EDITOR’S NOTE: This article inaugurates a new column, “Insurgencies,” which will appear on TheNation.com and occasionally in print. It will probe the clash between people and plutocrats, failed shibboleths and new ideas, and explore the emerging strategies linking people in motion with progressive champions in office.
Update: On September 28, California State Treasurer John Chiang, who is running for governor, blasted Wells Fargo for “venal abuse of its customers” and announced that the state was “suspending business relations” with Wells Fargo for a year. This affects a significant profit center for Wells, the second-largest underwriter in California municipal debt in the first half of 2016. Chiang called on Wells CEO John Stumpf to resign and urged other states and municipalities to review their relations with the bank. Connecticut and the City of New York have already announced reviews. Bloomberg reports that federal prosecutors in New York and San Francisco have opened criminal inquiries. Wells Fargo faces a blizzard of lawsuits by fired workers, defrauded customers, and investors. Wells stock has lost 11 percent, or about $27 billion, in market value since the scandal broke, with more losses certain to follow.
“The business model of Wall Street is fraud,” Bernie Sanders proclaimed repeatedly on the stump. Wall Street’s big banks seem intent on proving his case. Most recently, Wells Fargo—whose CEO, John Stumpf, was celebrated as “banker of the year” by American Banker in 2013—has been fined $185 million for abusing its own customers. From 2011 to 2015, the company opened nearly 2 million bank accounts and more than 500,000 credit cards for customers who didn’t ask for them, engaging in fraud, identify theft, and forgery along the way. Its customers, as former Wells Fargo sales manager Beth Jacobson put it, were “all riding the stagecoach to hell.”
Wells Fargo executives touted the tactic of “cross-selling”: getting existing customers to buy the bank’s other products. To achieve this, executives set impossible quotas for sales personnel, called “team members.” Tellers and salespeople, often stuck in $35,000-a-year jobs, were told either to meet the quotas or lose their jobs. Bonuses were awarded to those who hit the sales targets—but the only way to meet them consistently was to cheat. When customers began to complain—after being charged fees for accounts they didn’t know they had, or seeing their credit ratings lowered for credit-card applications they didn’t know they’d made—the bank set up the proverbial “cover-your-ass” briefings with its salespeople: warning them not to cheat, but keeping the quotas in place. Under increasing scrutiny from regulators, Wells Fargo fired some 5,300 low-level employees—as much as 2 percent of its workforce—over a period of five years, claiming that the frauds had been committed by rogue team members.
That won’t wash. This was a classic case of what legendary bank investigator William Black calls “control fraud”: a scam set up and sustained by top executives, who earned a fortune from it. All of the signs are there, starting with the 2 million fake accounts, which simply couldn’t be opened by a few bad apples. Whistle-blowers were ignored and often fired. Senior executives raked in bonuses as the company’s stock rose, benefiting from the charade. Thousands of low-level employees were fired for the frauds, but we don’t know how many more were fired simply for not meeting the quotas.