bank fiascos

Not a lot of news in the last few days about the Wells Fargo new account fiasco, but there are a few pieces of information.

12/12 – Reuters – Prudential stops distribution of policies sold through Wells Fargo – With the increased attention on the low-cost life insurance product from Prudential, called MyTerm, which was sold by Wells Fargo, the insurance company suspended sales of the product through the bank.

Article says that separately Wells Fargo suspended sales of renters insurance that goes through a different insurance company.

The California Insurance Commission has opened an investigation of the product sales.

Article says the California regulators says the New Jersey insurance regulator has also opened an investigation. Reporter cannot get confirmation from the New Jersey regulator.

12/16 – Francine McKenna at MarketWatch – Prudential allegations complicate Wells Fargo’s work with new partners – …

Minor updates on Wells Fargo fiascoRead More »

More punishment on the way from the OCC.

Also, accusations emerged over the weekend that staff of Wells Fargo may have been opening insurance products from Prudential without customer permission. Keep in mind those are only accusations by terminated staff. If substantiated, this could be a new layer of the fake account scandal.

I previously mentioned OCC imposing additional consequences from the fake account scandal. Background for the next article:

• 11/18 – Wall Street Journal – Banking Regulator Imposes New Restrictions on Wells Fargo – Apparently the consent degree signed by Wells had some harsh language in it which was immediately waived by the OCC. On Friday the OCC unilateally revoked their waiver. As of now, Wells Fargo must get OCC permission before it hires or fires senior executives, before it make changes to the board of directors, and before making any “golden parachute” severance payments to executives. Approval will be required to changes in the bank’s business plans.

Update on that action:  11/20 – Wall Street Journal – Wells Fargo Grapples With OCC Move – Internal communication from the new CEO indicates the restrictions from OCC are not due to new developments. Sources for the article indicate uncertainty for the reason. Could be a bureaucratic reaction to criticism the OCC was slow to catch on to the issue or that the agency went too lightly on the bank.

Additional punishment…

12/9 – Wall Street Journal – Wells Fargo Likely Face Regulator Downgrade, harming Its Prospects – OCC may be downgrading Wells’ rating under the Community Reinvestment Act. This would be another round of extra-judicial punishment for the fake account fiasco.

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More regulatory punishment for Wells Fargo. Another possible dimension of the fake account fiasco.Read More »

Odd development yesterday in the fake account fiasco at Wells Fargo. The OCC decided to get involved in lots of internal decisions at the bank.

The side fiasco of banks hiring relatives of clients in order to gain future business is off point from the banking fiascos I’ve been focused on. However, one settlement has caught my eye. Two articles describe the mess at J.P. Morgan.

11/18 – Wall Street Journal – Banking Regulator Imposes New Restrictions on Wells Fargo – Apparently the consent degree signed by Wells had some harsh language in it which was immediately waived by the OCC. On Friday the OCC unilaterally revoked their waiver.

As of now, Wells Fargo must get OCC permission before it hires or fires senior executives, before it make changes to the board of directors, and before making any “golden parachute” severance payments to executives. Advanced approval will be required to any changes in the bank’s business plans.

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A few more updates on the ongoing banking fiascos: Wells Fargo and J.P. MorganRead More »

A few more articles on the fake account mess at the bank:

• Wells Fargo is trying to get back on track.
• Other banks are getting inquiries from the OCC about incentives to open accounts.
• SEC is looking at possibility of missing disclosures.

On October 24 the bank ran a full-page color ad in the Wall Street Journal on the back of the A section. Article ran again a few days later. I’ll guess that is a rather expensive page anyway, especially for the whole page, even more so for a very pretty color photo. Nice shot of a Concord stage on the open prairies, by the way. Cool photo!

Several comments from the ad, which I will quote under fair use, which in any event I’m sure Wells Fargo is perfectly fine with me quoting.

Putting your interest first: We have eliminated product sales goals for our Retail Banking team members who serve customers in our bank branches and call centers. This means that their focus will be a meeting your financial needs, not meeting sales goals.

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More news on the Wells Fargo fake account fiascoRead More »

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 »