WFC - Wells Fargo

[tng]

Does anybody else expect a multi-billion dollar fines and legal fees before this is over? Bank of America was whacked for about $60 billion for the sins of Merrill and Countrywide when they were forced into buying Merrill and forced into not activating the material adverse change clauses (so you'd expect the government to be more lenient). And most of that can be explained by incompetence. But here, it is 100% fraud. It's basically a slam dunk case for the government and politicians looking for free points.

[TwoCitiesCapital]

Does anybody else expect a multi-billion dollar fines and legal fees before this is over? Bank of America was whacked for about $60 billion for the sins of Merrill and Countrywide when they were forced into buying Merrill and forced into not activating the material adverse change clauses (so you'd expect the government to be more lenient). And most of that can be explained by incompetence. But here, it is 100% fraud. It's basically a slam dunk case for the government and politicians looking for free points.

 

Yes, but we're also 8 years removed from 2008. Banks are out-of-favor, but they're not hated like they were. My guess is that 2008 won't be a good comparable.

[Travis Wiedower]

Planet Money Episode 728: "The Wells Fargo Hustle"

http://www.npr.org/sections/money/2016/10/07/497084491/episode-728-the-wells-fargo-hustle

h/t txlaw

 

That's sad and infuriating. I was shocked they promoted a new CEO from within. A scandal like this needs an outsider who can start from scratch and has no loyalty to anyone involved.

[LongHaul]

I am not sure what top mgmt at Wells knew, let's see from the investigation.  But they should have known. 

 

However, memories are short.  Wells with Stumpf breezed right thru the crisis with minimal losses which was a great service to US citizens and its customers.  That far overrides this situation.  We need a lot more bankers like Wells.

 

I probably would not of fired Wells CEO unless he was implicated in pushing the fraudulent practices.  That is contrary to many but

a good disciplined banker is rare.  If you are expecting perfection from any compensation scheme and perfect behavior from any company you are living in fantasy land.

 

And let's not forget what happened when Spitzer pushed out Hank Greenberg who was not replaceable as far as risk mgmt. 

AIG ended up with a buffoon who likely destroyed it and had to get a govt bailout.

[merkhet]

^ I agree up to a point. Stumpf's reaction to this crisis left a lot to be desired, IMHO. I can even understand him not being particularly up to speed for the first congressional hearing, but his performance for the second congressional hearing was disgraceful. No ownership of the problem, no attempt to fashion a solution, etc.

 

But I agree that Wells' stewardship up and to the GFC was something to be admired, and I think it outweighs this current crisis.

[Viking]

I wonder what Wells actually can do in the short term to 'fix' this issue. What happened was pretty bad, pretty widespread and happened over many years (my guess is most people there were aware it was an issue). I also listened to the new CEO's comments in the CNBC interview and was not impressed (better than Stumpf but not by much). Wells really is in a no win situation on this one and the next couple of months will likely be painful for investors.

 

Longer term I actually think this may be a very good thing for Wells Fargo. It appears they were getting a little too big for their britches; a little too arrogant. The CEO and Chairman roles have now been separated. They are going to be doing some important internal housecleaning; if there are any more skeletons they should be identified and addressed. This should prepare the bank well.

 

Let's hope the stock continues to decline. My guess is after the election we will hear from Buffett and my expectation is he will chastise Wells for past behavior but reaffirm he has full confidence in the company moving forward. Shares will at that point move higher.

[flesh]

Planet Money Episode 728: "The Wells Fargo Hustle"

http://www.npr.org/sections/money/2016/10/07/497084491/episode-728-the-wells-fargo-hustle

h/t txlaw

 

That's sad and infuriating. I was shocked they promoted a new CEO from within. A scandal like this needs an outsider who can start from scratch and has no loyalty to anyone involved.

 

Its interesting how variant perspectives can be. I've followed this and just listened to "wells fargo hustle", and basically I thought, so what.

 

I'm not sure what businesses the rest of you have been involved in but my experience as a salesman and running my own marketing company is not unlike what wells has been doing. Either I'm shady, like wells, according to some, or some of you are not familiar with the grey areas one must inhabit to do business and remain competitive. I can't say which it is for sure.

