Wells Fargo on Thursday said it had potentially opened an additional 1.4 million sham accounts customers didn’t want, 67 percent more than it initially estimated, escalating an already contentious battle over the future of the mega bank.
Renae Merle of The Washington Post had the news:
The bank revised the total, now up to 3.5 million, after discovering that employees may have been opening unauthorized credit card and bank accounts for customers for far longer than originally acknowledged. The eye-popping figure will likely hamper the bank’s efforts to move beyond the nearly year-long scandal as lawmakers and regulators delve deeper into its inner workings and demand changes.
The revision also comes amid a simmering debate over whether Wall Street has learned from its mistakes during the 2008 financial crisis and should have it regulatory reins loosened. Republicans in Congress who support such relief have acknowledged that Wells Fargo’s repeated stumbles could make that effort more difficult.
“We apologize to everyone who was harmed by unacceptable sales practices,” Wells Fargo chief executive Timothy J. Sloan said. “We are working hard to ensure this never happens again and to build a better bank for the future.”
But even the new estimates could be underestimating the extent of the problem. For its latest review, Wells Fargo examined internal data dating back to 2009 rather than 2011 as it had done initially. Yet, the bank has previously acknowledged that instances of unauthorized accounts have been found as far back as 2002.
Peter Conti-Brown of Fortune reported that the bank may have trouble surviving this scandal:
These dark and accumulating clouds hanging over Wells Fargo lead us to ask the existential question: Can the bank survive? In the aftermath of the scandal, former CEO John Stumpf gave close to a textbook testimony on Capitol Hill—if the textbook needed an example of the worst possible way to handle a scandal in front of Congress. Stumpf hemmed and hawed, quarreling with members of Congress and giving misleading answers about the scope of this scandal. And it wasn’t just Stumpf: The bank’s entire public relations approach appeared to be to minimize the scandal and disclaim any problem at all.
In the most obviously misleading talking point, the bank kept insisting that the 5,300 fired employees represented something of a rounding error given that the bank employs almost 300,000 people. That would be a fair point—except that the real denominator we need is the number of employees engaged in cross-selling to Wells customers in the U.S.
Given the profound mishandling of the scandal at the top, it was natural for the board to prompt a change in leadership and pursue an internal investigation. But the new CEO is Tim Sloan, the bank’s former president and chief operating officer at Wells since the late 1980s. That’s not exactly a fresh direction. Worse still is the board’s own exculpatory report, written by the law firm Shearman and Sterling. The report recites at length why the board did everything it could have done and congratulated it for the independent decision to fire Stumpf and another senior executive responsible for the mess.
Elizabeth Dexheimer of Bloomberg News reported that the disclosure will draw more scrutiny from Congress:
The bipartisan attacks indicate Congress will have Wells Fargo back in its sights when lawmakers return from their August recess next week. Still, it remains to be seen what the consequences will be for the bank, as its past missteps have led to congressional criticism followed by little action. And lawmakers have a full plate next month trying to cut deals to avoid a government shutdown and raising the debt ceiling.
Here is an overview of some of the Thursday condemnations of Wells Fargo:
House Financial Services Committee Chairman Jeb Hensarling, a Texas Republican, said his panel is continuing to investigate Wells Fargo over the phony accounts scandal and the bank’s July disclosure that some of its auto-loan customers may have been charged for insurance they didn’t want or need.
