The problem with running a business based on ripping people off is pretty simple: Everyone will hate you.
There is certainly no shortage of reasons to hate Wells Fargo. The bank opened over 3 million accounts for people who never actually requested them. It wrongly repossessed “at least 27,000” cars. It accidentally foreclosed on hundreds of people due to a computer glitch. It’s still signing multibillion-dollar settlements for mortgage abuses dating back to the last big housing bubble. The bank has even scammed people on pet insurance.
On Tuesday, Wells Fargo CEO Timothy Sloan appeared before Congress to assure the country that the ripoffs are, at last, under control. Sloan promised that he has made “fundamental changes” at the bank and its problems have been “fixed.”
“Our company does well by doing right,” Sloan told the House Financial Services Committee. It’s “rebuilding trust” by “putting our customers’ needs first,” he said.
Sloan, who made $60.4 million working for the bank before the fake-account scandal broke in 2016, has been saying this kind of thing for years now. The bank has launched multiple marketing campaigns hoping to repair its reputation as the scandals continue to pile up, repeatedly reassuring investors of its great progress during quarterly earnings calls.
But in federal court, Wells Fargo tells a different story. Sloan’s vows to “restore trust,” according to court filings from the bank’s own lawyers, are mere “corporate puffery” that “no reasonable investor” could rely on.
On Tuesday, Rep. Katie Porter (D-Calif.) flagged these quotes from filings in an ongoing class-action lawsuit against Wells Fargo that alleges the company hurt shareholders by hiding its car repossession scandal from the public in the months after the fake-account scandal. Even as Sloan was telling the world it would “leave no stone unturned” and “be very transparent” with investors, he had in his hands a report from independent consultants indicating that the bank had been forcing bogus insurance on its customers, which had resulted in a wave of car repossessions. Michael Hiltzik from the Los Angeles Times reported on the lawsuit in November.
In a novel legal argument, Wells Fargo’s attorneys maintained that its executives’ statements about “trying to be more transparent” and “restore trust” are no different than the kind of exaggerated advertising claims that corporations make all the time. People quite literally shouldn’t put any stock in them.
At the hearing, Porter asked Sloan whom Congress should believe: Sloan when he says he’s fixed things, or his lawyers who say he’s just resorting to puffery.
“I don’t know why our lawyers are arguing that,” said Sloan, who is personally named as a defendant in the case, which is moving through federal court.
👀@RepKatiePorter: Do these statements mean something? Sloan: They doPorter: Then why are your lawyers in federal court arguing these are ‘corporate puffery’?Sloan: idkPorter: You're a named defendant. Are you lying to a federal judge, or are you lying to me right now? pic.twitter.com/DJ7nErAO07
— AFR (@RealBankReform) March 12, 2019
The bank’s lawyers seem to have a point. At the hearing at least, Sloan did not sound like a man to be taken seriously. At one point he claimed that “no institution in this country has done more for diverse communities than Wells Fargo” ― quite a claim for a bank that has been separately sued by the cities of Chicago, Baltimore, Miami and Philadelphia for targeting black and brown borrowers with predatory loans. In 2012, Wells Fargo paid $175 million to settle allegations from the Justice Department that it had engaged in “systemic discrimination” involving more than 34,000 minority customers.
Sens. Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.) have both introduced legislation that would break up Wells Fargo, and Warren has been calling for Sloan to be fired since the fake-account scandal broke in late 2016.
On Tuesday, Rep. Maxine Waters (D-Calif.), chairwoman of the Financial Services Committee, asked if the bank’s persistent troubles were evidence that it is “too big to manage.”
“Why should Wells Fargo continue to be the size that it is?” asked Waters.
Sloan’s defense was, essentially, corporate puffery. “I believe that Wells Fargo serves our 70 million customers … in a very effective way,” he said, citing “the changes I’ve made since becoming CEO.”
Sloan received some backup from Rep. Roger Williams (R-Texas), who said Waters was advocating for “socialism” that would transform the United States into “Venezuela.”
Wells Fargo posted a $22.4 billion profit in 2018 and sent its shareholders an additional $20 billion in the form of stock buybacks. Turns out ripping people off pays pretty well.