Wells Fargo & Company, with $1.7 trillion in assets, as of September 30, is currently the second largest bank in the U.S., and one of the world’s most valuable banks by market capitalization ($223 billion).
Its history is long. Founded in 1852 in San Francisco, the institution known for its iconic stagecoach logo, provides banking, insurance, investments, mortgage, and consumer and commercial financial services through more than 8,600 locations, 13,000 ATMs, online (wellsfargo.com), and mobile devices. Wells boasts some 70 million customers and one in three U.S. households who are served by their estimated 268,000 “team members” in 36 countries and territories across more than 90 businesses. In 2015, Wells Fargo was named “Most Admired” among the world’s largest banks by Fortune magazine, and “Best U.S. Bank” by The Banker magazine.
But right now, the spotlight is on Wells Fargo for a scandal that threatens to topple the giant. Wells has been in the headlines for excessive cross-selling to customers, and the roughly two million sham deposit and credit card accounts employees (driven by incentives) arranged for customers who didn’t need, understand or ask for them. The Consumer Financial Protection Bureau hit the bank with a record $185 million penalty for its sales practices. Outcries from Elizabeth Warren, Pat Toomey, and many others put pressure on the bank to make the top guns accountable, and not just low level employees. Published reports say that CEO John Stumpf will forfeit much of this year’s salary, including his bonus and $41 million in stock awards as the bank investigates the fake accounts ordeal. Heads are already rolling. Carrie Tolstedt, who was in charge of the division that created the fake accounts, recently left the company. She was reportedly planning to retire at year-end, but is gone and will not receive a bonus or severance.
So what does all this portend for Wells? Only time will tell. Wells has managed to come through major hurdles, like game-changing mergers in 1998 with Norwest, and the mother of all mergers in 2008 with Wachovia (which had its own set of issues). Wells was among the banks that took TARP money. While it repaid the $25 billion government bailout it received during the financial crisis, it was among the last of the largest banks to do so. The Corporate Research Project, a non-profit center that assists community, environmental and labor organizations in researching and analyzing companies and industries has a “corporate rap sheet” on Wells Fargo that’s none too pretty. “Wells Fargo like its larger counterparts has been embroiled in a series of scandals involving reckless lending practices and customer deception,” says the report by Philip Mattera.
The shame list is long, Mattera points out that in 1992, Wells agreed to pay $43 million to settle a lawsuit alleging that it conspired to fix the interest rates on millions of credit card accounts. He reports that Wells also ran into problems with regulators. In 2002 it agreed to pay a penalty of $150,000 to settle SEC charges of improperly switching customers among mutual funds. In 2005 the NASD (now FINRA) fined Wells Fargo $3 million for improper sales of mutual funds. Two years later the NASD fined Wells Fargo Securities $250,000 for the failure of one of its analysts to disclose that he had accepted a job at the company he was writing about.
The current improprieties though, are a different animal. The outrage runs deep, and wide, and includes, regular Joes and Janes, politicians, regulators, pretty much everybody. Will folks remember Wells Fargo’s indelible footprint on society? In 1967, Wells and three other banks introduced MasterCard. In 1995, it was the first U.S. bank to offer secure accounts on the internet. In 2015 alone, it invested $7.6 billion in community development projects in low and moderate-income neighborhoods, provided $1.4 million in disaster recovery and relief, provided $18.8 billion in new loan commitments to U.S. small businesses, and the list goes on and on.
After all, Wells Fargo is the seventh largest public company in the world, the 27th biggest company by revenue in the U.S. and named the most valuable bank brand in the world for years 2013-2015 by Brand Finance. It is noted for having the largest workplace employee giving campaign in the U.S. for the seventh consecutive year, based on 2015 donations (2016) United Way Worldwide, and the #3 Most Generous Cash Donor (U.S.) (2016) by The Chronicle of Philanthropy. The Points of Light Civic 50 named it the Most “Community–Minded” Companies in the U.S. (2016).
But all that may not matter much. Memories can be short. The power of the present cannot be underestimated. It’s about today, today, today -- and that can’t be a good thing for Wells Fargo.