How to Make 200 Million by Lying, Stealing and Cheating and Get Away With It.
Also, John Stumpf — go fuck yourself.
If you’re reading this, you might be aware that there was an incident involving a financial institution — something to the tune of creating 2 million fake accounts, racking up service fees, artificially boosting cross selling ratios, inflating stock prices, firing 5300 employees and being fined 185 million dollars. Wall Street executives line their pockets with ill gotten gains, fire low level wayward employees who are making just barely over minimum wage, leaving senior executives unscathed. Sure, it’s nothing entirely new, but I want to shed light to the gravity of the problem on a sector wide level.
I want to break down every aspect of this calamitous clusterfuck so that you may understand why society, at a fundamental level is so systematically screwed.
Once upon a time, there was a CEO named John G. Stumpf working at a bank called Wells Fargo. They’re like any other bank in that they hold money, provide (sell) — clients savings accounts, chequing accounts, and lending products such as mortgages, credit cards etc. Then one day, they decided that the metric that determines their share price, or the value of their company, was cross selling ratios. So, what’s a cross sell ratio?
Cross selling is essentially the number of products a client holds with a bank. If everyone who went to your bank had only a chequing account, your cross sell ratio would be 1. If you had a chequing and savings account, your cross sell ratio would be 2, etc etc. Wells Fargo, decided the magical cross sell ratio to entice investors to buy more Wells Fargo stock was 8. This means that they believed, every client at their bank should have 8 products with them — it’s like saying you should have our chequing, then a regular savings account, a tax free savings account, a high interest savings account, a mortgage, then 4 other credit cards… Insane right? I think if executives at the top asked the simple question: “Why does anyone need 8 products,” they’d know of this scam a long time ago. (I’m only joking, I’m sure they knew about it a long time ago, but just decided to fuck over everyone anyways.)
Fun Fact: How Wells Fargo arrived at the cross sell target of 8 products wasn’t through studying customer banking patterns, or a survey of customer satisfaction and utilization ratios, no. They got the number 8 because, “eight, rhymes with great…” — John G. Stumpf.
These sales targets were so aggressively unobtainable that tellers at the bank, to keep their jobs, were creating false accounts — that is creating fake email addresses to open accounts without the consent of their clients. In some instances, people who had never even had a Wells Fargo account were receiving debit cards and credit products in the mail. Tellers had a better chance of dating Kendall Jenner, than meeting their sales goals. When unsuspecting clients found these accounts and asked their respective banking representatives why they were there, or to close them, the typical response was, “Oh just throw the debit card away, it was probably a mistake.”
Now, you’d think, “Ok, large financial institution — created 2 million fake accounts, fined 185 million — that should teach them not to defraud their clients.” And yet, you’d be wrong.
Per their earnings report, Wells Fargo’s annual revenue is roughly 23 billion dollars.
This means, the fine that was levied against Wells Fargo equivocates to less than 1/100th of their revenue; in layman's terms — it is what a cent is to a dollar — the SEC could have fined them 1 billion dollars and it would only be 4% of their revenue; you start to see the problem? In fact, it takes 5 years of fines to account for just 18% of their net 2015 revenue. That’s the quintessential definition of FUCKING INSANE. It’s like saying to a bully who’s been taking everyone’s lunch, “Because of your inappropriate behaviour, we’re going to take away your prune juice.” He’s not going to care, and neither is Wells Fargo. To them, 185 million is a rounding error.
The chairman and CEO of Wells Fargo, John Stumpf, personally through artificially boosting the share price by lying about cross selling ratios made 200 million dollars. The board, after uncovering this massive fraud decided to 1. Continue having him as residing chairman and CEO, 2. Let him keep the entirety of his compensation, and 3. Leave him unprosecuted under the laws of the United States of America. Now, I’m no lawyer, but I’m pretty sure conspiracy to commit identity theft, fraud, and racketeering are illegal activities. So ask yourself, how come he’s allowed to keep all the money he stole? How come he doesn’t have to resign? And how come he’s not facing legal prosecution?
During the hearing in front of the US Congressional Senate, Sen. Elizabeth Warren, said very aptly:
“If one of your tellers had taken a handful of 20’s from the register and was caught, they would be charged with theft, terminated, and probably facing jail time…It is gutless leadership.”
Addressing the last statement she made, ‘gutless leadership,’ Stumpf allowed Carrie Tolsted — the woman responsible for the community banking unit at WF, to ‘retire,’ as opposed to being terminated thereby allowing her to walk away with 125 million. How is a leader fit to lead when the person overseeing the department that created 2 million fake accounts is allowed to walk away and collect bonuses? When pressed about the issue of executive clawbacks, (the provision allowing corporations to take back compensation in the event of fraud or accounting issues) Stumpf said repeatedly, “The board will consider that…” “There is a process the board takes…” When asked point blank, “Will you personally support clawing back all or part of Ms. Tolsted’s pay?” He replied, “I am going to have the board do their process…”
It’s a simple question of right and wrong. We’re taught as children that there are consequences to lying, stealing and cheating. However, time and time again, when have we ever seen Wall St. execs prosecuted to the fullest extent of the law? Wells Fargo lied to their investors, stole from their clients, and cheated their employees and yet their board of directors are allowed to continue to run a corporation built on a bedrock of filthy ethics.
The aspect that scares me, isn’t the insignificance of the fine, or the fact that another so called, “sterling,” financial institution, has been found guilty of fraud — it is that this has become the norm. We’ve seen it time and time again: 1637, 1797, 1819, ‘37, ‘57, ‘84, 1901, ’07, ’29, ’37, ’74, ’87, ’92, ’97, 2000, 2008, and now this.
What’s the solution? A swift and drastic reform across the board for corporate governance, regulatory bodies, tax codes, and politics both in the corporate and political world. We need companies, regulation agencies, not to mention political parties, governed by people who are able to bring down efficacious and decisive actions in the pursuit of righteousness, fairness and uniformity. There should be no discretion given to someone due to their rank in a company — the consequences brought upon someone who has committed a wrongdoing should be equal and proportionate to the offence perpetrated. It’s as simple as that. Unfortunately, this may be one of the hardest things we as humans can do. Rhetorically speaking, is there still honor and servitude left in the world? I understand the difficulty in doing the right thing when looking over, John is making tenfold the amount of money you make by acting in a way that questions all moral ethics; furthermore, when no consequences seem to befall John for his actions.
As ironic as this is, Patrick Bateman said it best in the film, American Psycho:
“… We have to encourage a return to traditional moral values. Most importantly, we have to promote general social concern and less materialism in young people.”
I’ll be the first to admit that I was never a very optimistic person; pessimism and realism were more my tune — does a bear shit in the woods? Is a duck's ass tight? Lets just call a spade a spade. We’re not going to change. We’ll have a show of it all and what’s going to happen is, big banks will pour billions into lobbying congress to squash big reform, no one will be prosecuted and it’s going to be business as usual. You can disagree with me, make a monumental claim to righteousness and preach honesty and integrity but really ask yourself if you’d do anything differently. If you were given 100 million for stealing, lying and cheating — and allowed to walk away with it — no consequences, would you? Or would you do the “right thing?”