Articles

Integrity in business

Back in the day when I was a banker the prevailing phrase was "If you can't trust your banker, who can you trust?" It implied that banks and bankers were worthy of the trust that allowed you to place your money with them with confidence, and that their word was their bond. I believe that this was the case at that time. Today this premise is getting stretched to the breaking point. 

Enron was a black mark on business. Volkswagen took things to a new low by faking emissions tests for their engines. Now, Wells Fargo Bank has delivered yet another blow to our capitalistic system that has done so well for us for so many years. In the midst of a very toxic and degrading political campaign, it is particularly disheartening to hear about the antics of this bank. 

Apparently over 5,000 bank employees created in excess of two million false accounts for existing customers so that sales quotas could be met. This all might have gone under the radar since it was not disclosed in any of the required regulatory filing reports because, in the bank's words, "Based upon our review we determined that the matter was not material."

The Senate Banking Committee and the House Finance Services Committee had a little different opinion. They asked CEO John Stumpf to please come and visit and then proceeded to rip him a new one. Of course he claimed no knowledge of this mischief, but apologized profusely and took full blame as the Chairman of the Board. He also claimed that Carrie Tolstedt, the person in charge of the misbehaving division, also did not know of this behavior, and she was allowed to resign with full severance pay and bonuses. 

So, one more time, the "too big to fail banks" have done us in. In 2008 they collectively drove our economy into a ditch and we bailed them out. Subsequently, they have been fined a whopping $251 billion in fines. Wells Fargo was fined a paltry $185 million for this latest escapade, which for them is a rounding error based upon their 2015 net profit of $22.9 billion. 0.9% to be exact. 

Fortunately the Senators and Legislators were not amused. The result is that Stumpf has agreed to forfeit $41 million in stock bonuses and Tolstedt will forfeit $19 million as well as any severance pay. The Wells Fargo board woke up and has started an independent investigation and the federal government is in the process of conducting a full review of this affair. 

I'm not big on a lot of governmental regulations of business, primarily because politicians have no clue about how business actually operates, but we all need to be protected from nonsense like this. 

I'm also not big on boycotting anyone as a means of displaying our displeasure, but if you are a customer of Wells Fargo you might ask yourself if this is the sort of firm you want to patronize. 

The fact is that there are a lot of excellent "small enough to fail" banks out there that are honest and operate with integrity. They don't deserve this sort of black mark on banking, and they do deserve your business. They are staffed with competent professionals and offer an impressive array of services to small businesses. Look around and you will see that this is true. 

No matter what you decide to do, we can all take heart that our strong capitalistic system will survive this latest blow, and the excruciating political campaign will soon be over! 

Have a great day! 

Tracy Bech