14 ms·

Wells Fargo Is Accused of Making Improper Changes to Mortgages

195 points by frgtpsswrdlame 9y ago

maxxxxx 9y ago
The financial crisis of 2008 really shattered my world view. Until then I thought there was a free market where the companies that do good business survive. Since then you almost hear every week how banks do stuff that would have killed pretty much any other company but banks get away with it. This is just unbelievable.
- lettergram 9y ago
  That's what happens when you centralize banking...
  - bobabooey02 9y ago
    Nah, it's just the nature of capitalism. Industries that require a large amount of startup capital lead to natural monopolies or duopolies. Those who cheat, skirt the law, or lobby to make getting into the industry harder do better than those who follow the spirit of the law. Board of directors exist not to create a balanced society, but to maximize returns on investment for owners and shareholders, and so will always behave as sociopathically as they can get away with. The government is supposed to regulate those industries, but because they buy off the government in the US, the duopoly-forming pressures continue unabated.
    - Chaebixi 9y ago
      >> That's what happens when you centralize banking... > Nah, it's just the nature of capitalism. Industries that require a large amount of startup capital lead to natural monopolies or duopolies. But is that true of banking? The nation has a long history of small banks. While they've had their crises too, I don't think there's any natural motivation for bank consolidation besides using scale to eek out efficiencies and to gain power and influence.
      - bobabooey02 9y ago
        > I don't think there's any natural motivation for bank consolidation besides using scale to eek out efficiencies and to gain power and influence. Motivation has nothing to do with it. The development of power and influence through asymmetric growth in the industry is enough for this to emerge. There are still small banks today, but it's no coincidence that the largest (and thus overall best performing) banks cheat the system. The best performing become large and powerful on their own.
        Chaebixi 9y ago
        But your assertion was that banking is an "industr[y] that require[s] a large amount of startup capital" such that it will "lead to natural monopolies or duopolies." The fact that you can have a small, profitable bank disproves that.
        bobabooey02 9y ago
        Two things here: Capital is more than just money. It takes a lot to jump through the regulatory hoops, money requirements, and insurance costs while having competitive prices against other Banks and still make a profit. Even if it was just a money issue, new banks do still require a fair amount of money for relatively little profit in an industry that is well established. If someone is going to put their capital on the line, why wouldn't they put it in a higher growth industry? These don't make new bank creation impossible, just unlikely.
        zo1 9y ago
        In the same thread you state "Nah, it's just the nature of capitalism. Industries that require a large amount of startup capital lead to natural monopolies or duopolies" as the cause of centralization of the banks. Then you go on and explain where the high-capital cost actually comes from: "It takes a lot to jump through the regulatory hoops, money requirements, and insurance costs while having competitive prices against other Banks and still make a profit." And yet you still blame capitalism?
  - cmurf 9y ago
    Locality is one aspect that helps incentivize a bank being a "good local citizen". Another might be a "benefit corporation" which is a kind of entity that can be created in 30 states. I'm not aware of any state dissolution of corporations or shareholder lawsuits to enforce such articles of incorporation. But at least in theory, the reason why a corporation is "for profit" or "not for profit" is because it's in their articles of incorporation, so any other purpose for the corporation set out ought to be enforcible as long as it's not vague nonsense. For example "make some people happy" might mean you can be an dick company, but if you make a really slick iphone app that people "like" then you've complied? This is something ethical startup founders would have to write into the articles of incorporation to bind future board of directors even once the founders aren't majority shareholders, is how I understand it. https://en.wikipedia.org/wiki/Benefit_corporation https://en.wikipedia.org/wiki/Benefit_corporation
- JumpCrisscross 9y ago
  Most people don't price check banking like they do e.g. groceries or mobile-phone plans. This is why Chase can pay a pittance of interest and charge for using others' ATMs while e.g. Ally pays 10 to 60 basis points on their checking account [1] while re-imbursing the ATM fees other ATM providers assess. [1] https://www.ally.com/bank/interest-checking-account/ https://www.ally.com/bank/interest-checking-account/
  - bluGill 9y ago
    Most people don't have enough in bank accounts for it to matter. People do tend to price check loans rates. Those who keep more money in their bank account will price check CDs, but for a checking/savings account you are probably looking at around $20 a year if you find the best account - having a local bank close by is worth more than that.
    - djohnston 9y ago
      I switched from BOA to ALLY for the satisfaction of asking BOA if they could give me 100X better interest rate.
      - DaiPlusPlus 9y ago
        And how did they respond?
        djohnston 9y ago
        A surprisingly succinct "No."
  - jdmichal 9y ago
    So for the cost of keeping $15000 stuck in a checking account for say 10 years, you get a whopping $927.31. You'd get more money back dropping that into a high-efficiency AC system or solar panels. Meanwhile, most people don't even have $15000 lying around with nothing else to do. My understanding from surveys done by various companies is that 60% of Americans don't even have $1000 in savings. And those with beaucoup money are negotiating their own loan rates, because there's better places to park their money for long-term interest.
- refurb 9y ago
  Businesses are run by human beings. Of course they take shortcuts and try and screw people over. Not sure that would really change regardless of the system we're under.
  - castis 9y ago
    Its the perception we're talking about here. Not everyone starts out jaded.
- rndmwlk 9y ago
  "The forces interested in keeping a large company afloat, he argue, are far greater than those that wish to see it perish. He'd present the students with the following hypothetical situation. First, he'd say, let's locate our major factory in an earthquake zone. Then let's infuriate unions by paying executives large sums of money while cutting wages. Third, let's select a company on the brink of bankruptcy to supply us with an essential irreplaceable component in our production line. And fourth, just in case our government is tempted to bail us out when we get into trouble, let's bribe a few indiscreet foreign officials. That, Milken would conclude, is precisely what Lockheed had done in the late 1970s." This isn't something localized to banks. (The quote is from Liar's Poker, a really enjoyable read IMO)
