Wells Fargo Fallout Leads to Big Bank Witch Hunt
In the fallout of the Wells Fargo scandal from September of 2016 — in which it was revealed that fraudulent credit and banking accounts were being created for Wells Fargo customers without their knowledge — regulators, customers, and Wells Fargo execs have been looking for someone to blame. And it seems that they’ve found their scapegoats. The bank is putting all the blame on two former executives: Former CEO John G. Stumpf and former head of community banking Carrie L. Tolstedt. Wells Fargo is clawing back $75 million from the two former executives. But is that enough to calm the waters?
What Other Fallout Can We Expect From the Wells Fargo Debacle?
While the signs of fraud may have been evident to anyone at Wells Fargo who bothered to look, whenever any reports or claims were brought up about improper banking practices, everything was swept under the rug. CEO John Stumpf refused to believe any wrongdoings were happening, and blamed cases of employees gaming the system on a few bad apples. Yet, investigations revealed that thousands of employees were involved. As a result, Wells Fargo was fined $185 million for opening the fraudulent accounts, tarnished their reputation, and saw an exodus of customers switch banks.
Someone had to be held accountable.
And that’s exactly what’s happened. The big witch hunt resulting from the fallout led to the blame being laid at the feet of Former CEO John G. Stumpf and former head of community banking Carrie L. Tolstedt. Stumpf actively ignored the situation, while Tolstedt has all fingers pointed at her.
Tolstedt ran her department as a sales organization rather than a service-oriented institute. She was reported to have kept the actual number of people fired for setting up fake accounts hidden, and minimized problems in reports.
As a result, the board of Wells Fargo has reclaimed $75 million in salary, bonuses, and stock from both Tolstedt and Stumpf. But is that enough?
Here’s the thing, the blame was heaped onto two people by Wells Fargo’s board of directors. Those two people are no longer with the company. So essentially, the board is deflecting all fallout from themselves and walking away without a scratch. So while they may be happy to leave the blame at the feet of Tolstedt and Stumpf, But outside of the board room, many people will have a hard time believing Wells Fargo is owning the misconduct. And considering that the sole responsibility of a board member making more than $300k each year is to identify risk for the bank and guide practices.
A report was released on Monday which was produced by independent board members at the bank, along with outside legal help. That report blasted Wells Fargo execs for not noticing the fraud and failing to take action against it. With the 113 page report being full of accusations, expect more heads to roll as Wells Fargo continues the Witch Hunt until the company feels customers believe they have made amends.
Watch this interview from CNN Money about how Wells Fargo creating fake accounts:
In the meantime, expect Wells Fargo & Company (WFC) to continue DOWN.
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