Wells Fargo executives are getting the treatment Wall Street deserved after 2008

After the 2008 financial crisis, American lawmakers set a terrible precedent. The big banks faced billions in fines, and new regulations were imposed on them. But for the individuals in charge of the banks when they almost destroyed the global economy, there were virtually no consequences: Few fines, and even fewer prosecutions. The executives basically skated, and many of them remain in their positions today.

But it looks like things may actually go differently for the people who were in charge of Wells Fargo.

You might recall how, back in 2016, a scandal suddenly exploded around the bank. Wells Fargo employees had defrauded customers on a massive and industrial scale by opening accounts they didn't ask for, signing them up for products they didn't want, and charging them fees they shouldn't have had to pay. Public outrage ensued, the bank was raked over the coals by Congress, and the CEO who presided over the debacle, John Stumpf, stepped down. (Amazingly, Stumpf's successor, Tim Sloan, also dropped out as CEO last year, after failing to clean up Wells Fargo's act to everyone's satisfaction.) The bank's board also clawed back $69 million worth of stock payouts it had given Stumpf on his way out the door.

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As welcome as those repercussions were, they were basically compensation losses. They were not society at large demanding accountability. That changed last week, when the Office of the Comptroller of the Currency (OCC) brought the hammer down: In an announced settlement with the office, Stumpf will pay a $17.5 million fine and agree to a lifetime ban from the banking industry.

It's unclear how large Stumpf's personal fortune is now, but it was around $200 million before the scandal broke in 2016. That $17.5 million could be a decent chunk of what's left, but you could also argue it should be even larger to really act as a deterrence to others. But $17.5 million is also the biggest penalty the OCC has ever leveled against an individual. And it wants to impose an even bigger $25 million penalty on Carrie Tolstedt, who ran the division where most of the abuses occurred. (Tolstedt retired from Wells Fargo in 2016, a few months before the scandal broke.) The lifetime ban is striking too — one should never underestimate how much pride and hubris these sorts of financial titans derive from their position.

Two other lower-level former executives from Wells Fargo have agreed to lesser fines and punishments. Five others, including Tolstedt, have also been charged by the OCC, but are fighting it in court. And everyone could still face criminal charges from the Justice Department.

This is already a remarkable outcome compared to how the 2008 financial crisis was handled, not to mention other scandals, as multiple outlets noted. "Even though the biggest American banks paid billions of dollars to settle civil cases stemming from their mortgage activities in the lead-up to the 2008 financial crisis, their chief executives have not given up a penny to federal bank regulators," The New York Times wrote. Kenneth Lewis, CEO of Bank of America during the crisis, paid no fines to federal regulators, to take one example. (He did have to fork over some money to New York State prosecutors.) JPMorgan Chase CEO Jamie Dimon led the bank through the $6 billion London Whale scandal, and the bank has paid $44 million in fines since 2008, but none of that came out of Dimon's own pocket.

The differences in treatment are all the more infuriating when you consider how the same system-wide mad scramble for profits drove both scandals.

The OCC released a massive 100-page legal brief detailing how Wells Fargo's demands and sales goals, imposed by the higher-ups, turned the bank into a thunderdome for "hundreds of thousands" of mid- and low-level employees. They basically had to either rip off customers, or be fired. An employee wrote directly to Stumpf's office, admitting that "I had less stress in the 1991 Gulf War than working for Wells Fargo." Workers at one Wells Fargo branch were told they would be "transferred to a store where someone had been shot and killed" if they didn't hit their sales targets. The OCC's brief includes a cascade of emails and memos and other evidence showing Stumpf and the rest of Wells Fargo's executive hierarchy either approved of what was going on, or were grossly negligent. The agency sensibly concluded that Stumpf should be held personally accountable for overseeing the ecosystem that created this whole mess; the buck, after all, stops with him.

When it came to the housing bubble, junk financial engineering allowed bad mortgages to be passed off as super-safe investments, sliced and diced into numerous instruments, then sold off throughout the system. This ability to essentially launder bad investments opened up a world of profit possibilities, but it also meant tons of bad mortgages had to be created to fuel the money grab. And that led to a massive effort throughout the banking industry to sucker customers into taking on shoddy loans and poorly-designed mortgages. Necessary paperwork was flubbed or falsified, and millions of families were shoveled though inappropriate and straight-up illegal foreclosures to protect the banks' bottom line once the housing bubble popped.

Again, the people in charge of the banks were either completely complicit, or criminally incompetent. But in the latter case, federal lawmakers and regulators essentially lost their nerve, refusing to go after the executives out of fear of creating a panic.

It's worth wondering how American politics might have evolved differently over the last decade if all the C-suite occupants on Wall Street had gotten the same treatment as Stumpf. Would the country have suffered from the same simmering populist resentment that ultimately gave us President Trump? Maybe not.

Finally, the other striking aspect of this is that it's Trump's regulators who decided to throw the book at Stumpf and his lieutenants. Trump's man in charge of the OCC, John Otting, is a textbook case of putting the fox in charge of the henhouse: Before taking over the OCC, he was in charge at OneWest Bank, which was neck deep in the mortgage abuses of the crisis. And in other instances, Otting has happily pushed Trump's kid gloves approach to Wall Street. Yet it was the Obama administration, supposedly a sober and technocratic operation by comparison, that basically let all the titans of Wall Street off the hook after 2008.

It's no secret that Trump's White House is basically a grift machine. But perhaps there's a paradoxical lesson in that: Having dismissed the demands of technocratic sobriety, Trump's people are both more willing to hand the big bank executives their heart's desire, and more willing to throw them under the bus if popular anger demands it. Something to think about there.