September 8, 2017 at 4:58 p.m.
Banking industry needs regulation
The Rest is History
About a year ago, Wells Fargo was facing a firestorm after it was revealed that the company had created more than one million fake bank accounts using customers’ personal information.
Last week, that firestorm got worse as Wells Fargo admitted the initial estimate of accounts was far too low. Now, a review has found that up to 3.5 million bank accounts were created without customers’ knowledge or authorization. The review also found that 190,000 customers were charged fees for accounts in their name they had no knowledge existed, and 528,000 customers’ accounts were enrolled in automatic bill payments without their authorization.
In short, the company was engaged in large scale fraud and theft of its customers money.
The punishment? Last year, it was a sad slap on the wrist from regulators with a $185 million fine. Not much when the company’s 2016 revenue was $88.3 billion. Two-tenths of 1 percent of the company’s revenues.
The reason bad behavior by big banks is such an important issue is that they don’t seem to learn. It still hasn’t been 10 years since the world’s economy nearly collapsed because Wall Street bankers chose to use the home loan market as a roulette wheel. And the same executives who oversaw that debacle still seem to be thriving in the post-recession financial world, despite crushing job loss and an economic death spiral that impacted everyday Americans all across the country.
The whole scandal with Wells Fargo was a result of horrible management practices. The company’s big wigs had set unachievable quotas for sales personnel, and the fraudulent accounts were the sales associates’ way of keeping up. More than 5,300 sales personnel were fired for the scandal.
You can make a bad apple argument in some cases.
This isn’t one.
If 5,300 sales associates participated in incredibly unethical and possibly illegal behavior, it’s likely a result of management.
John Stumpf, the CEO during the first revelations of the scandal, did step down. But how many board members and others at the top contributed to the problem and still remain employed?
The Federal Reserve has the power to remove board members, and that power should be exercised to replace the 12 remaining members who were around during the time of the scandal.
The country’s biggest banks hold an enormous amount of power in the global economy. Their decisions have the possibility to impact all of us.
So, instead of letting them return to their pre-recession ways, it’s time to start advocating for meaningful reform that protects consumers and places safeguards on banking behavior.
This scandal won’t be the last we see from the big banks, but it does mark just one more warning sign that without a change, the bad banking culture that led to recession could rear its ugly head once more.
Last week, that firestorm got worse as Wells Fargo admitted the initial estimate of accounts was far too low. Now, a review has found that up to 3.5 million bank accounts were created without customers’ knowledge or authorization. The review also found that 190,000 customers were charged fees for accounts in their name they had no knowledge existed, and 528,000 customers’ accounts were enrolled in automatic bill payments without their authorization.
In short, the company was engaged in large scale fraud and theft of its customers money.
The punishment? Last year, it was a sad slap on the wrist from regulators with a $185 million fine. Not much when the company’s 2016 revenue was $88.3 billion. Two-tenths of 1 percent of the company’s revenues.
The reason bad behavior by big banks is such an important issue is that they don’t seem to learn. It still hasn’t been 10 years since the world’s economy nearly collapsed because Wall Street bankers chose to use the home loan market as a roulette wheel. And the same executives who oversaw that debacle still seem to be thriving in the post-recession financial world, despite crushing job loss and an economic death spiral that impacted everyday Americans all across the country.
The whole scandal with Wells Fargo was a result of horrible management practices. The company’s big wigs had set unachievable quotas for sales personnel, and the fraudulent accounts were the sales associates’ way of keeping up. More than 5,300 sales personnel were fired for the scandal.
You can make a bad apple argument in some cases.
This isn’t one.
If 5,300 sales associates participated in incredibly unethical and possibly illegal behavior, it’s likely a result of management.
John Stumpf, the CEO during the first revelations of the scandal, did step down. But how many board members and others at the top contributed to the problem and still remain employed?
The Federal Reserve has the power to remove board members, and that power should be exercised to replace the 12 remaining members who were around during the time of the scandal.
The country’s biggest banks hold an enormous amount of power in the global economy. Their decisions have the possibility to impact all of us.
So, instead of letting them return to their pre-recession ways, it’s time to start advocating for meaningful reform that protects consumers and places safeguards on banking behavior.
This scandal won’t be the last we see from the big banks, but it does mark just one more warning sign that without a change, the bad banking culture that led to recession could rear its ugly head once more.
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