The recent Wells Fargo scam – with 5,300 Wells Fargo employees fired from the well-known bank – has led to a firestorm in Washington. ABC News reports that Sen. Elizabeth Warren is demanding that Wells Fargo CEO John Stumpf resign immediately. And with the 2016 presidential debates only a few days away, it’s likely that this will be a major topic of discussion for both Hillary Clinton and Donald Trump.
ABC News also reported the news earlier this month that thousands of Wells Fargo employees had engaged in a scam which affected millions of customers across the country. While not as massive as other banking scandals of the last few decades, it nevertheless reinforces the idea that banking and financial regulation might be a good thing. Wells Fargo stock has dropped significantly after being downgraded by J.P. Morgan.
At this point, Hillary Clinton is leading Trump in discussing the issue. This might come as a surprise – since the Clinton campaign has received very large donations from Wells Fargo during her presidential bid. Could this indicate that – contrary to what some suggest – Clinton isn’t going to feel obligated to provide cover for companies that have supported her?
The Wells Fargo Scam Explained
Wells Fargo has always attempted to represent itself as a bank for the common person and totally unlike those other Wall Street bankers. But Wells Fargo’s employees shattered that delusion with the revelation of a massive, nationwide scam. The 5,300 employees who were fired represent approximately 1 percent of Wells Fargo’s entire workforce.
The core of the Wells Fargo scam revolved around these employees creating false checking accounts and credit cards for current Wells Fargo customers without their knowledge. This fraudulent behavior began in 2011, with the employees creating roughly 2 million accounts using fake email addresses and forged signatures.
While the fired employees are being blamed for the Wells Fargo scam, the upper executives at Wells Fargo created an environment that made this behavior almost inevitable. Supervisors at the banks placed an enormous pressure upon the employees to meet quotas for cross-selling other services to customers. They often forced employees who failed to meet quotas to stay late or work on weekends.
CEO for WELLS FARGO gets pummeled on Capitol Hill over multiyear scam... https://t.co/0x5zgpFSpU— DRUDGE REPORT (@DRUDGE_REPORT) September 20, 2016
The customers not only lost $1.5 million because of fees charged for these Wells Fargo scam accounts, but many also saw their credit ratings badly damaged because of their failure to keep up with accounts they didn’t even know existed.
Wells Fargo and the Presidential Debates
The Wells Fargo scam – and the scandal it has generated – is forcing politicians to once again look at the effectiveness of current banking and financial regulation in the United States. Since the most recent recession was caused by regulatory failures, it’s understandable that politicians would be nervous about what’s going on at Wells Fargo.
During hearings on the issue, Sen. Elizabeth Warren has expressed outrage with the executives at Wells Fargo, none of whom have actually been fired or faced any significant penalties for what they have done. The $185 million in penalties imposed on the bank itself represents a tiny fraction of the profits that resulted from Wells Fargo’s scam.
For Donald Trump, this situation represents a potential minefield in the upcoming debates. Trump has always been strongly opposed to federal regulation of the financial industry – or any industry for that matter. This opens a vulnerability that Hillary Clinton could take advantage of if she plays her cards right in the presidential debate.
As reported by the AP, Clinton is already positioning herself for this possibility by noting Trump’s weakness in this area. On Monday, Clinton wrote an open letter to all Wells Fargo’s customers, making it clear that she was “deeply disturbed” by the situation at Wells Fargo and determined to maintain the Consumer Financial Protection Bureau.
“Donald Trump, the Republican Party, and Wall Street lobbyists are desperate to dismantle this effective agency, which is dedicated solely to protecting consumers from unfair and deceptive practices. I won’t let them put the CFPB under their thumb. I’ll protect the CFPB and make sure it can continue its essential work on behalf of the American people.”
The gist of the letter is that Hillary Clinton is dead set on ensuring that federal regulators – and federal regulations – are up to the task of managing the banking industry. Such a position allows her to play the champion of the worker, while making Donald Trump seem more interested in protecting billionaires.
[Featured Image by (Left) Alex Wong/Getty Images (Right) Justin Sullivan/Getty Images]