Other stuff

Lots of news to catch up on the Wells Fargo unauthorized account mess from when I was on vacation last week.

A few articles for your consideration:

• What, if anything, should have been disclosed about the investigation while it was underway?
• Disclosures likely in the next round of filings with SEC.
• Hints the fake account fiasco could extend into the small business division.
• Bank’s CEO resigns.
• The Congress and CFPB were late to the party.
• California AG opens investigation of possible identity theft.

9/29 – Michael Rapoport at Wall Street Journal – To Disclose or Not to Disclose? Wells Fargo Woes Shine Light on a Knotty Problem – Wells Fargo did not disclose the existence of the investigation and settlement talks regarding the fake account scandal.

Interesting question for companies and auditors arises: should it have been disclosed?

Article provides a good non-technical explanation of materiality:

Generally speaking, materiality depends on whether a reasonable investor would consider the information important enough to affect the investor’s decision to buy a company’s securities.

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More news on the Wells Fargo fake account fiascoRead More »

Wells Fargo got some more visibility this week for violating federal law on repossessing property from servicemembers on active duty. The CEO got another round of public thrashing, this time from the House of Representatives. The CEO and former head of community-banking forfeited a bunch of future compensation.

9/29 – Bloomberg – Wells Fargo Troubles Mount With Penalty for Soldiers’ Loans – Federal law has been in place since about 1940 that provides protection to servicemembers from collection efforts. The law currently says lenders have to get a court order before they repossess property from anyone who is on active duty. The law was rewritten in 2003 and has been updated since then.

The protections for servicemembers have only been around for, oh, about 75 years. Need I point out that is plenty of time for the compliance staff to catch on to the pertinent laws?

The Pentagon has a list of all active duty service members which lenders may access if they wish.

Two separate enforcement actions within two years against Wells Fargo for violations of that law suggests the bank may just have a systemic compliance issue.

The newest issue involves 413 alleged violations of the law. The bank agreed to pay $4 million for unlawful repossessions during a seven-year run. That’s an average restitution of about $10,000 each. In addition the OCC ordered the bank to pay a $20M fine for a decade’s worth of violations.

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Another fiasco at Wells Fargo and another round of hearingsRead More »

The Wells Fargo CEO got a good whuppin’ yesterday. The Senators each took their turn striving for the lead quote in the evening news.

As usual, the comments on Twitter are entertaining. Deep thoughts range from wanting to throw all the bankers in jail to one person lauding one senator for having personally discovered and exposed the fake account fiasco. Really. One of the senators found this mess.

If your knowledge of Cold War history extends to knowing what a show trial is, ponder the visuals and theatrics of the hearing. As I browsed through my twitter feed looking at the linked photos, show trial is what came to mind.

9/20 – Wall Street Journal – Whipping Wells Fargo / The bank blundered, and the politicians will make it pay – Editorial provides valuable perspective. Opening paragraph brings together multiple ideas, which I’ll quote under fair use:

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Wells Fargo gets public whippingRead More »

Before you tune in to the headlines generated by Senators striving for the best one-liner in hearings which will appear in the evening news, check out these background articles.

So far looks like there is stiff competition in the race for most outraged Senator. At the moment, Senator Warren is in the lead.

9/16 – CNN Money – Wells Fargo drumbeat grows louder. House launches investigation – The House Financial Service Committee will start hearings late in September. The Wells CEO has been called to testify.

The rhetorical trap already set by the minority chair of the Senate Banking Committee is that if senior management did not know this was going on then the bank is too big to manage. The choice, as she infers: senior management is complicit or the bank ought to be broken up.

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Prep reading for today’s hearings on Wells Fargo fiasco in Senate Banking committeeRead More »

Unlike nudging Libor or Forex rates, it is easy to grasp that it is wrong to open bank accounts without a customer’s permission. The ease of understanding the mess is why I think the Wells Fargo fiasco is growing rapidly.

Here’s my free tip of the day on how not to handle a crisis: don’t blame it on the employees who got fired for breaking the rules to meet sales quotes set by management. That is the current strategy of the CEO:

9/13 (in print edition on 9/14) – Emily Glazer (have seen her name a lot on this story) and Christina Rexrode at Wall Street Journal – Wells Fargo CEO Defends Bank Culture, Lays Blame With Bad Employees – In an interview with WSJ reporters on Tuesday, the CEO blamed the whole mess on misbehaving employees.  He insisted there were not any incentives to improperly open accounts.

In the same interview, he indicated the bank will end its sales quotas for customer-facing staff.

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Ripple effects spread out from Wells Fargo fake account fiascoRead More »

When the leading article from the Wall Street Journal mentioned earlier was placed on the front page of the print edition, the headline of

 Wells Fargo Fined for Sales Scam

was in type 0.4 inches tall. Yes, I measured it.

That is the largest font I recall seeing on the front page in a long time. Maybe I don’t pay enough attention to font size, but still, that is the largest headline I recall lately. Isn’t quite the way you want to get your name on the front page of the Journal.

Here’s another article from the WSJ and a discussion from Rumbi Bwerinofa. Also, a study that quantifies the damage caused to senior executives earnings from the stigma gained by having a scandal-tainted company on their resumes.

9/9 – Emily Glazer at Wall Street Journal – Next Test for Wells Fargo: Its Reputation – The fiasco of opening accounts in customers’ names without their permission is a story that could cause reputational damage. Article says analysts are concerned and bank execs are worried how much this will damage earnings.

Difference with this mess from other banking fiascos is that this one is easy to explain and easy to understand.

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Followup on Wells Fargo opening accounts without customer permissionRead More »