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Wells Fargo – Too big to close?

September 9, 2016

The storyline on Wells Fargo’s  bilking of customers seems to assume that because the bank was assessed $185 million dollars in fines, all is now made right.

Others, particularly opponents of Wall Street and big banks in general, are calling for Wells Fargo to be broken up into much smaller banks or even shut down completely.

Considering the magnitude and cumulative impact of their practices, you can see why.

Wrong is still wrong, and a fine and even restitution never makes criminal behavior OK.

So what if it is the largest bank (by market cap) in the country?

Wells Fargo for its part has fired a small town’s worth of people (5300) who were exposed by the investigation and seem to feel that no customers were permanently injured, since any money will be refunded.

In fact,  they seem to feel that in most cases there was no lasting harm done, noting that the actual cost to each customer, averaged over some two million transactions, was around twenty-five dollars.

They also say that employees put the money they removed from the customer’s actual account right back as soon as the employees got credit for the sale. The law of averages says that probably wasn’t true in every case.

Even if all that is true, so what? Each and every unauthorized transfer was a theft, chargeable as petit larceny at the very least.

If you happened to be one of the customers “inconvenienced” by having bogus accounts sent to collection, or having your checks declined at a business because of a bounced check due to these shaky business practices, it isn’t a little thing.

If you were someone whose application for a loan was turned down due to an erroneous credit rating resulting from this little debacle, this wasn’t a little thing.

Have you ever tried to get something removed from your credit history? Ticks embedded in your tush are easier to get rid of than a bad credit report entry.

And the bank “regrets” the  incident, or rather the 2 million little incidents?


They regret getting caught.

The aggressive cross-selling that included incessant mailers, bank personnel who simply didn’t hear “no thanks” no matter how many times you said it, and of course the actual fraudulent transfers and bogus accounts should result in them losing a substantial number of their 40 million customers.

Chances are though, it won’t.

For one thing, the actual transfers were done by low to mid-level sales staff trying to keep their jobs. If you’ve ever worked on commission or had to meet targeted sales goals, you understand all too well why this happened.

The highest level management can claim and probably even prove that they had no direct knowledge of the practices.  After all, what they see is a report showing which branches and territories are meeting sales targets and which aren’t.

Is breaking up the bank a plausible idea?

Plausible, but probably not practical.

For one thing, Wells Fargo stock sits in just about every portfolio and 401K out there. It closed Thursday at $49.90 which is about its average price over the past six months, and is currently off .21 at the opening bell on Friday. It’s averaging about $3.25 in dividends, or about 6.70% to shareholders when savings accounts are at a quarter percent or less.

Also, it takes big banks to finance big projects. Want to build a bridge or a highway or a skyscraper or a shopping mall?  Even taxpayer-funded payments have to have a place to reside, or a lending department that can handle the transactions.

Love ’em or hate ’em,  we need big banks.

And of course there is the public perception that all big businesses are just crooks by nature, so why get all bent out of shape over this little blip?

So yes, not only is Wells Fargo too big to fail, it’s also too big to close.

From → op-ed

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