- netcan 9y ago
  I had a related comment on another thread earlier today. Different context, similar point. "Free Market" is a big hairy term. But, the definition of free market that includes (or expects) all the emergent benefits attributed to free market is limited to a certain realm. Markets with barriers to entry (emergent or regulated, high fixed/marginal costs, any structure that lends to oligopoly, financialization, and bunch of other market characteristics (including interventionist policy) result in markets that are not free in that sense. There is no creative destruction, highly competitive dyanamics and such. The financial markets have never (and IMO will never) resemble the market for toiletries or music festivals. Neither will many other markets: transport infrastructure, for example, for different reasons. The free market is an abstract concept, a model. It explains some markets better than others.
  - dforrestwilson1 9y ago
    This. The real irony about the banks is that by heavily regulating banks and explicitly backing them, we also implicitly allow this sort of abusive behavior towards customers.
    - Finnucane 9y ago
      Well, no, because the problem is not the regulation, but the lack of enforcement of the regulation. And that happens because the political appointees who runt the agencies are too close to the banks they are supposed to be monitoring. If Wells is making changes to the loans without properly getting the court's approval, that's fraud on the court and clearly illegal. Getting a criminal proceeding against Wells or any of its employees requires the DoJ to agree to take action, which seems highly unlikely. During the fallout from the housing bubble, it became apparent that many loans had not been properly transferred as they were sold from one investor to the next. The result of this was that many foreclosures were brought with essentially forged papers--servicers worked overtime trying to cover up broken paper trails. The courts in some states, esp. Florida, looked the other way as this bogus paper was passed in front of them.
      - scarmig 9y ago
- payne92 9y ago
  Free markets work really well…except when there is fraud. No economic system works when people don't follow the rules. And the only way to manage that is to make sure the expected value of the fraud is significantly lower (ideally greatly negative) than the gains from the fraud. That means that the chances of getting caught times the costs of getting caught need to be quite high.
  - specialist 9y ago
    Freedom Markets™ don't have rules.
    - talmand 9y ago
      Free market doesn't necessarily mean anarchy market.
      - krapp 9y ago
        A free market is commonly defined as one in which competition is unrestricted by anything but the natural forces of the market itself - voluntary contracts and supply and demand. A market which recognizes the legitimacy of government to regulate it must restrict competition to whatever that government declares legal, and as such any such market cannot be considered free. A free market, like free speech, must be anarchist, or in the weak case, must tend towards anarchy.
        specialist 9y ago
        Open market means balancing capitalism vs democracy. Property rights, fair and impartial judiciary, regulations to promote competition, and so forth. Whereas free market means might makes right. AKA feudalism, corporatism, kleptocracy, neo-reactionary, fantasy land, etc. Basically whatever nonsense the Heritage Foundation stooges are paid to peddle. Even though I grew up listening to the Sex Pistols, I still have no idea what anarchy is, idealized or not. I just assume its more Lord of the Flies than some hippy free love commune.
- conanbatt 9y ago
  I felt unscathed in this regard, considering banks are so intertwined with government. In an organic way, it might have been better to let the banks fail hard in 2008, that would hve served as a cautionary tale to bank managers/owners not to rely on the state. On the other hand, that could have had tremendous economic short-term consequences. The problem is not that banks mismanaged and failed, but that the consequences of it were too grave to allow failure.
- curun1r 9y ago
  Even some of the legal stuff that Wells Fargo does boggles the mind. My parents had a Wells Fargo mortgage. It's now been sold twice and I've had to setup automatic monthly payments for them each time. I live in fear of two things... First, some enterprising fraudster will call/mail that they've acquired the loan and demand payment. Given how often loans are sold, it wouldn't take much conning to convince retirees that a payment is due and a check needs to be mailed to some P.O. Box. Second, these companies that buy up loans don't seem all that technically capable. I fear that, one day, my parents' loan will be bought by one without an automatic monthly payment system. Again, someone with shady morals could start a company that looks to buy mortgages on properties where the mortgage is a fraction of the cost of the home and then not offer a auto-pay feature. When people inevitably miss a couple of manual payments, they could aggressively try to foreclose. Both of these opportunities for abuse are made possible by banks with mostly positive reputations doing something that shouldn't be allowed. If a bank wants to offload debt that they've initiated, we should require them to continue to process customer payments on that debt and forward the money to whomever they sold to. Consumers should have the right to choose which companies they have business relationships with and we shouldn't have that relationship changed without our permission.
  - yardie 9y ago
    My bank, when it can't send payment through ACH, will cut and mail a papercheck to the address on record.
    - toomuchtodo 9y ago
      But when happens if the mortgage services doesn't process that payment and you begin to incur late fees and head towards preforeclosure through no fault of your own?
      - yardie 9y ago
        You send it certified. Then fax them and their lawyer a copy of the air bill and say see you in court. Trust me, slumlords pull this shit everyday with renters.
- jpster 9y ago
  The former attorney general Eric Holder basically admitted that some banks are too big to face any criminal charges they might deserve. So expect the crimes to continue. https://www.washingtonpost.com/business/economy/holder-concerned-megabanks-too-big-to-jail/2013/03/06/6fa2b07a-869e-11e2-999e-5f8e0410cb9d_story.html https://www.washingtonpost.com/business/economy/holder-conce...
  - talmand 9y ago
    I've always felt the "too big to fail" is an excuse that covers for something else.
    - ashark 9y ago
      IIRC 3-4 years after the financial crisis NPR ran a story the premise of which was basically "WTF is up with major white collar crime seemingly never being punished?" and they claimed the FBI's division devoted to financial crimes had been gutted to devote more resources to fighting terrorism after 2001, and that those resources had simply never been restored, leaving them only able to pursue a couple major cases at a time. Since these sorts of investigations/cases are against people and organizations with money and the laws in question are often nuanced and complex, the cases drag on for months to years. IOW as long as a dozen plus major violations are occurring every year they'll only be able to pursue a few percent of them, and only some smaller percentage will end in more than a slap on the wrist (because, again, these people have money). If that's true then ROI on corporate law-breaking is great right now, as long as you're not one of the one or two most egregious cases any given year.
