Wells Fargo is one of the oldest and most powerful banks in the United States. Its reputation today is in tatters, following a notorious scandal that is still unfolding.
Reports of fraudulent activity in Wells Fargo's sales department first surfaced in 2013. The bank opened at least 3.5 million fraudulent accounts for unwitting customers, according to researchers at the Harvard Business School. This and other issues have led the government to fine the bank repeatedly.
Regulators for banking, consumer protection, trading, and workplace safety continue to keep a close watch on Wells Fargo. The bank says it's working to comply with a barrage of consent orders issued by the government dating back to 2016. In addition to fines, Wells Fargo has faced a cap on its assets, issued by the Federal Reserve in 2018.
"We continue to hold the firm accountable for its deficiencies with an unprecedented asset cap that will stay in place until the firm has fixed its problems," Federal Reserve Chairman Jerome Powell told reporters at a press conference in late 2021.
The issues at Wells Fargo are still unfolding. In September hearings before the House and Senate banking committees, lawmakers singled out Wells Fargo's newest CEO, Charles Scharf, for his company's corporate governance issues. Scharf, a protege of JPMorgan Chase CEO Jamie Dimon, said he was brought in to make substantial changes at the bank. "Seventy percent of our company's operating committee is new from when I joined," Scharf said in his second day of hearings.
Experts said the government has wide authority to limit Wells Fargo, given the reputation senior management has earned for imposing demanding business goals on its workforce. These lofty goals may have led employees to engage in deceitful and at times allegedly illegal behavior.
"The fact that a large institution of such importance was nevertheless able to engage in fraud and effectively illegal transactions on such a scale — that is staggering," said Saule T. Omarova, a professor at Cornell Law School.
In a statement to CNBC, Wells Fargo said the bank is revising its management, risk and control frameworks while changing the company's culture and policies. "[T]here's more work we must do to rebuild trust, and we are committed to doing that work," the bank said.
Watch the video to see how the Wells Fargo scandal positions the bank in 2022.
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October 20, 2022 at 01:05AM
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Here's what the Wells Fargo cross-selling scandal means for the bank's growth - CNBC
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