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foreign
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[Music]
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here's a comment that's been sticking
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with me and can you make a vid about
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Wells Fargo hasn't there been a scandal
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with them well yes there most definitely
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has been a scandal with them one that
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can potentially be relevant to all of
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our lives so I feel it's important for
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everyone to at least know a little bit
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about it that's my motivation here is
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simply put for years Wells Fargo
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employees created millions of
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unauthorized accounts on behalf of their
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customers and here's what I mean by that
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a person can have no interest in opening
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a credit card account with them they
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never authorized it they never contacted
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anyone about it they never wanted it yet
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someone from Wells Fargo would sign them
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up for a credit card they wouldn't even
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tell them they did it which of course is
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very illegal and it's almost
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unbelievable to me I say this may be
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relevant to you because Wells Fargo is
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one of the largest banks in the United
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States they're typically ranked by total
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assets and when we do that there's four
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banks in the country that stand out as
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being significantly larger than the rest
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currently Wells Fargo is the smallest of
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the big four but that still makes them
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seriously large they have 1.9 trillion
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dollars in assets and claim to serve one
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in three American households so today I
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want to talk about what was going on
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with the Scandal but first let's go all
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the way back to the beginning for a
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minute there's a man named Henry Wells
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and a man named William Fargo and a
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third man named John Butterfield all
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three of them were owners of separately
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competing Express companies on the east
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coast in the year 1850 the three of them
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figured that it would be a smart move to
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come together and dominate their
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industry on the East Coast that newly
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combined company was known as American
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Express two years later Wells and Fargo
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took notice of the California Gold Rush
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people were traveling out there the area
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was expanding and they identified San
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Francisco as a potential new market for
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their Express business now Butterfield
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and some of the other Executives over at
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American Express disagreed they felt
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that it would be too risky and too
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competitive so in a bold move Wells and
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Fargo came together to start a second
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very similar business on the west coast
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called Wells Fargo that's how they
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started and that's where they get the
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name from in the interest of time and
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simplicity I'm gonna skip ahead almost
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150 years over that time they had grown
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consistently helped enlarge by a ton of
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Acquisitions others were doing it too
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and the whole industry was consolidating
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Norwest is the relevant one here they
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were a bank based in Minneapolis that
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was actively growing so much so that in
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1998 they actually acquired Wells Fargo
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but chose to adopt the name Wells Fargo
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for the combined company I know that
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part gets confusing so let me emphasize
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it the Wells Fargo company that was
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started by Wells and Fargo in the 1850s
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was acquired by a different bank named
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Norwest so the company that we now know
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as Wells Fargo is actually Norwest but
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the original Wells Fargo was combined
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into it back in 1998. I realized this
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may only sound like a meaningless naming
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distinction but it does matter because
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the former head of the Norwest company
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Richard kavasovich became the head of
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the new Wells Fargo company and the next
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head of the company John stump who is
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most associated with the Scandal also
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came from Norwest when Richard
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cavazovich first took charge of Norwest
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back in 1993 his strategy was to put an
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emphasis on customer relationships which
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was actually a bit different from the
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direction of the industry over the next
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few years many of the other Banks valued
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speed and convenience ATMs and internet
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banking was on its way but Norwest
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preferred to build relationships with
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their customers by dealing with them on
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a personal level now his real motivation
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behind this strategy was cross-selling
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it was the idea that if they built a
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good relationship with the customer
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they'd be more likely to open more
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accounts with them an example would be
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if you're happy with your experience
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with Norwest as if pertains to your
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checking account you'd be more likely to
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use them when opening your savings
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account or retirement account or
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whatever else you need plus you have to
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consider the more accounts that you have
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with them the more likely you are to
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open more accounts with them in short
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they were less concerned with attracting
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new customers and more concerned with
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expanding the products that they sold to
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their existing customers since this
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leadership from Norwest came to be in
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charge of the new Wells Fargo as of 1998
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the strategy carried over which I know
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it sounds like a positive potentially
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effective strategy but here's where
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things went wrong eventually The company
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took it too far when they became
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obsessed with selling multiple products
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to each customer it got to a point where
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they were putting unacceptable pressure
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on their employees to sell them they
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would provide performance-based
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incentives and generally High sales
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goals I don't claim to know what was
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happening at each store level but in
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some cases they would require hourly
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conferences with branches is concerning
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how their daily quotas were looking if
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employees weren't meeting them they
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would be forced to stay late or work
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weekends and if they still weren't
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performing they would be fired that's
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the general idea of the culture that the
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company created in fact if anyone
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watching this actually worked for Wells
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Fargo at the time I'd be very interested
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in hearing what you experienced and how
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it made you feel so now we have all
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these Wells Fargo employees that are
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incredibly motivated to open more
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customer accounts they're motivated by
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fear motivated by Money Motivated
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because they wanted to go home on time
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plus it's important to remember that
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there was a corporate culture created
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that seemed to Value new customer
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accounts more than the ethics involved
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in how they were created thought to have
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started around 2002 and Lasting until
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2016 when it was all exposed many of
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these employees just started saying I
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cannot meet these unreasonable
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expectations so I'm going to have to
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cheat a little bit that's when the
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fraudulent account started and it was
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getting pretty bad too they would use