  - maxxxxx 9y ago
    That's just nuts. He pretty much officially declared that some institutions are beyond the rule of law. That's simply not acceptable.
- fredgrott 9y ago
  wait til you hear this.. There was a study recommendation to regulate unregulated securities and take them away from investment banks..Guess what Goldman Sacs in Trump admin is thee to do? Resist that recommendation
delinka 9y ago
I have trust issues with banks, and even my credit union. I verify their interest calculations. I monitor payment amounts. I challenge every single incorrect "NSF fee" (it's a small-town bank, and this has happened several times.) In a situation like in the article, continue paying the original, higher, correct loan payment. Make sure that the 'extra' (and indeed, any extra you intentionally pay any other time) goes toward the principal balance and not into your property tax escrow account. You've got to watch any bank you do business with, even to correct their honest mistakes. If your payment changes, find out why. If your extra principal payments aren't applied correctly, get it fixed. And when you have evidence of a pattern of wrongdoing, get the law involved.
- maxxxxx 9y ago
  Once you involve the law after finding a pattern of wrongdoing they get a small fine and move on to the next scam.
  - noxToken 9y ago
    If they even bother investigating. From the sibling comment: > But who's going to investigate Wells Fargo over a $15 "mistake" that they fix as soon as you ask them to? The bureaucracy to file charges for something so small is a non-starter. It's probably happening to tens of thousands of other customers, but then you have to do the leg-work to get other people on board. There's nothing you can do involving the law that doesn't require a significant time investment. And as you've said, the punishment is such a pittance that all the hard work didn't matter in the end.
    - creepydata 9y ago
      You're wrong. I've successfully gotten the law involved with Citibank with a time investment of around 10, maybe 15 minutes. All I did was filled out this form: https://www.consumerfinance.gov/complaint/ https://www.consumerfinance.gov/complaint/ and they handled it from there. However, the CFBP has only been around for less than a decade.
dmalvarado 9y ago
Stories like this really go to show that no matter how much PR a bad company uses to try to regain good will, they are still rotten and are still actively trying to screw you. Wells Fargo, Walmart, Uber, TimeWarner/Spectrum, etc.. all bad to the core.
heisenbit 9y ago
The frontline employees are typically not authorized to make such changes alone. This sounds again like too much pressure by management and somewhere in the chain someone was stepping over the line. The fact that such egregious missteps have happened now twice (unauthorized account opening) is a very, very worrying sign for the culture in Wells Fargo. Top management should be asked some very hard questions and maybe some changes are needed.
Simulacra 9y ago
Banks seem to be insulated these days like the Oligarchs after the fall of the Soviet Union. They can do no wrong. Even when they're caught, few if any ever go to jail. What does a bank have to do before the government says "enough" and starts locking people up?
- maxxxxx 9y ago
  "What does a bank have to do before the government says "enough" and starts locking people up?" They protect themselves by hiring politicians and people from regulating agencies for a lot of money. If they stopped doing that they would be in trouble.
- arethuza 9y ago
  Worth noting that one of the first things a lot of the Russian oligarchs did was set up their own banks - alongside their own security and intelligence services.
swiley 9y ago
I go quite a bit out of my way to avoid any interactions with banks. I keep most of my savings in cash and never take out loans. The result: a blank credit report (which HR at most companies seems to like when I'm getting hired) and few late penalties, and never being told I can't have access to my money because of "XYZ." Not to mention, avoiding all the crappy online banking web GUIs.
- usaphp 9y ago
  Don't you aftraid of losing all of your savings due to a robbery? Also if you would want to purchase a house in the future how would you make a payment? IRS won't like a diplomat full of cash in hundreds of thousands of dollars? They will have questions.
  - thatwebdude 9y ago
    No, glass jars are buried in the back yard. It'd take shovels and hard work to be robbed of that!
  - emjoes1 9y ago
    I second that. Tried using cash as a down payment on a house did not fly even though I could reconcile the difference in cash with what I kept in the bank with my pay stubs and deposit/withdrawl records. Underwriters want to see that cash sitting in a bank account.
    - Goronmon 9y ago
      Yeah, if you want to use cash, you basically have to be able to just pay for the house in it's entirety. With downpayments, the underwriters really want to make sure you didn't just take out a loan somewhere to finance that downpayment. Showing up with cash in that instance is basically indicating you don't want them to know where you got the money, which isn't going to fly when a person's job is based around playing it safe.
      - creepydata 9y ago
ams6110 9y ago
I don't know why any individual uses the big national banks for their personal checking/savings. Use a local bank or credit union. I've always had much better service and respect for me as a customer that way.
_jal 9y ago
Good lord. Assuming this is largely true (and Wells Fargo has lost any presumption of good faith), people need to start using the word "RICO".
cmurf 9y ago
Wells Fargo is yet another example of big bank that a long time ago should have been disallowed from buying any more banks. Local banks don't get away with shady stuff like this because you can go visit a banker in person. There is no such thing as a "local" Wells Fargo. It has the same customer service and anonymity as an internet forum.
megamindbrian 9y ago
Wells Fargo decided I had to pay a $50 fee for a failed transaction even though my mortgage was already paid for the month. They refused to remove the fee even though they could produce a signed transfer of service disclosure.
joncrane 9y ago
Disclaimer: I work for one of the top 10 banks in the US by assets. I was shocked, SHOCKED, to find out that our CEO isn't even a tiny bit of a lying, cheating sociopath. I started working here for the benefits and culture in the IT department, and assumed that the people responsible for paying for all the cool stuff we got were doing the same thing I assume all the other big banks do (Wells, JPMorgan Chase, Citi). I've only been here a little while, and not seen anything nefarious, though I only have visibility into the IT infrastructure mostly, and some development work. But I'm still wondering how a company can become this large and successful in this sector without griminess from the top. It's restored my faith in stuff a little bit. Also note, if you look at the top 10 banks in the USA, the bottom half are a small fraction of the size of the top 3, and we're in the bottom half.
