Other than President Donald J. Trump, Wells Fargo CEO Timothy Sloan has to be the most hated man in Washington, or at least he was this week.
On Monday, the New York Times published a story which said employees at the bank “remain under heavy pressure to squeeze extra money out of customers” despite “years [of] publicly apologizing for deceiving customers with fake bank accounts, unwarranted fees and unwanted products” and claims by top executives that they “have eliminated the aggressive sales targets that spurred bad behavior.” That was a reference to the 2016 scandal in which over a period of many years, thousands of bank employees opened millions of accounts without customers’ knowledge or consent.
But that proved to be only the beginning of the bank’s problems. Since then there has been a steady drip of one scandal after another, from forcing auto loan customers to buy insurance they didn’t need to allegedly overcharging military veterans for mortgage refinances.
Indeed, “each time a new scandal breaks, Wells Fargo promises to get to the bottom of it. It promises to make sure it doesn’t happen again, but then a few months later, we hear about another case of dishonest sales practices or gross mismanagement,” Rep. Patrick McHenry, R-N.C., told Sloan at a House Financial Services Committee hearing on Tuesday.
At the hearing, members of both parties lambasted Sloan and his bank.
“Robbing your customer is not an error in business. It is something more sinister,” said Rep. Stephen F. Lynch, D-Mass.
Yet, the icing on the cake was to come minutes after the hearing ended, when the Office of the Comptroller of the Currency issued a statement that said, “We continue to be disappointed with Wells Fargo’s performance under our consent orders and its inability to execute effective corporate governance and a successful risk management program. We expect national banks to treat their customers fairly, operate in a safe and sound manner, and follow the rules of law.”
Obviously, the OCC – one of the bank’s main regulators – doesn’t think it does. According to the Wall Street Journal, the agency is even debating whether to force out top executives or directors because it can’t seem to get its act together. It’s also contemplating imposing a special fee on Wells because it costs the agency so much to oversee it.
At the same time, the Federal Reserve has placed a cap of about $2 trillion on the bank’s assets, meaning that it has to sell businesses or assets if it wants to grow in another area. That seems like an inconvenience rather than a punishment, but the bank has also been fined more than $1 billion by the Consumer Financial Protection Bureau and other government agencies.
One of the reasons why Sloan is such a lightning rod – besides the obvious one that he’s the head of a rogue bank – is that he’s a holdover from the previous regime which perpetrated the fake accounts scandal and all the others that have followed.
John Stumpf, the previous chairman, and CEO was forced to resign in 2016 after the phony accounts scheme was exposed only to be replaced by Sloan, who had previously been a chief operating officer and chief financial officer. He’s a lifer, having worked at the bank for more than 30 years.
While I suppose it’s noble of Wells to stick by Sloan through all this, it’s also terrible public and investor relations at best and the height of arrogance at worst. It also costs the bank money in extra borrowing costs. Next time you’re shopping for a certificate of deposit, guess which bank is at or near the top of the list offering the highest rate? Wells Fargo bonds also yield a lot more than its competitors.
It’s not like Sloan founded Wells Fargo and the fate of the company rides on his staying in place, like a Jeff Bezos or an Elon Musk (we’ll overlook his own regulatory problems for the moment). He’s also not Jamie Dimon.
So I’m bewildered – full disclosure, I’m a former shareholder who sold my shares shortly after the fake accounts scandal came to light, costing me several hundred dollars in losses – why Wells Fargo continues to keep Sloan around. Not only is he a symbol of the bank’s scandal-ridden past and present, but there’s no reason to believe that he hasn’t played a major role in creating that shameful record, given his high positions over the past three decades.
If for no other reason than to try to change the subject and put a fresh and new face in front of Congress, bank regulators and investors, you would think Wells Fargo would put an end to the Sloan regime and bring in someone from the outside. The longer it doesn’t, one of those groups is going to do it for them. That would truly create an unprecedented situation: the head of a large American bank being run out on a rail.
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Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.