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the bank's database to find customers
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who had been pre-approved for a credit
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card and then just open a credit card
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for them that would Forge their
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signature and be careful to fill out
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their own contact information or give
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out fake emails on the paperwork so the
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customers wouldn't even find out it
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happened if the customer did find out
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about it they would cover it up by
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saying that it was a simple computer
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error or some other nonsense they were
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signing up homeless people for accounts
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having their own family sign up for them
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just a lot of unbelievable shadiness in
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2017 Wells Fargo admitted to opening a
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possible 3.5 million fake accounts Which
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is far higher than initially believed
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but I have to admit it was producing
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results I mean a lot of it was phony and
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I have to think even many of those
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legitimate accounts that were forced
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upon the clients were in the end not
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necessary but it looked like they were
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doing well as of 2005 Wells Fargo has
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been led by John Stumpf as I said he was
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part of Norwest going back before Wells
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Fargo was in involved and when he took
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over he continued with this strategy
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maybe even intensified it as part of
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Wells Fargo's 2010 annual report he
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included a personally signed letter to
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the owners I want to read a couple
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sentences from that letter he says 13
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years ago when I was head of community
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banking for Norwest Bank in Texas before
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Norwest acquired Wells Fargo our company
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set an ambitious goal to have our
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average banking household have eight
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products with us the letter includes
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figures of how they have been effective
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in increasing their products per
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customer at the time of the acquisition
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they were at 3.2 and by 2010 that was up
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to 6.1 remember their goal at the time
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was to get that number up to eight then
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later on he says I'm often asked why we
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set a cross-sell goal of eight the
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answer is it rhymed with great perhaps
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our new cheer should be let's go again
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for 10. Senator Elizabeth Warren was
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very aggressive in holding Wells Fargo
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in specifically John Stumpf responsible
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for the fraud I think she made a good
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point when she suggested that they were
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more concerned with their own sales
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goals than they were with providing the
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customer with the products that they
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needed and that's not because you ran
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the numbers and found that the average
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customer needed eight banking accounts
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those statements just don't feel very
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customer oriented here's the
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consequences immediately following the
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break of the Scandal Wells Fargo fired
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over 5 000 employees the CEO John strump
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had to appear before Congress and
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Elizabeth Warren in the end there was no
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jail time for him but he did get
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penalized he was removed from his CEO
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position about a month after everything
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came to light 41 million dollars in
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compensation was taken away and then
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there was another 17 million dollar fine
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in January of 2020 he also agreed to a
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lifetime ban from the banking industry
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as far as the various fines and fees and
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settlements resulting from the Scandal
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there's almost too many of them to keep
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track of but here's a few of the bigger
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ones that stand out in September of 2016
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the world first learned about the
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Scandal when they were fined 185 million
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dollars from multiple sources in May of
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2018 there was a 142 million dollar
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settlement resulting from a class-action
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lawsuit from the fraudulent account
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holders in December of 2018 they were
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fined
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575 million dollars by every state that
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same month there was a 480 million
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dollar settlement with investors they
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sued claiming that all the fake accounts
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made it so that their financial reports
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were misrepresented like for instance an
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investor may have looked at those
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increasing products per customer and
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chose to invest based on that the
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biggest one was a three billion dollar
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settlement in February of 2020 with the
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justice department and the SEC I know
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that they seem like really big amounts
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and they are of course but not as big to
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a company like Wells Fargo with their
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1.9 trillion dollars in total assets
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their net income is around 20 billion
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dollars a year so all of these payments
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really equate to just a few months of
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earnings what I view as a bigger
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consequence was given to them by the
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Federal Reserve responding to widespread
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consumer abuses and compliance
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breakdowns by Wells Fargo Federal
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Reserve restricts Wells growth until
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firm improves governance and controls
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basically saying they let some pretty
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terrible things happen so they can't
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grow anymore until they get their act
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together and again I realize it doesn't
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seem very harsh as saying you can't grow
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past the two trillion dollars you're
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already at but looking at it financially
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it has affected them historically they
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have grown that number almost every year
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and they have been stuck at that level
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since 2016 while the competitors around
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them have continued to grow but I would
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say that their biggest consequence is
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the loss of trust it's a bank and you
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have a lot of choices when it comes to
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that and I would think one of your
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bigger concerns when choosing one is how
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much you can trust them when something
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like this happens it just makes you
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second-guess things there were thousands
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if not millions of people that made a
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mistake in trusting them before now I'm
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not saying you should stay away from
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them but it is something that you should
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be aware of and consider in their
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defense following the Scandal they now
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say they no longer set sales goals for
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branch managers they made this
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commercial saying as such and as saying
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that you can trust them again Jon Stumpf
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is no longer part of the company and he
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has apologized and said he takes full
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responsibility so I guess just keep all
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this in mind when it comes to dealing
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with Wells Fargo let me know in the
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comments how is this Scandal affected
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your view of Wells Fargo I should make
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it clear that this is by far not the
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only Scandal or Shady thing in their
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history there's been multiple issues
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come to light since this one but I think
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this one is the biggest and the one that
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I felt is most important to focus on
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this really is a deep subject so any
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other thoughts you have about any of it
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leave them in the comments I'd like to
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hear what you have to say thank you for
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watching
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[Music]
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foreign
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[Music]
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