- i-machine-learn 9y ago
  why don't you name the bank? It's always good for consumers to have examples of good ethical companies to do business with.
- tnorthcutt 9y ago
  our CEO isn't even a tiny bit of a lying, cheating sociopath How would you possibly know?
  - antisthenes 9y ago
    And honestly, how is it even relevant? CEO is only one person, who could have been with a bank for any arbitrarily short period of time. The rest of management/leadership could still be rotten to the core.
BlackjackCF 9y ago
I'm not surprised. I might be misremembering, but I'm pretty sure Wells Fargo was also the bank where its employees were opening up bank accounts without their customers' knowledge for bonuses. Oh, and it's also one of the banks where whistleblowers were basically pressured into leaving and then blacklisted on a list that big banks circulate internally so they couldn't find jobs in the banking industry ever again.
- eternalcode 9y ago
  you are correct. It greatly saddens me this organization still exists.
  - mtgx 9y ago
    That's why the "Too Big To Fail" mentality needs to be erased from Americans' and especially American politicians' minds. http://www.rollingstone.com/politics/news/u-s-sues-wells-fargo-yet-another-bailed-out-bank-accused-of-fraud-20121010 http://www.rollingstone.com/politics/news/u-s-sues-wells-far...
- _jtrig 9y ago
  They were. http://www.vanityfair.com/news/2017/05/wells-fargo-corporate-culture-fraud http://www.vanityfair.com/news/2017/05/wells-fargo-corporate...
- iagreeentirely 9y ago
  Please don't take this as a comment against you specifically. I am incredibly saddened by the fact that this association is weak enough that people could even entertain the idea that they are misremembering. Wells Fargo should be forever branded, and if you are doing business with them you really should stop.
  - creepydata 9y ago
    Not so simple. My mortgage was sold to Wells Fargo without my input. I don't want to refinance because it wouldn't make sense financially as well as it could just be sold right back to Wells Fargo.
s73ver 9y ago
But clearly, what needs to happen is that the protections passed in the wake of the 2008 financial crisis need to be undone, and the Consumer Financial Protection Bureau needs to be neutered.
OliverJones 9y ago
This bank helped build the American West. It was there before the current batch of executives arrived. Will it still be there after they leave? Possibly, if they accept personal responsibility for these problems, pay big fines, do some time at Club Fed, and get out of banking. Will they do that? Probably not. After all, no organization in the 21st century is conceivably more valuable than the people who are lootingxxxxx running it.
pasbesoin 9y ago
Fraud. Personal culpability. Jail. The one thing that will put the brakes on such. P.S. Also worth mentioning, various governments have various laws and regulations prohibiting doing business with agents convicted of criminal activity. It would also be worth actually adhering to and enforcing those. A bigger threat than a fine that often represents a fraction of the profits already gained. But seriously, pierce the corporate veil and lock them up. Long past due. And experience has now shown, the only way to substantially reduce such activity (e.g. Savings and Loan Scandal of the '80's). P.P.S. Regarding this, and all the Federal agents/roles that have been reassigned from domestic and financial crime to "terrorism". More Americans face greater terror today from the prospect of being screwed over by fraudulant big business, than face real (as opposed to manufactured) terror over a terrorist attact. Or, a "terrorist" attack, looking at how broadly that label gets applied, today. (I was going to say, how broadly it gets "thrown around", only it isn't really being "thrown around", it's being used quite deliberately to foster self-serving agendas.)
shaftway 9y ago
I'd appreciate some clarification from someone... I get that generally changing the terms of a loan after everything is signed is sketchy. But in this case it looks like they were trying to do the customers a service: >The changes, which surprised the customers, typically lowered their monthly loan payments, which would seem to benefit borrowers, particularly those in bankruptcy. But deep in the details was this fact: Wells Fargo’s changes would extend the terms of borrowers’ loans by decades, meaning they would have monthly payments for far longer and would ultimately owe the bank much more. I guess the devil is in the details, but if they just lowered the minimum payment what's the harm to the consumer? AFAIK the vast majority of loans in the US are simply calculated. If you make your payments as expected on time you wouldn't be effected. If you aren't able to do that, then of course you're not paying off the principle as quickly and the term would be extended. Just like making extra payments will shorten the term. To be clear: changing the rate? Adding fees? Sure, that's really bad; rake them over the coals. But if it's just changing the minimum payment amount I'm missing the problem.
- caseysoftware 9y ago
  Changing the terms of the contract without explicit approval from both sides is beyond sketchy. At minimum, it's an unapproved amendment and therefore doesn't apply. At worst, it's a new contact that at least one side didn't agree to and therefore doesn't apply. It looks like people agreed without understanding the details. In this case, I'd wager by lowering the payments, less loans were "risky" and therefore their assets look better. That probably was for the benefit of repackaging those "assets" and/or better guarantees from the Fed.
- scott00 9y ago
  The most specific allegation is that they extended the maturity of the loan, which as a consequence lowered the minimum payment. Under normal circumstances, and with clear communication to the borrower, this is a change that can only be better for the borrower; they can continue to pay on the old schedule, or pay less on the new schedule over more time without going into default. However, many of the borrowers were in bankruptcy at the time of the change. During this process they were not in control of their own assets; the bankruptcy trustee was paying their bills for them. If the bankruptcy trustee paid the new lower minimum payment, it would result in the borrower paying more in interest than they otherwise might have.
cbanek 9y ago
I feel like everyone is being overcharged these days. From groceries, with cashiers not ringing up specials or coupons correctly, sometimes the wrong UPC/wrong price and they aren't even paying attention. Everyone else is trying to charge extra hidden fees, and sometimes they are illegal, like these. But honestly, most people are so out of it, so clueless, they don't notice if they have the paperwork in hand. Now we've really jumped the shark and are forging people's paperwork (account scandal) and submitting false documents.

