The following article is a written adaptation of an episode of Thrilling Tales of Modern Capitalism, Slate’s new podcast about companies in the news and how they got there.
The history of American business is littered with companies whose reputations fell apart overnight. But it’s rare for a company with a history as long and august as Wells Fargo’s to suffer so quick and thorough a fall. For 160 years, Wells Fargo was a feel-good brand name. It’s a Main Street bank, meaning that by and large it makes its money by selling services to individuals and small businesses—checking accounts, savings accounts, mortgages, safety deposit boxes. From its beginnings as a cross-country express service in 1852, the company evolved into a regional powerhouse, and from there, to one of the biggest retail banks in the world. But today, for many people, the name Wells Fargo stands for scandal.
It’s been sort of a bad decade for Wells Fargo. In 2013, the Los Angeles Times broke a blockbuster story about how a “pressure-cooker” internal sales culture centered on meeting unrealistic quotas had led Wells Fargo employees to sign what turned out to be millions of customers up for accounts and credit cards they didn’t want, didn’t need, and often didn’t even know about.
Initially, the company tried to play it off as the work of a few bad apples. Further investigations revealed that Wells Fargo branch employees were under incredible pressure to sell more products to more customers. Senior executives threatened branch managers, branch managers threatened their staff—they were pushed to go for great, as if their jobs were on the line every day. And these employees, by and large, were just normal people. They came from the communities they served, and they needed the jobs they had, so they tried their best to meet those unrealistic quotas.
The tactics they used to cross-sell were extreme and sometimes ridiculous. According to reporting by the New York Times, some bankers would manufacture fraud alerts on people’s accounts in order to get them to close those accounts and open new ones. Sign ’em up for online banking too! They didn’t have an email address? Make one up for ’em! If someone came in to open a checking account, bankers would pressure people to open additional accounts for family members, for special occasions, just as a backup, and maybe a credit card as overdraft protection for those 14 unnecessary checking accounts too. What about 14 credit cards?
For some Wells Fargo workers, the pressure was too much to bear. The Times reported on one Wells Fargo banker in Wisconsin who took to chugging bottles of hand sanitizer at work to relieve her anxiety. Business reporter Bethany McLean remembers interviewing a banker at a small branch in St. Helena, California, about what it was like: “There were only about 11,500 potential customers in the area and 11 other financial institutions. Her quotas totaled 12,000 daily solutions each year, including almost 3,000 new checking accounts. Without fraud, the numbers just didn’t work.” Some 5,300 Wells Fargo employees were ultimately fired for creating fake accounts.
Then-CEO John Stumpf pleaded ignorance to the whole scheme. But the Senate banking committee called Stumpf onto the carpet. Sen. Elizabeth Warren famously rebuked him: “You squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket. … You should resign.”
It’s important to recognize that these fake accounts and high-pressure sales tactics didn’t even make Wells Fargo much money. Yeah, some customers ended up paying fees on accounts and credit cards they didn’t need, but those bankers who were going for great weren’t trying to maximize Wells Fargo’s sales revenue, not really. They were just trying to boost the number of sales, and for a while it worked.
“It enabled Wells Fargo to go to Wall Street, its investors, and say, ‘Look, we’re better than all these other financial firms because our customers do so much more business with us than they do with other financial firms,’ ” McLean says. “It was part of Wells Fargo’s brand, and it was part of the reason that Wells Fargo stock for a long time traded at a higher multiple—meaning it was more valuable than other financial firms, because investors believed they’d figured out the secret sauce, that Wells had this miraculous way of getting customers to do more business with them.”
In January 2020, Treasury Department officials issued a report on the Wells Fargo account scandal. It tore Wells Fargo’s executive suite to shreds. The report found that the community bank’s business model “imposed intentionally unreasonable sales goals and unreasonable pressure on its employees to meet those goals and fostered an atmosphere that perpetuated improper and illegal conduct.” The office fined the former head of Wells Fargo’s community banking division $25 million. John Stumpf got a $17.5 million fine and a lifetime ban from the banking industry. This all came two years after the Fed had kept the bank’s assets, just under $2 trillion, as punishment.
But that wasn’t the only scandal Wells Fargo had to contend with. In the past few years, the cities of Sacramento, Philadelphia, Miami, and Oakland have sued the bank for allegedly giving unfavorable mortgage terms to Black and Latino homebuyers.
Karen Attiah, global opinions editor at the Washington Post, grew up with Wells Fargo. Her parents banked with the company for years, and when she graduated from high school 16 years ago, she opened her very first checking account there. But lately, every time Wells Fargo hit the headlines with another scandal, Attiah looked at her debit card and wondered why exactly she hadn’t yet moved her money elsewhere. The breaking point came earlier this year, when current CEO Charles Scharf told employees that the bank had failed to diversify its executive core because “the unfortunate reality is that there is a very limited pool of Black talent to recruit from.”
In September, Attiah wrote a column for the Washington Post headlined “I’m Done With Wells Fargo.” Afterward, she heard from readers recounting their own negative experiences with Wells Fargo, people who had also had enough and were planning to cut ties with the bank. Attiah says this feedback made her wonder how this iconic American company came to so thoroughly squander its brand equity and make so many people feel betrayed.
Wells Fargo has long been obsessed with its own history. It employs internal historians and operated 12 Wells Fargo museums across the country—or at least it did up until this year, when it closed 11 of them. And there’s nothing wrong with that, either. The company’s history is really interesting, and it did play an important role in the story of America’s westward expansion. But history can also be a way to deflect attention from the present. Bethany McLean suggests that Wells Fargo’s preoccupation with its past helped keep it in denial about its present: “They couldn’t get over their self-righteous horror that this was happening to them. In their view the rest of the world was wrong, because they were Wells Fargo and they were perfect, and of course they didn’t mean to do anything like this, and this was all an accident, and why was the press after them? It literally could not understand why people were so upset. I think that sanctimoniousness just extended throughout the executive suite into the very blood and bones of the company.”
But unlike some of the low-level employees who lost their jobs, Wells Fargo the company will be fine. Yes, it’s had a wave of layoffs this year and, like many other companies, recently saw its stock plunge by more than half this winter during the onset of the COVID-19 pandemic. But it’s still the fourth biggest bank in the country. It might be a retail bank rather than a major player in the global economy, but Wells Fargo is still too big to really fail.
But it’s not Karen Attiah’s bank anymore. She went ahead and closed her account with Wells Fargo.