Following a massive scandal that defrauded millions of its customers, Wells Fargo has come under even more scrutiny after it rewarded the executive responsible for the fraud with $125 million. Carrie Tolstedt, who will leave her position later this year, was in charge of consumer banking, the unit of the bank responsible for opening more than 2 million unauthorized customer accounts in a scandal that cost Wells Fargo $185 million in fines. Richard Cordray, head of the Consumer Financial Protection Bureau, said that:
“It is quite clear that [the actions of Tolstedt’s unit were] unfair and abusive practices under federal law.”
Yet, in July, when the extent of the fraud was well known to Wells Fargo executives, CEO John Stumpf praised Tolstedt as a “standard-bearer” for the bank and for being “a champion for our customers,” further illustrating that criminal behavior is just “business as usual” for one of the US’ largest banks. Tolstedt’s sudden decision to “retire”allegedly had nothing to do with the scandal, according to an official statement from the bank. Wells Fargo claimed it was based “on a personal decision to leave the bank after 27 years.” Upon leaving, Tolstedt will receive $124.6 million in stock options, and restricted Wells Fargo shares on top of her $1.7 million salary for this year. If Tolstedt had been fired, she would have had to give back at least $45 million of that money, possibly more.
The fallout from Carrie Tolstedt’s lucrative payday was immediate. Outrage over Tolstedt’s retirement package has now led Wells Fargo to announce it will eliminate all product sales goals in retail banking starting next year. These sales goals were allegedly a major source of motivation for the fake account fraud and could, potentially, prevent it in the future. However, this gesture on the part of Wells Fargo may be too little too late as 5 lawmakers have called for an investigation into the bank this past Monday, and the bank has received subpoenas from three different US attorneys’ offices over the last week. Will Wells Fargo suffer actual penalties if the government gets involved? It seems doubtful.
Recently, Wells Fargo openly admitted to defrauding and deceiving the federal government about its housing loans from 2001 to 2008. Their punishment? No one was fired. No one was punished. Another fine was paid and the New York Federal Reserve rewarded them with primary dealer status, an exclusive appointment which grants them direct access to US Treasury auctions. Do we have any reason to believe things will be different this time around?