The financial crisis of 2008 really shattered my world view. Until then I thought there was a free market where the companies that do good business survive. Since then you almost hear every week how banks do stuff that would have killed pretty much any other company but banks get away with it. This is just unbelievable.

lettergram 9y ago
That's what happens when you centralize banking...
- bobabooey02 9y ago
  Nah, it's just the nature of capitalism. Industries that require a large amount of startup capital lead to natural monopolies or duopolies. Those who cheat, skirt the law, or lobby to make getting into the industry harder do better than those who follow the spirit of the law. Board of directors exist not to create a balanced society, but to maximize returns on investment for owners and shareholders, and so will always behave as sociopathically as they can get away with. The government is supposed to regulate those industries, but because they buy off the government in the US, the duopoly-forming pressures continue unabated.
  - Chaebixi 9y ago
    >> That's what happens when you centralize banking... > Nah, it's just the nature of capitalism. Industries that require a large amount of startup capital lead to natural monopolies or duopolies. But is that true of banking? The nation has a long history of small banks. While they've had their crises too, I don't think there's any natural motivation for bank consolidation besides using scale to eek out efficiencies and to gain power and influence.
    - bobabooey02 9y ago
      > I don't think there's any natural motivation for bank consolidation besides using scale to eek out efficiencies and to gain power and influence. Motivation has nothing to do with it. The development of power and influence through asymmetric growth in the industry is enough for this to emerge. There are still small banks today, but it's no coincidence that the largest (and thus overall best performing) banks cheat the system. The best performing become large and powerful on their own.
      - Chaebixi 9y ago
        But your assertion was that banking is an "industr[y] that require[s] a large amount of startup capital" such that it will "lead to natural monopolies or duopolies." The fact that you can have a small, profitable bank disproves that.
        bobabooey02 9y ago
        Two things here: Capital is more than just money. It takes a lot to jump through the regulatory hoops, money requirements, and insurance costs while having competitive prices against other Banks and still make a profit. Even if it was just a money issue, new banks do still require a fair amount of money for relatively little profit in an industry that is well established. If someone is going to put their capital on the line, why wouldn't they put it in a higher growth industry? These don't make new bank creation impossible, just unlikely.
        zo1 9y ago
        In the same thread you state "Nah, it's just the nature of capitalism. Industries that require a large amount of startup capital lead to natural monopolies or duopolies" as the cause of centralization of the banks. Then you go on and explain where the high-capital cost actually comes from: "It takes a lot to jump through the regulatory hoops, money requirements, and insurance costs while having competitive prices against other Banks and still make a profit." And yet you still blame capitalism?
- cmurf 9y ago
  Locality is one aspect that helps incentivize a bank being a "good local citizen". Another might be a "benefit corporation" which is a kind of entity that can be created in 30 states. I'm not aware of any state dissolution of corporations or shareholder lawsuits to enforce such articles of incorporation. But at least in theory, the reason why a corporation is "for profit" or "not for profit" is because it's in their articles of incorporation, so any other purpose for the corporation set out ought to be enforcible as long as it's not vague nonsense. For example "make some people happy" might mean you can be an dick company, but if you make a really slick iphone app that people "like" then you've complied? This is something ethical startup founders would have to write into the articles of incorporation to bind future board of directors even once the founders aren't majority shareholders, is how I understand it. https://en.wikipedia.org/wiki/Benefit_corporation https://en.wikipedia.org/wiki/Benefit_corporation
JumpCrisscross 9y ago
Most people don't price check banking like they do e.g. groceries or mobile-phone plans. This is why Chase can pay a pittance of interest and charge for using others' ATMs while e.g. Ally pays 10 to 60 basis points on their checking account [1] while re-imbursing the ATM fees other ATM providers assess. [1] https://www.ally.com/bank/interest-checking-account/ https://www.ally.com/bank/interest-checking-account/
- bluGill 9y ago
  Most people don't have enough in bank accounts for it to matter. People do tend to price check loans rates. Those who keep more money in their bank account will price check CDs, but for a checking/savings account you are probably looking at around $20 a year if you find the best account - having a local bank close by is worth more than that.
  - djohnston 9y ago
    I switched from BOA to ALLY for the satisfaction of asking BOA if they could give me 100X better interest rate.
    - DaiPlusPlus 9y ago
      And how did they respond?
      - djohnston 9y ago
        A surprisingly succinct "No."
- jdmichal 9y ago
  So for the cost of keeping $15000 stuck in a checking account for say 10 years, you get a whopping $927.31. You'd get more money back dropping that into a high-efficiency AC system or solar panels. Meanwhile, most people don't even have $15000 lying around with nothing else to do. My understanding from surveys done by various companies is that 60% of Americans don't even have $1000 in savings. And those with beaucoup money are negotiating their own loan rates, because there's better places to park their money for long-term interest.
refurb 9y ago
Businesses are run by human beings. Of course they take shortcuts and try and screw people over. Not sure that would really change regardless of the system we're under.
- castis 9y ago
  Its the perception we're talking about here. Not everyone starts out jaded.
rndmwlk 9y ago
"The forces interested in keeping a large company afloat, he argue, are far greater than those that wish to see it perish. He'd present the students with the following hypothetical situation. First, he'd say, let's locate our major factory in an earthquake zone. Then let's infuriate unions by paying executives large sums of money while cutting wages. Third, let's select a company on the brink of bankruptcy to supply us with an essential irreplaceable component in our production line. And fourth, just in case our government is tempted to bail us out when we get into trouble, let's bribe a few indiscreet foreign officials. That, Milken would conclude, is precisely what Lockheed had done in the late 1970s." This isn't something localized to banks. (The quote is from Liar's Poker, a really enjoyable read IMO)
netcan 9y ago
