(article link)Wells Fargo, one the US's largest mortgage banks, is in the news this week, for some less than stellar activities. The city of Los Angeles is suing and charging the bank giant with a fraud lawsuit. Wells Fargo employees were allegedly under so much pressure to meet sales goals that they were opening unauthorized accounts, charging customers "bogus" fees, and causing major damage to customers' credit. The city is seeking a court order to stop any remaining bad behavior and to have the company pay back those who were affected by the fraudulent actions. Wells Fargo has also reported that they have fired or punished all employees who were involved.
All of this sounds pretty familiar to the fraudulent activities that were occurring in corporate banks and mortgage firms that led to the financial crisis. And it goes to show just how pervasive the pressures to make a profit despite who gets hurt are in the banking world.
If the banking collapse and the financial crisis and its aftermath haven't been enough to stop these kinds of fraudulent activities in banks (especially large powerful ones like Wells Fargo) do you think it will ever be stopped?
My initial reaction is fear because, like you said, clearly the financial crisis and its aftermath have not been enough to stop these types of fraudulent activities. I'm also afraid because this example of Wells Fargo is more likely an example of such activity that was caught, but I'd be willing to bet this happens and banks get away with it more often. There needs to be extremely serious consequences in place for this kind of activity. So severe that banks couldn't possibly consider even giving in to the pressure of making a profit.
ReplyDeleteI agree with Cameron in that this situation is scary. Apparently the crisis and its aftermath were not severe enough to make bank fraud stop. It seems like bank employees become too desperate to make their sales goals. Some organization set up by the government should be made to overview bank activity and mitigate bad activities.
ReplyDeleteI also think that it is scary to witness the same mistakes in the aftermath of the financial crisis. Regulations should have been tightened a lot more to stop these behaviors, as the lack of proper regulations was recognized and stressed in both Bernanke's and Wolf's books. People involved in the financial industry should be fully aware of the impacts of their behaviors on the economy. I guess more often individual benefits win over. (People thought that if only they did it, there would be no major effect, but the problem is that everyone thought so....)
ReplyDeleteIt does not seem like banks or their employees will ever learn. It's sad that these employees were under so much pressure to meet sales goals, that they were creating fake accounts. Also, I see this as a flaw of the upper management as well. I worked at a credit union a few years ago, and opening new accounts was double and triple checked to make sure everything was done correctly. Obviously, the managers and upper level employees were not doing their job either because if they were, then employees would not have succeeded in creating fraudulent accounts. Hopefully other institutions learn from Wells Fargo's mistakes.
ReplyDeleteI have to agree with everyone above and say that this is worrying, especially after the financial crisis. I think the most worrying thing is that these employees did this to hit quotas. The higher-ups must be pressuring employees to hit unattainable quotas in this era of finance. It seems that until this improves, we could see this continue to happen unfortunately.
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ReplyDeleteAs many of you mentioned above, this is really frightening. It is even more frightening knowing that Wells Fargo took over Wachovia after its bankruptcy. This goes to show that the banks never learned from the past crisis and the banking collapse. In this particular case, I wouldn't put the blame on the lower level employees. Wells Fargo and its managers are responsible for these fraudulent actions because they are the ones who put heavy pressure on their employees to meet expected sales.
ReplyDeleteAs many of you mentioned above, this is really frightening. It is even more frightening knowing that Wells Fargo took over Wachovia after its bankruptcy. This goes to show that the banks never learned from the past crisis and the banking collapse. In this particular case, I wouldn't put the blame on the lower level employees. Wells Fargo and its managers are responsible for these fraudulent actions because they are the ones who put heavy pressure on their employees to meet expected sales.
ReplyDeleteAs many of you mentioned above, this is really frightening. It is even more frightening knowing that Wells Fargo took over Wachovia after its bankruptcy. This goes to show that the banks never learned from the past crisis and the banking collapse. In this particular case, I wouldn't put the blame on the lower level employees. Wells Fargo and its managers are responsible for these fraudulent actions because they are the one who put heavy pressure on their employees to meet expected sales.
ReplyDeleteI have a siimliar view as everyone else. I think the fact that big banks such (I.e., wells Fargo) have not learned from the mistakes previously "too big to fail" companies is alarming. I agree with Hang, that regulations need to be tightened in order stop these behavior. Also, I think Nolan poses a good idea. I think a reexamination of the finance system should be made in order to stop the continuous pressure on employees to reach unattainable quotes.
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