 

In the past i routinely set difficult to reach sales goals for my employees and beyond that, believe it or not, I fired them when they didn't achieve them. My expectation was that 1 out of 5 of them would quit, leaving me with the best suited to the job, this typically took a couple months. There was no room for under performance and frankly I would laugh at the people who quit, not because they were inadequate in some broad sense, but because they never took accountability. Their claimed reason for failure was things like pressure, ethics, etc, but never, never, that they just couldn't cut it. No one who was successful ever shared the same challenges as those that failed.

 

In the event that I'm wrong, meaning, you don't have to deal in grey areas to make an above average income, I'd love to hear about the jobs/businesses that I could participate in to achieve this degree of wholesomeness. Anecdotally, my bro in law, an anesthesiologist, sometimes deals with patients whom he's pretty sure doesn't need the surgery. My father, a utility cost consultant, often charges businesses tens of thousands of dollars for 10 minutes of work, he feels conflicted about this because he's paid based as a % of what he saves them, is this bad or good?

 

My sales people would routinely break rules to achieve goals. Naturally over time I would do my best to solve this problem. According to some, apparently I should have just done away with goals altogether so that some people wouldn't have to feel uncomfortable and sometimes feel pressured to break rules. Even though doing so would reduce my and my staff's income substantially.  Again, this is not the business world that I am familiar with and I suspect that if you are, your in a monopoly situation and not a competitive one.

 

 

 

 

[rb]

Flesh. I think that Warren Buffett and Berkshire Hathaway proved that you can make lot's of money without having to play in the gray zone. That's just a high profile company that everyone on this board is familiar with. There are tons of businesses around of different sizes and not that well known that treat their employees and customers with respect and avoid gray areas like the plague and are nonetheless very profitable. You do with your business what you wish.

[arcube]

Planet Money Episode 728: "The Wells Fargo Hustle"

http://www.npr.org/sections/money/2016/10/07/497084491/episode-728-the-wells-fargo-hustle

h/t txlaw

 

That's sad and infuriating. I was shocked they promoted a new CEO from within. A scandal like this needs an outsider who can start from scratch and has no loyalty to anyone involved.

 

Its interesting how variant perspectives can be. I've followed this and just listened to "wells fargo hustle", and basically I thought, so what.

 

I'm not sure what businesses the rest of you have been involved in but my experience as a salesman and running my own marketing company is not unlike what wells has been doing. Either I'm shady, like wells, according to some, or some of you are not familiar with the grey areas one must inhabit to do business and remain competitive. I can't say which it is for sure.

 

In the past i routinely set difficult to reach sales goals for my employees and beyond that, believe it or not, I fired them when they didn't achieve them. My expectation was that 1 out of 5 of them would quit, leaving me with the best suited to the job, this typically took a couple months. There was no room for under performance and frankly I would laugh at the people who quit, not because they were inadequate in some broad sense, but because they never took accountability. Their claimed reason for failure was things like pressure, ethics, etc, but never, never, that they just couldn't cut it. No one who was successful ever shared the same challenges as those that failed.

 

In the event that I'm wrong, meaning, you don't have to deal in grey areas to make an above average income, I'd love to hear about the jobs/businesses that I could participate in to achieve this degree of wholesomeness. Anecdotally, my bro in law, an anesthesiologist, sometimes deals with patients whom he's pretty sure doesn't need the surgery. My father, a utility cost consultant, often charges businesses tens of thousands of dollars for 10 minutes of work, he feels conflicted about this because he's paid based as a % of what he saves them, is this bad or good?

 

My sales people would routinely break rules to achieve goals. Naturally over time I would do my best to solve this problem. According to some, apparently I should have just done away with goals altogether so that some people wouldn't have to feel uncomfortable and sometimes feel pressured to break rules. Even though doing so would reduce my and my staff's income substantially.  Again, this is not the business world that I am familiar with and I suspect that if you are, your in a monopoly situation and not a competitive one.

 

+1 This is one of the most honest and thought provoking posts. I appreciate you sharing.