I had a related comment on another thread earlier today. Different context, similar point. "Free Market" is a big hairy term. But, the definition of free market that includes (or expects) all the emergent benefits attributed to free market is limited to a certain realm. Markets with barriers to entry (emergent or regulated, high fixed/marginal costs, any structure that lends to oligopoly, financialization, and bunch of other market characteristics (including interventionist policy) result in markets that are not free in that sense. There is no creative destruction, highly competitive dyanamics and such. The financial markets have never (and IMO will never) resemble the market for toiletries or music festivals. Neither will many other markets: transport infrastructure, for example, for different reasons. The free market is an abstract concept, a model. It explains some markets better than others.
- dforrestwilson1 9y ago
  This. The real irony about the banks is that by heavily regulating banks and explicitly backing them, we also implicitly allow this sort of abusive behavior towards customers.
  - Finnucane 9y ago
    Well, no, because the problem is not the regulation, but the lack of enforcement of the regulation. And that happens because the political appointees who runt the agencies are too close to the banks they are supposed to be monitoring. If Wells is making changes to the loans without properly getting the court's approval, that's fraud on the court and clearly illegal. Getting a criminal proceeding against Wells or any of its employees requires the DoJ to agree to take action, which seems highly unlikely. During the fallout from the housing bubble, it became apparent that many loans had not been properly transferred as they were sold from one investor to the next. The result of this was that many foreclosures were brought with essentially forged papers--servicers worked overtime trying to cover up broken paper trails. The courts in some states, esp. Florida, looked the other way as this bogus paper was passed in front of them.
    - scarmig 9y ago
payne92 9y ago
Free markets work really well…except when there is fraud. No economic system works when people don't follow the rules. And the only way to manage that is to make sure the expected value of the fraud is significantly lower (ideally greatly negative) than the gains from the fraud. That means that the chances of getting caught times the costs of getting caught need to be quite high.
- specialist 9y ago
  Freedom Markets™ don't have rules.
  - talmand 9y ago
    Free market doesn't necessarily mean anarchy market.
    - krapp 9y ago
      A free market is commonly defined as one in which competition is unrestricted by anything but the natural forces of the market itself - voluntary contracts and supply and demand. A market which recognizes the legitimacy of government to regulate it must restrict competition to whatever that government declares legal, and as such any such market cannot be considered free. A free market, like free speech, must be anarchist, or in the weak case, must tend towards anarchy.
      - specialist 9y ago
        Open market means balancing capitalism vs democracy. Property rights, fair and impartial judiciary, regulations to promote competition, and so forth. Whereas free market means might makes right. AKA feudalism, corporatism, kleptocracy, neo-reactionary, fantasy land, etc. Basically whatever nonsense the Heritage Foundation stooges are paid to peddle. Even though I grew up listening to the Sex Pistols, I still have no idea what anarchy is, idealized or not. I just assume its more Lord of the Flies than some hippy free love commune.
conanbatt 9y ago
I felt unscathed in this regard, considering banks are so intertwined with government. In an organic way, it might have been better to let the banks fail hard in 2008, that would hve served as a cautionary tale to bank managers/owners not to rely on the state. On the other hand, that could have had tremendous economic short-term consequences. The problem is not that banks mismanaged and failed, but that the consequences of it were too grave to allow failure.
curun1r 9y ago
Even some of the legal stuff that Wells Fargo does boggles the mind. My parents had a Wells Fargo mortgage. It's now been sold twice and I've had to setup automatic monthly payments for them each time. I live in fear of two things... First, some enterprising fraudster will call/mail that they've acquired the loan and demand payment. Given how often loans are sold, it wouldn't take much conning to convince retirees that a payment is due and a check needs to be mailed to some P.O. Box. Second, these companies that buy up loans don't seem all that technically capable. I fear that, one day, my parents' loan will be bought by one without an automatic monthly payment system. Again, someone with shady morals could start a company that looks to buy mortgages on properties where the mortgage is a fraction of the cost of the home and then not offer a auto-pay feature. When people inevitably miss a couple of manual payments, they could aggressively try to foreclose. Both of these opportunities for abuse are made possible by banks with mostly positive reputations doing something that shouldn't be allowed. If a bank wants to offload debt that they've initiated, we should require them to continue to process customer payments on that debt and forward the money to whomever they sold to. Consumers should have the right to choose which companies they have business relationships with and we shouldn't have that relationship changed without our permission.
- yardie 9y ago
  My bank, when it can't send payment through ACH, will cut and mail a papercheck to the address on record.
  - toomuchtodo 9y ago
    But when happens if the mortgage services doesn't process that payment and you begin to incur late fees and head towards preforeclosure through no fault of your own?
    - yardie 9y ago
      You send it certified. Then fax them and their lawyer a copy of the air bill and say see you in court. Trust me, slumlords pull this shit everyday with renters.
jpster 9y ago
The former attorney general Eric Holder basically admitted that some banks are too big to face any criminal charges they might deserve. So expect the crimes to continue. https://www.washingtonpost.com/business/economy/holder-concerned-megabanks-too-big-to-jail/2013/03/06/6fa2b07a-869e-11e2-999e-5f8e0410cb9d_story.html https://www.washingtonpost.com/business/economy/holder-conce...
- talmand 9y ago
  I've always felt the "too big to fail" is an excuse that covers for something else.
  - ashark 9y ago
    IIRC 3-4 years after the financial crisis NPR ran a story the premise of which was basically "WTF is up with major white collar crime seemingly never being punished?" and they claimed the FBI's division devoted to financial crimes had been gutted to devote more resources to fighting terrorism after 2001, and that those resources had simply never been restored, leaving them only able to pursue a couple major cases at a time. Since these sorts of investigations/cases are against people and organizations with money and the laws in question are often nuanced and complex, the cases drag on for months to years. IOW as long as a dozen plus major violations are occurring every year they'll only be able to pursue a few percent of them, and only some smaller percentage will end in more than a slap on the wrist (because, again, these people have money). If that's true then ROI on corporate law-breaking is great right now, as long as you're not one of the one or two most egregious cases any given year.
- maxxxxx 9y ago
  That's just nuts. He pretty much officially declared that some institutions are beyond the rule of law. That's simply not acceptable.
fredgrott 9y ago
wait til you hear this.. There was a study recommendation to regulate unregulated securities and take them away from investment banks..Guess what Goldman Sacs in Trump admin is thee to do? Resist that recommendation

