Eugene Grygo, Chief Content Editor, FTF News
My guess is that the dizzying fall from grace for Wells Fargo Chairman and CEO John Stumpf is making some Wall Street executives a little nervous, especially if they have something to hide.
To recap, after a scandal broke about the bank setting up fraudulent consumer accounts, the Wells Fargo board of directors decided this week to immediately retire Stumpf and replace him with Tim Sloan, CEO, chief operating officer (COO) and now a director for the bank. Sloan will be busy as he fends off class action lawsuits, federal investigations, regulators and more all while trying to salvage the bank’s battered reputation.
Over the past month, there have been revelations that the bank was pressuring its retail work force via oft-cited “boiler room” tactics to boost sales, which resulted in a corporate culture in which “cross selling” to customers went too far. Approximately two million unauthorized customer accounts and credit cards were created.
If all those troubles aren’t enough, the CFTC had something to say as our recent story shows [http://ftfnews.wpengine.com/cftc-fines-wells-fargo-400k-on-faulty-ltr-charges/14479 ]. The commodities regulator ordered Wells Fargo Bank, N.A. to pay a $400,000 civil monetary penalty for “failing to comply with its obligations to submit accurate large trader reports (LTRs) for physical commodity swap positions.” The bank has neither admitted nor denied the CFTC’s allegations but will be paying the penalty.
Timing is everything and the bank has been caught up in a cultural/political storm with left-wing firebrand Elizabeth Warren, the U.S. Senator from Massachusetts, leading the charge in a case that most people can understand. Sorting out derivatives is beyond the attention span of most people who are not directly involved in them; savings, checking and credit card accounts created out of thin air is more shocking to them.
The big question, though, is whether this justifiable outrage will grow and encompass the major Wall Street crooks that have been ducking the pitch-fork anger of those who are perceived by criminal bankers and traders as peasants and hillbillies to be duped out of their money. As we’ve seen with the rise of Donald Trump, a powerful wave of anger can force its way into the political system and cause serious damage.
However, one of the problems with this blind anger, which has been building for a decade, is that it can decimate the innocent as it takes down the few truly guilty ones.
We should keep in mind that most U.S. securities trading firms are abiding by the law and are suffering under horrific regulatory burdens. They are working hard to keep the faith with investors, clients and the government. As is frequently the case, the innocents get punished for the guilty ones.
In almost lockstep with the anger of Main Street, the U.S. regulators have become very aggressive and effective in their pursuit of Wall Street scalps and are being egged on by politicians expert in covering their back-sides. (But will the election time contributions end?)
It very well could be that Main Street finally rises up and makes Wall Street accountable in ways that regulators cannot. If so, I hope that this sense of justice does not turn into the blind and dangerous revenge of the masses.
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