[Picasso]

flesh,

 

I think for most businesses that might be true.  You naturally want the best salesman in the organization.  I remember being hired in a "class" with about a hundred other salesmen and within two years it was whittled down to less than ten salesman, myself included.  I saw a lot of guys being put under pressure to do really unethical things to survive an extra month or two.

 

But I'm guessing your business isn't dominated by workers who lack the pedigree to get a better job out of school or whatnot.  Wells Fargo is unique among the large banks in that the personal bankers almost always have a Series 6 license.  That lets them sell certain security products like in house mutual funds.  But they also have a public/private U-4 that comes with that license.  So if Wells Fargo decides to fire them for not performing in sales, they can put on the U-4 "Terminated for not performing job duties."  It makes it incredibly difficult for them to find any other banking jobs.

 

Now if others are cheating the system, it makes the ones who are *not* cheating the system look much worse.  A lot of these sales goals were based on how districts performed, so the more cheating that went on within a district the more the honest workers stood out as poor performers.  And those poor performers end up jobless for a long time because now they likely need to switch careers.  They can't just head over to a bank with a less demanding sales culture because their securities license is ruined.

 

It's different to work in an industry that wasn't so directly tied to taxpayer assistance where you have the ability to resize a workforce without purposefully causing a lot of devastation on their lives.  Wells should have been more mindful of that, but they're paying the penalty for that now and it seems to be quite costly from a reputation standpoint.

[flesh]

Flesh. I think that Warren Buffett and Berkshire Hathaway proved that you can make lot's of money without having to play in the gray zone. That's just a high profile company that everyone on this board is familiar with. There are tons of businesses around of different sizes and not that well known that treat their employees and customers with respect and avoid gray areas like the plague and are nonetheless very profitable. You do with your business what you wish.

 

RB,

 

I am attracted to WEB because as you stated he's proven you can have high standards and be very successful, for me, this is what intrigued me most about him and I owe a lot to him. On the black to white spectrum, of the truly rich, he's no doubt quite close to pure white. OTOH, it's not difficult to make a case he's no angel. I doubt I"ll get much push back on that from anyone who knows his whole history. He's honest, yet tough.

 

I'm hoping I'm wrong, I'm hoping there's a better way, I shut down my marketing company and started a incubator fund because of WEB. At a huge pay cut, so far. That said, I'm prone to optimism and possibly delusional.

 

Arcube, Thanks.

 

Picasso,

 

If it's true Wells routinely/indiscriminately put poor ratings on their employees U4's, this is clearly evil and taking using pain/the stick to motivate too far. It's one thing to push people and see who shines, it's a different animal to put them out of work long term. If this is the case, would you point me toward it being commonplace?

 

How would we know it was commonplace? IMO, if cheaters were causing sales people to lose their jobs in different regions, the problem is that mgmt didn't improve their ability to catch cheaters fast enough. Maybe the ceo should be fired for being lazy? Perhaps I'm incorrect but I'd bet private companies wo massive headline risk would think of nothing other than this.

 

It's difficult to say how ubiquitous the problem really is. Considering wells has tens of thousands of employees, how many would it/should it take before we are convinced it's gone to far? How much weight should be given to disgruntled employees?

 

I'm not convinced this all amounts to anything more material than the politicians can cook up.

 

No more sales goals except the kind with zero incentives/consequences? Bizarre.

 

 

[SmallCap]

Flesh. I think that Warren Buffett and Berkshire Hathaway proved that you can make lot's of money without having to play in the gray zone. That's just a high profile company that everyone on this board is familiar with. There are tons of businesses around of different sizes and not that well known that treat their employees and customers with respect and avoid gray areas like the plague and are nonetheless very profitable. You do with your business what you wish.

 

Have you experience the tactics and pressure used by Kirby Vacuum cleaner sales people and their managers? Very much in the grey area. I don't believe that WEB would ever operate in this way and yet one of his subsidiaries operates that way.

[undervalued]

Flesh. I think that Warren Buffett and Berkshire Hathaway proved that you can make lot's of money without having to play in the gray zone. That's just a high profile company that everyone on this board is familiar with. There are tons of businesses around of different sizes and not that well known that treat their employees and customers with respect and avoid gray areas like the plague and are nonetheless very profitable. You do with your business what you wish.