delinka 9y ago

I have trust issues with banks, and even my credit union. I verify their interest calculations. I monitor payment amounts. I challenge every single incorrect "NSF fee" (it's a small-town bank, and this has happened several times.) In a situation like in the article, continue paying the original, higher, correct loan payment. Make sure that the 'extra' (and indeed, any extra you intentionally pay any other time) goes toward the principal balance and not into your property tax escrow account. You've got to watch any bank you do business with, even to correct their honest mistakes. If your payment changes, find out why. If your extra principal payments aren't applied correctly, get it fixed. And when you have evidence of a pattern of wrongdoing, get the law involved.

maxxxxx 9y ago
Once you involve the law after finding a pattern of wrongdoing they get a small fine and move on to the next scam.
- noxToken 9y ago
  If they even bother investigating. From the sibling comment: > But who's going to investigate Wells Fargo over a $15 "mistake" that they fix as soon as you ask them to? The bureaucracy to file charges for something so small is a non-starter. It's probably happening to tens of thousands of other customers, but then you have to do the leg-work to get other people on board. There's nothing you can do involving the law that doesn't require a significant time investment. And as you've said, the punishment is such a pittance that all the hard work didn't matter in the end.
  - creepydata 9y ago
    You're wrong. I've successfully gotten the law involved with Citibank with a time investment of around 10, maybe 15 minutes. All I did was filled out this form: https://www.consumerfinance.gov/complaint/ https://www.consumerfinance.gov/complaint/ and they handled it from there. However, the CFBP has only been around for less than a decade.

dmalvarado 9y ago

Stories like this really go to show that no matter how much PR a bad company uses to try to regain good will, they are still rotten and are still actively trying to screw you. Wells Fargo, Walmart, Uber, TimeWarner/Spectrum, etc.. all bad to the core.

heisenbit 9y ago

The frontline employees are typically not authorized to make such changes alone. This sounds again like too much pressure by management and somewhere in the chain someone was stepping over the line. The fact that such egregious missteps have happened now twice (unauthorized account opening) is a very, very worrying sign for the culture in Wells Fargo. Top management should be asked some very hard questions and maybe some changes are needed.

Simulacra 9y ago

Banks seem to be insulated these days like the Oligarchs after the fall of the Soviet Union. They can do no wrong. Even when they're caught, few if any ever go to jail. What does a bank have to do before the government says "enough" and starts locking people up?

maxxxxx 9y ago
"What does a bank have to do before the government says "enough" and starts locking people up?" They protect themselves by hiring politicians and people from regulating agencies for a lot of money. If they stopped doing that they would be in trouble.
arethuza 9y ago
Worth noting that one of the first things a lot of the Russian oligarchs did was set up their own banks - alongside their own security and intelligence services.

swiley 9y ago

I go quite a bit out of my way to avoid any interactions with banks. I keep most of my savings in cash and never take out loans. The result: a blank credit report (which HR at most companies seems to like when I'm getting hired) and few late penalties, and never being told I can't have access to my money because of "XYZ." Not to mention, avoiding all the crappy online banking web GUIs.

usaphp 9y ago
Don't you aftraid of losing all of your savings due to a robbery? Also if you would want to purchase a house in the future how would you make a payment? IRS won't like a diplomat full of cash in hundreds of thousands of dollars? They will have questions.
- thatwebdude 9y ago
  No, glass jars are buried in the back yard. It'd take shovels and hard work to be robbed of that!
- emjoes1 9y ago
  I second that. Tried using cash as a down payment on a house did not fly even though I could reconcile the difference in cash with what I kept in the bank with my pay stubs and deposit/withdrawl records. Underwriters want to see that cash sitting in a bank account.
  - Goronmon 9y ago
    Yeah, if you want to use cash, you basically have to be able to just pay for the house in it's entirety. With downpayments, the underwriters really want to make sure you didn't just take out a loan somewhere to finance that downpayment. Showing up with cash in that instance is basically indicating you don't want them to know where you got the money, which isn't going to fly when a person's job is based around playing it safe.
    - creepydata 9y ago

ams6110 9y ago

I don't know why any individual uses the big national banks for their personal checking/savings. Use a local bank or credit union. I've always had much better service and respect for me as a customer that way.

_jal 9y ago

Good lord. Assuming this is largely true (and Wells Fargo has lost any presumption of good faith), people need to start using the word "RICO".

cmurf 9y ago

Wells Fargo is yet another example of big bank that a long time ago should have been disallowed from buying any more banks. Local banks don't get away with shady stuff like this because you can go visit a banker in person. There is no such thing as a "local" Wells Fargo. It has the same customer service and anonymity as an internet forum.

megamindbrian 9y ago

Wells Fargo decided I had to pay a $50 fee for a failed transaction even though my mortgage was already paid for the month. They refused to remove the fee even though they could produce a signed transfer of service disclosure.

joncrane 9y ago

Disclaimer: I work for one of the top 10 banks in the US by assets. I was shocked, SHOCKED, to find out that our CEO isn't even a tiny bit of a lying, cheating sociopath. I started working here for the benefits and culture in the IT department, and assumed that the people responsible for paying for all the cool stuff we got were doing the same thing I assume all the other big banks do (Wells, JPMorgan Chase, Citi). I've only been here a little while, and not seen anything nefarious, though I only have visibility into the IT infrastructure mostly, and some development work. But I'm still wondering how a company can become this large and successful in this sector without griminess from the top. It's restored my faith in stuff a little bit. Also note, if you look at the top 10 banks in the USA, the bottom half are a small fraction of the size of the top 3, and we're in the bottom half.

i-machine-learn 9y ago
why don't you name the bank? It's always good for consumers to have examples of good ethical companies to do business with.
tnorthcutt 9y ago
our CEO isn't even a tiny bit of a lying, cheating sociopath How would you possibly know?
- antisthenes 9y ago
  And honestly, how is it even relevant? CEO is only one person, who could have been with a bank for any arbitrarily short period of time. The rest of management/leadership could still be rotten to the core.

