Wells Fargo: Why We Need More Banking Regulation

Wells Fargo: A Whole New Definition of "Bank Robber"

Wells Fargo: A Whole New Definition of “Bank Robber”

In the storm and fury of the presidential election and the chaos that has surrounded the president-elect, we’ve almost lost sight of the biggest banking scandal since the mortgage loan scandal that triggered the last recession.

The fourth largest bank in the U.S., Wells Fargo & Co., was caught stealing customers’ money.1 With total assets of $1.75 trillion, it’s hard to get your mind around just how big Wells Fargo is. But if you converted those assets to $20 bills, and laid them end-to-end, it would paper a path to the moon and back 17 times, with enough money left over to support yourself in the manner to which you would like to become accustomed.

But $1.75 trillion wasn’t enough, so Wells Fargo created an absurd compensation system that rewarded staff for opening additional accounts for existing customers, and then created a bonus system for supervisors that rewarded the supervisors whose employees opened the most accounts.

Adam Smith could have predicted what would happen next: staff opened hundreds of thousands of unauthorized customer accounts. Everyone in the chain of supervision had big financial incentives to cheat, because there was no accountability. Some 2 million unauthorized accounts were opened, all of them earning fees for Wells Fargo and big bonuses for Wells Fargo staff. All of those 2 million unauthorized accounts stealing money from Wells Fargo customers.

It gets worse. Staff who objected to stealing customers’ money were fired. And when they were fired, in violation of whistleblower laws, they had black marks placed on their work histories which made it very difficult to get new jobs in banking. Regulated employees – brokers and financial advisers – had negative comments placed on their federal discharge reports, making them utterly unemployable.

Wells Fargo was eventually caught, and ended up paying a $185 million fine under a settlement in September with the Consumer Financial Protection Bureau. Some 5,300 employees were fired. Under pressure, two top Wells Fargo officers resigned, but most of the top brass who designed this idiot scheme have escaped accountability. There are pending class actions and grand jury proceedings.

With this recent example in mind, how can anyone seriously argue that banks are “over-regulated”? The fourth largest bank steals hundreds of millions of dollars from millions of customers and someone thinks the poor baby is being regulated too much?


Wells Fargo is a fine example of under-regulation, not the opposite. If the banking industry could manage, say, 20 years, even 10 years, without a major scandal, then come to WC with a claim of over-regulation.


  1. Wells Fargo is the largest bank in the U.S. by capitalization, but 4th largest by assets. Assets, in WC’s view, are a better judge of value than market whims. Especially in the case of banks. 

One thought on “Wells Fargo: Why We Need More Banking Regulation

  1. I couldn’t agree with you more. As far as I am concerned, all the dislike of regulation is a byproduct of greed. Greed can’t thrive with regulation.

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