Wednesday, September 28, 2016
Wells Fargo bank already lost its reputation over consumer fraud in its community banking division. Now it is looking ugly with the news that it punished whistleblowers who would not establish fake accounts. Clawbacks of unvested equity won't repair the bank's reputation, much less the CEO's. It is clear now that the bank was running an old-fashioned boiler room, flogging sales at the expense of consumers. Many years will pass before the bank lives this incident down, and it might never. The question remains of how the division got so far out of control. Clearly its managers were in on the scheme and executives above the division weren't asking questions. Pro forma attempts to stop manufacturing fraudulent accounts weren't followed up by discipline that made the bank's point clear and firm. High goals weren't relaxed to remove excessive pressure from employees. It was a text book management disaster for which Wells Fargo will be paying for years.