Banking: Wells Fargo can’t outrun its scandals
The abrupt retirement of Wells Fargo CEO Tim Sloan last week left the country’s fourth-largest bank scrambling, said Deon Roberts in the Charlotte, N.C., Observer. Wells Fargo’s 2016 fraud scandal—in which employees were pressured into opening millions of fake deposit and credit accounts—continues to haunt the company, and last year the Federal Reserve put a cap on Wells Fargo’s growth after additional reports of consumer abuse. Sloan had just testified on Capitol Hill, and clearly failed to mollify congressional critics. “No sooner had the bank announced Sloan’s departure than consumer advocacy groups and lawmakers pounced,” calling for further sanctions and “a culture shift.” The bank’s reputation is now so damaged that Wells faces calls to “change the bank’s name and rebrand itself” to regain trust. The bank now might as well put up a Help Wanted sign: “New executive to clean up radioactive mess,” said Emily Flitter and Stacy Cowley in The New York Times. The board chair said the company is going to try to recruit a new chief executive from outside, with a clean slate. But “persuading that person to take the job” will be a difficult task, considering the bank still faces massive litigation, more than a dozen federal investigations, “a largely demoralized workforce,” and another round of berating before the House Financial Services Committee later this month.
Washington has claimed its second Wells Fargo CEO in three years, said Rachel Louise Ensign and Andrew Ackerman in The Wall Street Journal. Sloan’s predecessor, John Stumpf, resigned “13 days after a brutal appearance before Congress” in 2016. Sloan lasted 16 days. His Washington “charm offensive” was met with only wrath and condemnation. One of the bank’s main regulators, the Office of the Comptroller of the Currency, even issued a rare statement critical of Sloan’s “inability to execute effective corporate governance.” After this, Sloan had “little choice but to resign”—giving Washington what it wanted, again. The fact that he served under Stumpf meant Sloan was “guilty until proven guilty” in the eyes of lawmakers, said Jim Cramer in TheStreet.com. Wells Fargo’s board was happy with Sloan’s performance. It gave him a raise plus a performance bonus after the bank beat expectations. But Sloan could see what was coming. The heads of all the big banks will be in Washington on April 10, and it was clear Sloan “would be the focal point” for Congress’ ire yet again. It’s not fair, but he had to quit.
The 2020 election is only going to raise the heat on corporate executives, said The Wall Street Journal in an editorial. Sloan’s biggest mistake might have been “not genuflecting enough to the bank’s regulatory and political overlords.” Since 2016, Wells has fired 5,300 employees, lost several prominent executives, and turned over much of its board. But politicians keep demanding changes. Massachusetts Sen. Elizabeth Warren’s triumphant reaction to Sloan’s departure says it all: “About damn time.” Whoever takes Sloan’s place “should understand that he answers to politicians as much as to shareholders.” ■