 

Have you experience the tactics and pressure used by Kirby Vacuum cleaner sales people and their managers? Very much in the grey area. I don't believe that WEB would ever operate in this way and yet one of his subsidiaries operates that way.

 

WEB follows the returns. Usually those companies have above average returns which usually translate with above average business discipline / tactics but for sure not average.

[Jurgis]

I think this is somewhat tough situation.

 

On one hand, like flesh says, some organizations succeed and do better than others due to the sales push tactics. This was probably one of the reasons WFC outperformed other banks.

 

On the other hand, it sucks to be the ones forced to sell (never done it myself, but had relatives in retail where they had to push CCs and stuff), it sucks to be customer to whom unnecessary crap is pushed, it sucks to be person who's fired with black record, it sucks to be person who resorts to fraud, it sucks ultimately for WFC where 2M fake accounts brought very little business, but a huge losses in reputation/etc.

 

There has to be balance. It is likely WFC overstepped. Whether they can work out a good solution for the future is one of the questions on how well they will do.

[Matson125]

LOL, just for the added data point. I decided to check out my mother's relationship with Wells (she's super unsophisticated). They were table to talk her into creating new checking accounts for different travel destinations, explaining to her that by having separate accounts it limited her financial exposure if her account information became compromised (kind of true! good job, bankers).

 

Morality aside, it is really unbelievable that Wells didn't at the most basic level have something in place to recognize that turning a PMA customer with 1 checking account into a PMA customer with 3 checking accounts doesn't actually create much value for the company. Everybody involved in the design of this system deserves to be fired for basic incompetence.

 

Voices From Wells Fargo: ‘I Thought I Was Having a Heart Attack’

 

http://www.nytimes.com/2016/10/21/business/dealbook/voices-from-wells-fargo-i-thought-i-was-having-a-heart-attack.html?smid=tw-share&_r=0

 

Johnny, thanks for your example.  Check out #1.

[IceCreamMan]

http://www.nytimes.com/2016/10/21/business/dealbook/lions-hunting-zebras-ex-wells-fargo-bankers-describe-abuses.html

[Grenville]

Voices From Wells Fargo: ‘I Thought I Was Having a Heart Attack’

 

http://www.nytimes.com/2016/10/21/business/dealbook/voices-from-wells-fargo-i-thought-i-was-having-a-heart-attack.html?smid=tw-share&_r=0

 

These stories are crazy…I hope more people at Wells are held responsible.

[fareastwarriors]

Voices From Wells Fargo: ‘I Thought I Was Having a Heart Attack’

 

http://www.nytimes.com/2016/10/21/business/dealbook/voices-from-wells-fargo-i-thought-i-was-having-a-heart-attack.html?smid=tw-share&_r=0

 

These stories are crazy…I hope more people at Wells are held responsible.

 

absolutely disgusting...

[flesh]

Voices From Wells Fargo: ‘I Thought I Was Having a Heart Attack’

 

http://www.nytimes.com/2016/10/21/business/dealbook/voices-from-wells-fargo-i-thought-i-was-having-a-heart-attack.html?smid=tw-share&_r=0

 

These stories are crazy…I hope more people at Wells are held responsible.

 

absolutely disgusting...

 

Does a company exist with 10's of thousands of employees in which you can not find some employees (the guy in the article had ptsd no less) with experiences like this? If 1/1000th of 1% of employees have an experience like this annually, how many of these stories would we see? Is this bad or good? Given the distribution of extreme depression/anxiety that permeates the country and the distorted perception it creates at an individual level, would you expect any less under any possible circumstances?

 

 

 

 

[undervalued]

Voices From Wells Fargo: ‘I Thought I Was Having a Heart Attack’

 

http://www.nytimes.com/2016/10/21/business/dealbook/voices-from-wells-fargo-i-thought-i-was-having-a-heart-attack.html?smid=tw-share&_r=0

 

These stories are crazy…I hope more people at Wells are held responsible.

