Wells Fargo Must Be Cleansed
It's time for a new board and perhaps a new chief executive officer at Wells Fargo (WFC) - Get Report now that we have found that there were 67% more fraudulent accounts created to inflate earnings than previously thought.
The addition of 1.4 million more instances of false account creation, bringing the total to 3.5 million, is so outrageous that it's time to bring in a special master, someone appointed by a court, to oversee this bank to be sure it is not a rogue operation. I am talking like something akin to the ongoing oversight the federal government has of the Teamsters Central States Pension Fund. Similar to that situation, the government finally decided it just wasn't good enough to warn or cajole, someone had to be put inside the organization to be sure it didn't happen again.
Now Wells, unlike the Teamsters' pension plan, is a publicly traded company with a real board of a directors and a real CEO. The problem for me is what kind of oversight was the board providing and is it really right to have a CEO from another part of Wells? Shouldn't an outsider have been picked who could most certainly run a more thorough investigation. The Three Stooges could do a better job. And to think that the NFL spent months investigating Inflagate with a real firm, Paul Weiss, doing the investigating, is to remind you how little oversight the banks really have. They are so trusted that no one in the law and order side of the feds seems to realize how bad exactly this is.
It's almost as if because Warren Buffett, the biggest shareholder, seems okay with it beyond talking about cockroaches, all is well. Our system punishes petty theft harder than it is punishing Wells.
I want a special master because I have to believe there is something so wrong, so deeply embedded in the culture of this bank that I do not think anything the company says can be trusted, an odd position given that it is a gigantic bank entrusted with people's life savings. This bank has 165 million accounts and I am sure the investigators from the first investigation will moan about how hard the investigation was to do because there were so many accounts. I wonder if they even are embarrassed, that's how lackadaisical this whole episode appears to be.
I have to ask, what's wrong with a special master coming in and replacing the board of directors? What's wrong with examining the notion that Tim Sloan shouldn't be in his job given that, even though he ran a different division, perhaps the culture extended to that division? Do we know? What are we doing, taking this bank's word for it the way we took their word on the first investigation.
Now here's what really will happen: nothing. I am sure this Justice Department will not care. I am sure no one will listen to the people in Congress calling for an investigation because they will all be Democrats who are helpless. I am sure that neither the board nor the offending executives will be held to account, because that's not the way America works. Instead the company fires some bad apples and business continues apace even as it was the culture to incentivize what we now know was fraudulent behavior. How shameful. And how condoned by the Justice Department which is the only organization that can step in to change things.
Originally published Aug. 31 at 11:30 a.m. EDT on RealMoney.
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