upon like minnows thrown into a shark pool. Glad we have all that Dodd-Frank type stuff enacted so people could once again “trust” the banks and their bankers. But I digress.

If the CEO (e.g., Mr. Stumpf) would have hit the news wires first in some form of scathing rebuke of not only the people involved, but the audacity that the people at the very top of this scandal (which, in my analysis, directly implicates him either by willful ignorance or just plain incompetence) could walk away veritably unscathed with $millions to-boot? There might, and I say “might” have been a chance for credibility of deniability. But now it looks far more like implicit, willful, ignorance more than anything else. i.e., “Hey, her numbers are good – don’t ask questions. By the way, have you seen our latest stock price?!”

Because of this, it is my sentiment, that both Wells Fargo, as well as its CEO, have added their images to be poster-child’s in the growing list of what crony capitalism produces.

What the CEO (i.e., a true CEO with an ethical backbone) should have done was to come out swing with something along the lines of the following:

“This scandal is not only repugnant, it is unconscionable that some of the employees, some that I personally trusted and regarded highly, have been found to have violated our customers trust, along with our own, with criminal activity.
I have recommended to the board, and our legal team, to do everything in our power to claw-back every single dime possible that we have paid out seemingly under false pretenses, whether they were in the form of salary or bonuses. And, I want every possible criminal charge brought forth against them that may be applicable. Yes, even those which may result with the need of time being served. Let me be clear: against everyone responsible.
This is a blatant urination upon the sacred trust that is supposed to be upheld when a customer, regardless of how large or small, deposits funds or opens credit terms at any bank. Not just Well Fargo. This is unacceptable and it must not go unpunished. And I won’t rest with anything less than the full repercussions that the law can provide.”

Did you hear, read, or see anything resembling 10% of what I just stated? Hint: Nope.

Read the above quotes I referenced earlier as a reminder. Makes you want to run out and open an account and dispense with any of that troubling, filthy vehicle known as cash that far too many so-called “smart crowd” intellectuals are touting you should do. Doesn’t it? i.e., Don’t trust cash – trust the bank. Only criminals care about cash.

The only problem that now appears with that logic? It seems those criminals are within the banks just waiting for one to “hand it over.”  That’s a reality which is now becoming downright frightening. Just imagine what Jesse James would think about all this. It’s down right laughable if it wasn’t so infuriating.

And, by-the-way, if you’re concerned about such things: you’re insulted or portrayed as some type of “alarmist” (or worse – you must be a criminal) if you dare argue against the idea of a cashless society and the inherent problems contained within the theory.

Take the latest insult to intellect as proposed by Ken Rogoff, a chaired economics professor at Harvard, and a former chief economist at the International Monetary Fund.

In his case against cash, Mr Rogoff likes to build his case for a “cashless society” around all the boogeymen an Ivory Tower can muster. James Grant of Grant’s Interest Rate Observer™ wrote a cogent, scathing rebuke of Mr. Rogoff’s thesis. Here is just one line, yet, notice how perfectly it fits into this whole story. (The entire article is a must read) To wit:

“Terrorists traffic in cash, Mr. Rogoff observes. So do drug dealers and tax cheats. Good, compliant citizens rarely touch the $100 bills that constitute a sizable portion of the suspiciously immense volume of greenbacks outstanding—$4,200 per capita. Get rid of them is the author’s message.”

That’s right. Mr. Rogoff want’s you to deposit that filthy cash into a bank as to keep it out of the hands of criminals. The issue?

Well as of today it seems if you followed his advice and deposited at, oh let’s say, Wells Fargo? What you did in actuality was to hand it over to some greedy, dirty, disgusting criminal within where it was used to fuel criminal activity and self gain for themselves.

What’s the take away from all this? Hint: If there’s going to be criminal activity (as far as academia is concerned) might as well have it inside the bank rather than outside. After all: Criminals hate competing with each other. Whether in digitized currency or actual.

To people like Mr. Rogoff it would seem when it comes to criminality – banks are exempt. I wonder how Mr. Rogoff would feel if it was his “cash” that was suddenly misappropriated when it came time for him to use his ATM card only to find “insufficient funds” displayed when he knew he made a deposit days prior? I would wager he’d want his account closed – and paid in cash – as opposed to a “check” or “balance transfer” if he just found out “the bank” had been playing criminally with his hard-earned money. Bet on it.

Now Mr. Rogoff and his ilk could care less what a person like myself has to say about their ideas. After all, we’re nothing but a bunch on illiterate, economically challenged plebes that need to be herded into doing what “they” believe is “best for us.” Whether it’s in our best interest – or not.

So to that I would like to remind this Ivory Tower set of exactly what transpires when the banking system that issues all those digitized ones and zeros goes into free fall because of the reckless nature of those within that system created. e.g., The Great Financial Crisis of 2008. You know, the one that’s not even 10 years past and is requiring central banks around the world to continue “spinning plates” that would make a circus performer blush as to keep it all from crashing.

In, or about, 2008 during the heat of the crisis with the markets gyrating widely, none other than Mohamed El-Erian then at Pimco™ (someone I have great respect for) said in a televised interview on one of the financial shows I was watching (I’m paraphrasing): “My wife called me and asked me what she should do. I told her to go the nearest ATM and withdraw as much money as possible. For we both had no idea of just how bad things were going to get.”

I just wonder how well Mr. Rogoff’s argument about “cashless” would have stood had he needed to argue that position to Mr. El-Erian during that period? i.e., “Hey Mohamed, tell her not too worry, cash is for criminals and low life’s. She or you don’t need no stinkin’ cash! Have faith, faith in the system, faith in the banks!”

I don’t know what the response might have been, but I bet it could be summed up today in two words: Wells Fargo.

Yeah, I guess those other two words you were thinking of (e.g., FU) might be more appropriate. For I was thinking the same. Yet, on the other hand; don’t they mean the same thing as of today?

Wells Fargo: Who Says Crime Doesn’t Pay


© 2016 Mark St.Cyr