As bank customers across the country continued to fume Tuesday over news of Wells Fargo’s fraudulent accounts scandal, a House committee attacked the very law that guards against that kind of scheme.
Talk about embarrassingly bad timing.
On second thought, maybe it was good timing, in that it highlights how wrongheaded Republicans in Congress are to keep trying to dismantle the Dodd-Frank Act banking reforms passed in the wake of the financial crisis. Dodd-Frank created the Consumer Financial Protection Bureau, the federal agency that fined Wells Fargo a record $100 million for opening millions of fraudulent accounts, often without customers’ knowledge.
Singing from the aggrieved bank executive’s favorite songbook, Republicans say Dodd-Frank brings too much confusing red tape, stifles private-sector growth, and simply isn’t necessary.
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Quite the contrary, if the Wells Fargo scandal is any indication. It went on for years, apparently. Some 5,300 employees have been fired. “When politicians talk about Wall Street as a ‘criminal enterprise,’” New York Times business columnist Andrew Ross Sorkin noted, “this is exactly what they are talking about.”
CEO John Stumpf, in an interview with The Wall Street Journal, defended the bank’s culture and blamed the now-dismissed employees. They simply wouldn’t honor the bank’s customer-first culture, he said.
“There was no incentive to do bad things,” he told the Journal.
Few people seem willing to take him at his word, nor should they, given this egregious abuse of the public’s trust.
E. Scott Rekard, the retired Los Angeles Times business writer who broke the story, told Columbia Journalism Review his reporting started with one Wells Fargo employee.
The worker said he’d talked people into signing up for accounts and services they didn’t need.
Why? He described “incredible pressures to make sales numbers,” Rekard said.
Sounds more like a failure of corporate culture than a problem of rogue employees.
Given the potential for similar abuses in other banks, the public deserves answers. The Senate Banking Committee has called for a hearing on Tuesday, and Stumpf has rightfully been asked to testify.
All told, Wells Fargo paid a total of $185 million in fines, but didn’t admit any wrongdoing. The bank did the right thing Tuesday in announcing that it will halt sales goals for retail bankers. (It has also reimbursed $2.6 million to customers).
The fines sting Wells Fargo’s corporate image far more painfully than they do the bank’s bottom line, given the $22.8 billion in profits it earned last year.
Still, Wells Fargo’s public relations debacle should serve as a warning to other banks. We hope it helps Congress understand that we need to fine-tune Dodd-Frank, not gut it, and that the Consumer Financial Protection Bureau must be strengthened, not killed.