With more than 5,000 employees let go and $185 million levied against them in fines, Wells Fargo is facing a dilemma. After it was revealed that the San Francisco-based bank fraudulently established more than 2 million customer accounts – and, in many cases, charged customers maintenance fees for those accounts – the public has lost faith in the institution.
The question remains: What, if anything, can Wells Fargo do to make it up to consumers and regain their trust?
Can A Bank With “Gutless” Leadership Be Gutted?
In the wake of the scandal, the bank and its top brass have withstood a great deal of public scrutiny and criticism. On Capitol Hill, Senator Elizabeth Warren called Wells Fargo’s CEO, John Stumpf, a “gutless” leader. She urged him to resign and pay back the money he made from these illegal accounts.
Stumpf, for his part, has signaled that he will do “whatever it takes” to make things right. Thus far, he has promised to compensate any customers who suffered damage as a result of the phony accounts. This may mean refunding fines or fees they were charged and working with credit reporting bureaus to fix consumers’ credit. The bank plans to pay $5 million directly to consumers in recompense for any wrongdoing.
Moreover, Stumpf himself has forfeited his salary for the year and will pay back $41 million of his own holdings to the bank.
Caught Red-Handed
Yet such efforts strike most observers as minimal, and are unlikely to win back consumer faith. It is little more than the bank’s admitting it was caught red-handed, and giving back, sheepishly, what it held in its (proverbial) red hands. Moreover, many consumers are already finding that they need to hire attorneys just to pursue the funds to which they’re entitled.
Legislators – and consumers – want to see more substantial measures taken. Indeed, many are calling for the bank’s dissolution. Many have challenged the notion that a bank can be “too big to fail,” and have identified a core problem: banks like Wells Fargo that are considered “too big to fail” have an unfortunate tendency to leverage the backing they get from the government to exploit consumers for profit.
However, the bank’s defenders note that if Wells Fargo were shuttered the entire economy would be destabilized. In terms of assets held, it is the nation’s third-largest bank, and it employees thousands of people.
In any event, dissolution is unlikely. John Stumpf, after all, paid a fine – he didn’t quit*. The bank, too, will pay a fine, and keep serving – or, perhaps, disserving – its customers.
*NB – Since the writing of this post, Stumpf did, indeed, resign.