image: The house of disappearing deposits, a Wells Fargo bank branch in North Carolina
Wells Fargo, a bank with a history of playing fast and loose with the rules, recently got caught opening more than two million unauthorized bank accounts. The practice was so widespread that employees called the practice “sandbagging” and considered it a routine way to make performance goals. At least one former employee described the difficulty of achieving the bank’s nearly impossible performance standards as a “living nightmare.”
In their latest ripoff, Wells Fargo employees opened millions of bank and credit card accounts in the names of customers without their knowledge or permission. Sometimes employees went as far as creating fake pins and email addresses for the unauthorized transactions. Had this type of organized criminal activity been happening out of a Section Eight housing complex, there would have been a SWAT team and numerous arrests. But since it’s Wells Fargo there have been no arrests and the company agreed to pay a $185 million dollar fine to make the scandal go away. The person ultimately responsible walked away from the company with a nine-figure bonus, nearly as large as the fine the company agreed to pay.
Carrie Tolstedt was the Queen Sandbagger, the executive in charge of the division in which the fraudulent practices took place, yet she will probably not have to fork over any of the $125.4 million dollar exit bonus she received. It’s equally unlikely security escorted her out of the building when she left. Wells Fargo insists the practice was limited to a small number of employees, though they’ve fired 5,000 people over five years due to these acts. That means the mega-bank knew the behavior was going on for at least five years. Previously, CEO John Stumpf had called Tolstedt “a standard-bearer of our culture,” which is ironically the most honest comment to come from Wells Fargo about the relationship of this individual to the bank’s corporate ethos. It should be noted that Wells Fargo has never admitted fault in its settlements.
Not Their First Scandal
Wells Fargo is the focus of a long string of litigation involving claims of discrimination, illegal fees and predatory lending practices. Some of that litigation ended when the company agreed to pay $4 million in fines to settle charges that Wells Fargo charged illegal fees on student loans between 2010 and 2013. Other bad behavior includes false claims on FHA applications, and periodically illegally seizing loan collateral and other predatory lending practices.
Why This Should Scare You
This wasn’t a team of overseas hackers trying to buy movie tickets in Mexico on your credit card. This is the world’s largest bank by market capitalization and the third largest bank in the nation, stealing millions of customers’ identities and using them to create unauthorized financial products in those customers’ names without their knowledge. In some cases those unauthorized accounts generated fees and showed up on customer credit reports. It’s also a bank deliberately and over a period of years creating a revenue stream by fraudulently taking money from customers.
But the other wake-up call is the reason why this fraud took place. As consumers we’ve almost become numb to the attrition of our wealth through skyrocketing “fees” and “penalties.” Wells Fargo is hardly the only entity engaging in what Douglas Rushkoff at CNN either bizarrely or correctly calls “extreme capitalism” and I don’t have time to list every major airline and hotel chain as proof. The fact that one or two industries have been allowed to get away with the fee game is emboldening others to try the same tactic. But it’s this corporate incentivization of nickel-and-diming us, their customers, that led to this entirely predictable outcome. After all, these thousands of fraud-committing ex-Wells Fargo employees were simply trying to meet goals deliberately set by their company.
The bottom line is that the fee insanity is a way to extract more money out of customers you already have instead of creating value and attracting new business. When an institution like a major bank, that the public trusts with power to create wealth in the form of new debt, starts practicing identity theft to meet internal goals, then they deserve to be raided by a SWAT team and see the execs frog marched into the back of a paddywagon. Wells Fargo fired over 5,000 people for a practice they knew what was going on for at least half a decade. Institutions like Wells Fargo shouldn’t be able to buy their way out of their crimes that easily.