BlackjackCF 9y ago

I'm not surprised. I might be misremembering, but I'm pretty sure Wells Fargo was also the bank where its employees were opening up bank accounts without their customers' knowledge for bonuses. Oh, and it's also one of the banks where whistleblowers were basically pressured into leaving and then blacklisted on a list that big banks circulate internally so they couldn't find jobs in the banking industry ever again.

eternalcode 9y ago
you are correct. It greatly saddens me this organization still exists.
- mtgx 9y ago
  That's why the "Too Big To Fail" mentality needs to be erased from Americans' and especially American politicians' minds. http://www.rollingstone.com/politics/news/u-s-sues-wells-fargo-yet-another-bailed-out-bank-accused-of-fraud-20121010 http://www.rollingstone.com/politics/news/u-s-sues-wells-far...
_jtrig 9y ago
They were. http://www.vanityfair.com/news/2017/05/wells-fargo-corporate-culture-fraud http://www.vanityfair.com/news/2017/05/wells-fargo-corporate...
iagreeentirely 9y ago
Please don't take this as a comment against you specifically. I am incredibly saddened by the fact that this association is weak enough that people could even entertain the idea that they are misremembering. Wells Fargo should be forever branded, and if you are doing business with them you really should stop.
- creepydata 9y ago
  Not so simple. My mortgage was sold to Wells Fargo without my input. I don't want to refinance because it wouldn't make sense financially as well as it could just be sold right back to Wells Fargo.

s73ver 9y ago

But clearly, what needs to happen is that the protections passed in the wake of the 2008 financial crisis need to be undone, and the Consumer Financial Protection Bureau needs to be neutered.

OliverJones 9y ago

This bank helped build the American West. It was there before the current batch of executives arrived. Will it still be there after they leave? Possibly, if they accept personal responsibility for these problems, pay big fines, do some time at Club Fed, and get out of banking. Will they do that? Probably not. After all, no organization in the 21st century is conceivably more valuable than the people who are lootingxxxxx running it.

pasbesoin 9y ago

Fraud. Personal culpability. Jail. The one thing that will put the brakes on such. P.S. Also worth mentioning, various governments have various laws and regulations prohibiting doing business with agents convicted of criminal activity. It would also be worth actually adhering to and enforcing those. A bigger threat than a fine that often represents a fraction of the profits already gained. But seriously, pierce the corporate veil and lock them up. Long past due. And experience has now shown, the only way to substantially reduce such activity (e.g. Savings and Loan Scandal of the '80's). P.P.S. Regarding this, and all the Federal agents/roles that have been reassigned from domestic and financial crime to "terrorism". More Americans face greater terror today from the prospect of being screwed over by fraudulant big business, than face real (as opposed to manufactured) terror over a terrorist attact. Or, a "terrorist" attack, looking at how broadly that label gets applied, today. (I was going to say, how broadly it gets "thrown around", only it isn't really being "thrown around", it's being used quite deliberately to foster self-serving agendas.)

shaftway 9y ago

I'd appreciate some clarification from someone... I get that generally changing the terms of a loan after everything is signed is sketchy. But in this case it looks like they were trying to do the customers a service: >The changes, which surprised the customers, typically lowered their monthly loan payments, which would seem to benefit borrowers, particularly those in bankruptcy. But deep in the details was this fact: Wells Fargo’s changes would extend the terms of borrowers’ loans by decades, meaning they would have monthly payments for far longer and would ultimately owe the bank much more. I guess the devil is in the details, but if they just lowered the minimum payment what's the harm to the consumer? AFAIK the vast majority of loans in the US are simply calculated. If you make your payments as expected on time you wouldn't be effected. If you aren't able to do that, then of course you're not paying off the principle as quickly and the term would be extended. Just like making extra payments will shorten the term. To be clear: changing the rate? Adding fees? Sure, that's really bad; rake them over the coals. But if it's just changing the minimum payment amount I'm missing the problem.

caseysoftware 9y ago
Changing the terms of the contract without explicit approval from both sides is beyond sketchy. At minimum, it's an unapproved amendment and therefore doesn't apply. At worst, it's a new contact that at least one side didn't agree to and therefore doesn't apply. It looks like people agreed without understanding the details. In this case, I'd wager by lowering the payments, less loans were "risky" and therefore their assets look better. That probably was for the benefit of repackaging those "assets" and/or better guarantees from the Fed.
scott00 9y ago
The most specific allegation is that they extended the maturity of the loan, which as a consequence lowered the minimum payment. Under normal circumstances, and with clear communication to the borrower, this is a change that can only be better for the borrower; they can continue to pay on the old schedule, or pay less on the new schedule over more time without going into default. However, many of the borrowers were in bankruptcy at the time of the change. During this process they were not in control of their own assets; the bankruptcy trustee was paying their bills for them. If the bankruptcy trustee paid the new lower minimum payment, it would result in the borrower paying more in interest than they otherwise might have.

cbanek 9y ago

I feel like everyone is being overcharged these days. From groceries, with cashiers not ringing up specials or coupons correctly, sometimes the wrong UPC/wrong price and they aren't even paying attention. Everyone else is trying to charge extra hidden fees, and sometimes they are illegal, like these. But honestly, most people are so out of it, so clueless, they don't notice if they have the paperwork in hand. Now we've really jumped the shark and are forging people's paperwork (account scandal) and submitting false documents.