Wells Fargo is a Shadow of its Former Self: How to Get The Stagecoach Back on its Wheels
By State Treasurer John Chiang
Wells Fargo Bank shares a long, intertwined history with California that dates back to the Gold Rush era. Today, both are powerhouses. Wells Fargo has become the nation’s third largest bank by total assets and California is the world’s sixth largest economy.
What we each do, therefore, matters.
Revelations in 2016 that Wells Fargo fleeced 3.5 million customers by opening bogus accounts reeked of betrayal by a dyed-in-the-wool California institution that has long called the City by the Bay home.
For generations Wells Fargo has partnered with the state and municipalities to build roads, schools, dams, and other critical public infrastructure.
But where is that bank today?
Wells Fargo is a shadow of its former self. Today it is known for cruelly and systematically targeting our community’s most vulnerable citizens, including immigrants, seniors, veterans, and communities of color.
I reacted swiftly in 2016 when the bogus accounts scandal first emerged by levying sanctions barring Wells Fargo from three highly profitable lines of business with the state of California. But then came more allegations and the further erosion of public trust.
We learned as many as 800,000 consumers were allegedly forced by the bank to buy “lender-based” car insurance they did not need, tipping a quarter of a million Wells Fargo customers into delinquency and triggering 25,000 vehicle repossessions. Next, we learned Wells Fargo allegedly overcharged military veterans under a federal mortgage refinancing program. Then, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency imposed a $1 billion penalty against the bank for a laundry list of misdeeds.
As each wheel falls off the bank’s trademark stagecoach, it raises many vital questions. One of the most important being: where were this company’s leaders — its directors?
For more than a year I have been calling for a total reboot of the bank’s leadership. As part of this leadership overhaul, I demanded the removal of seven board members who were at the helm during what I will call the bank’s “venal decade.” They had a duty to know, to act, and to lead. But they were either MIA, or knew about and turned their back on the culture of wanton greed metastasizing within their bank.
Six of the seven board members are gone, or will be leaving soon. But one remains — Mr. John Baker.
Is Mr. Baker is willing to stand before the bank’s customers, shareholders and other public stakeholders and account for his inaction? What did he know? When did he know it? And why didn’t he raise a red flag and say, “Not on my watch?”
If Mr. Baker cannot answer these questions then he must go.
After Wells Fargo was exposed for opening 3.5 million bogus accounts, you might think — if only to give some credence to its crisis PR marketing slogan that it was “on the side of customers” — that it would try and make its victims whole.
You would be wrong.
One of the ways this bank continues to avoid full responsibility is by preventing victims from individually seeking judicial redress in a public court of law, before an independent judge or jury, affording all parties access to a fair and impartial resolution. Instead, Wells Fargo maintains a morally indefensible policy of forcing customers to settle their disputes through forced arbitration.
This is the best indicator that the bank’s promise to make things right is a bold lie.
By forcing fraud cases into secretive, behind-closed-doors proceedings, Wells Fargo has used forced arbitration to keep scandals out of the public view, allowing fraud to mushroom.
In 2017, I sponsored a bill to open the way for victims of bank fraud to sue in California courts. The bill is now the law of the land in California.
At its annual shareholder meeting in Des Moines, Iowa, I called on Wells Fargo’s board of directors to eliminate the onerous practice of imposing forced arbitration on fraudulently opened accounts and provide fairness to customers nationwide by giving them the opportunity to bring their cases into the light of day.
Until the forced arbitration policy is changed, customers and shareholders should not believe for one second that Wells Fargo is committed to changing the practices that led to its becoming one of the least-respected companies in America.
I am also calling for the removal of Chief Executive Officer Tim Sloan.
In October of 2016, I wrote to Mr. Sloan, who at the time had just been appointed CEO of the scandal-ridden bank, and told him I was rooting for his success. While I certainly wished him the best, I was skeptical that, as a 30-year veteran of Wells Fargo, he would rise to the challenge.
I was right to be skeptical.
A year and half after he took up the reins, Mr. Sloan has proven to be too much of a champion of the old guard to be the change agent needed.
He leads with a tin ear, recently even declaring, “I don’t think we have a culture problem.”
Mr. Sloan’s move-along-there-is-nothing-to-see-here approach to repairing the bank’s reputation is the proverbial dog that does not hunt.
Under his leadership, Wells Fargo has seen its stock decline during an era when the banking industry is thriving. Wells Fargo is the only bank among its peers to see a struggling stock trend over the last year, with prices as of earlier this month falling by more than 20 percent since January and by 5.5 percent over the course of the previous 12 months.
Meanwhile, Bank of America and JP Morgan Chase saw share prices increase by more than 25 percent between April 2017 and March 29 of this year. Consumer confidence in Wells Fargo is at an all-time low.
Here’s how a headline in the Washington Post last June captured what’s happening:“Wells Fargo is the least-respected company in America — even less than big tobacco.”
Meanwhile, Mr. Sloan dawdles. I am still waiting for basic information that I requested a year and half ago on the number of California consumers harmed in the fraudulent account scandal.
Time has proven Mr. Sloan cannot drain the swamp — he has become it. It is time for him to go.
The following article is based on remarks delivered by California State Treasurer John Chiang at the Wells Fargo Press Conference held just outside of the Wells Fargo headquarters in San Francisco, CA on April 23. You can watch the press conference on the State Treasurer’s Facebook page.