The San Francisco-based company’s recent $185 million fine for opening millions of customer accounts without their knowledge has fallen under plenty of scrutiny. WFC almost certainly generated far more income from the accounts than the fine reflects, but that is neither here nor there.
Best case, management was asleep at the wheel for years, blissfully ignorant that its customers were being ripped off. Worst case, they were complicit — or perhaps involved with — large-scale fraud.
The real question now becomes: if the minds in charge at Wells Fargo were unaware of the massive retail banking account fraud involving some 5,300 employees over a period of five years, what else are they unaware of? Or perhaps worse, what else could they be obfuscating.
The company’s annual report, for example, mentions $300 billion in “commercial and industrial loans.” Shareholders aren’t given any detail about the credit quality of these loans, who they were made to, the expected returns, or default levels. A similar lack of transparency can be found at any major U.S. bank, of course. But when a major bank’s reputation takes this big of a hit, everything begins to fall under intense scrutiny.
For its part, the company has fired the employees involved in the scandal, and is also doing away with sales goals for retail bankers next year. That’s a decent start, but a far cry from what WFC really needs to do to restore its image.
Wells Fargo shares fell $1.94 (-4.00%) to $46.60 in Tuesday afternoon trading. Year-to-date, the largest bank in the U.S. has now fallen 14.28%.