 

absolutely disgusting...

 

 

I might be bias as a WFC shareholder but after reading the article I am speechless. I didn't know it's safe to drink hand sanitizer.

 

I started to have extreme physical stress-related symptoms as well as random panic attacks. At some point during that summer, the stress was so intense that I could no longer handle the pressure. On the banker’s desk, in the bathroom, behind the teller line and in the vault, the store kept bottles of hand sanitizer.

 

One morning, before meeting with a customer, in which I knew I was going to have to sell unneeded services, I had a severe panic attack. I went to the bathroom and took a drink of some hand sanitizer.

 

This immediately reduced my anxiety. From that point, I began drinking the hand sanitizer all over the bank.

 

In late November 2012, I was completely addicted to hand sanitizer and drinking at least a bottle a day during my workday. In December, I was confronted by management about my behavior. I decided to seek treatment and went on leave.

 

 

Julie Miller, banker and manager in Allentown, Pa., 2005 to 2013

 

I got terminated for not achieving my sales goals one year after receiving an annual award for being in the top 2 percent of managers in the country for sales.

 

She were in the company for 8 years. She was the top 2 percent of managers in the country for sales.

 

I think they want some of the settlement pie.

[muscleman]

These employ stress stories are no different from the NYT article about Amazon being a Brutal working place.

[EricSchleien]

Flesh. I think that Warren Buffett and Berkshire Hathaway proved that you can make lot's of money without having to play in the gray zone. That's just a high profile company that everyone on this board is familiar with. There are tons of businesses around of different sizes and not that well known that treat their employees and customers with respect and avoid gray areas like the plague and are nonetheless very profitable. You do with your business what you wish.

 

Have you experience the tactics and pressure used by Kirby Vacuum cleaner sales people and their managers? Very much in the grey area. I don't believe that WEB would ever operate in this way and yet one of his subsidiaries operates that way.

 

That's the difference between a company like Berkshire where there's many different cultures VS a company like Markel where it's more uniform. Different models. Kirby is very much a Stage 3 culture where as Berkshire as a whole is Stage 4/Stage 5.

 

For those not familiar with those cultural mental models, check out this link starting at 23:50, http://www.mindsuitemetrics.com/culture-map-presentation

 

Average increase in profits go up on average from 3-5x when an organization stabilizes themselves from Stage 3 to Stage 4 hence why I actually like Markel's cultural model and see it as superior to Berkshire's.

[vox]

http://www.npr.org/sections/money/2016/10/28/499805238/episode-732-bad-form-wells-fargo

 

NPR reports that FINRA is conducting a review of U5 forms filed by Wells Fargo in recent years.

[zippy1]

http://www.npr.org/sections/money/2016/10/28/499805238/episode-732-bad-form-wells-fargo

 

NPR reports that FINRA is conducting a review of U5 forms filed by Wells Fargo in recent years.

I tracked this NPR story.  This company really have a culture going after the whistle blower, according to the fired employees.

I don't think this company is investable...

[Grenville]

http://www.npr.org/sections/money/2016/10/28/499805238/episode-732-bad-form-wells-fargo

 

NPR reports that FINRA is conducting a review of U5 forms filed by Wells Fargo in recent years.

I tracked this NPR story.  This company really have a culture going after the whistle blower, according to the fired employees.

I don't think this company is investable...

 

Thanks for bumping this up, I had bookmarked it but forgot to listen.

 

Much kudos for NPR  on continuing to investigate this story. It's the best way I see for all those fired WFC employees to have their stories heard and just maybe have their record cleared (U5).

 

WFC is tone deaf, everyday there is a one page ad in the WSJ, if they would stop trying to appease wall street and make these things right.

 

I sure hope Mr Buffett is aware of this or is asked directly about this. He's a 10% owner and this stuff happened during his ownership. If he's serious about reputation and Wells Fargo drags their feet, I hope he speaks up, more heads roll and Mr Buffett brings in someone from the outside. It's November and it's time to hear from Mr Buffett.

 

This is ridiculous.

 

When you ruin peoples live's over something stupid like products per customer and horrible upper management that's inexcusable.