by Mike Smith “It is wrong and immoral to seek to escape the consequences of one’s acts,” said Mahatma Gandhi, yet that is precisely what Wells Fargo’s chairman and chief executive officer John Stumpf attempted to do when he testified before Congress last week. Wells Fargo employees enrolled as many as two million unsuspecting customers into bank products without their permission. In some cases customers were charged fees. All of this was done, of course, to meet the quota the bank had established for cross-selling different financial products.
Recently, all of this became national news when Wells Fargo fired 5,300 bank employees for their involvement in this scam. In addition, the bank was assessed a $185 million penalty by the federal government. When Mr Stumpf testified before Congress, he pointed out that the bank failed to meet its responsibility to customers. But astonishingly, he also revealed that no high-level executives have been held accountable. Senator Elizabeth Warren told Stumpf he should resign and return the money he made while the scam was going on.
“It’s gutless leadership,” Warren said of Stumpf.
Senator Warren is right. As the bank’s leader, Stumpf should resign and give back money he earned during the time the bank was committing fraud, and so should other senior leaders. The person who was in charge of this particular unit, Carrie Tolstedt, is leaving the company, but get this: She is leaving with $125 million in stocks and stock options.
Senators of both parties were flabbergasted at the lack of accountability in the higher echelons of the bank. But perhaps the most damning aspect of Stumpf’s congressional testimony was his evasiveness. He was unsure whether executive payouts could be taken back. He wouldn’t commit to any further investigation of the fraud. He couldn’t even recall when he learned of the scam. And when asked whether the fraudulent practices of the bank damaged customers’ credit ratings, he said he didn’t know. There was smugness to his answers and annoyance at having to answer such questions. He came across as arrogant.
It is the arrogance of one believing that different rules apply to elites than to the rest of us. The American public remembers this kind of arrogance. It is the same arrogance that led to the 2008 market crash. For many Americans, their dreams were crushed, their savings disappeared, jobs were lost and lives were ruined, all because financial leaders thought more about enriching themselves than their ethical and fiduciary responsibilities to others.
And what happened to those financial leaders who drove the American economy over a cliff? Not much.
Nowadays, to most Americans the phrase, “too big to fail” simply means that those in financial leadership positions are never held responsible. Wells Fargo — just eight years after the 2008 crash — is reinforcing this belief. What worries many is this: Are the old ways of behaving in self-interest and ignoring ethical behavior back in vogue? Which leads to the next question: If that behavior is now tolerated, are the American taxpayers expected to bail out the financial institutions once again if they get themselves into trouble because they have returned to their old ways?
In Vermont we are lucky to have smaller community banks, and it would be unfair to lump these banks into the same category as Wells Fargo. We are still trustful of our community banks in this state, as we should be.
But Wells Fargo has tainted the image of all banks, big and small, and has reinforced a prevalent feeling among many Americans that the economic system is rigged and designed to protect the business elite. At Wells Fargo, 5,300 employees were fired and suffered the consequences of their actions, but a different standard applied to the senior leadership that oversaw them. Gandhi understood that in life we must take responsibility for our actions. Apparently, Wells Fargo’s senior executives see the world much differently than Gandhi did.
Mike Smith is the host of “Open Mike with Mike Smith,” on WDEV 550 AM and 96.1, 96.5, 98.3 and 101.9 FM. He is also a political analyst for WCAX-TV and WVMT radio and a regular contributor to The Times Argus and Rutland Herald, and Vermont Business Magazine. He was the secretary of administration and secretary of human services under former Gov. Jim Douglas.