7 ms·

OK, but Wells Fargo made $5 billion last year, and the activity they were fined for took place over many years, which leaves me to ask: after the fines, was thi

OK, but Wells Fargo made $5 billion last year, and the activity they were fined for took place over many years, which leaves me to ask: after the fines, was this activity profitable or not? If it was profitable, do the fines actually dissuade future dishonesty? Also, apparently Wells Fargo thinks that 27,000 people lost their cars over this. I bet none of those people will be made whole. Cars are really essential things: lose your car and you may be unable to take a child to school, unable to shop for food, or even unable to get to work. It's a pity that can't be undone.

johnwheeler 9y ago
No, they made 22 billion. You're probably reading their quarterly figures. source: https://www.nasdaq.com/symbol/wfc/financials?query=income-statement https://www.nasdaq.com/symbol/wfc/financials?query=income-st... The scams in themselves were not profitable. For the cross-selling, they made an extra 100 million or so over the course of many years, I don't recall the figures I read.
- perseusprime11 8y ago
  This billion dollar fine is like a small change for them. Warren Buffet has a lot of exposure to this company and he has been influencing to let them go for a long time. Go figure!
  - johnwheeler 8y ago
    Well, the shareholders have suffered outsize to the amount of damage to the victims in dollar terms by orders of magnitude. Probably 100-150 billion, conservatively, wasn’t realized. Wells didn’t get in trouble during the financial crisis because they stuck to conventional banking instead of investment banking, like their peers. Their reputation was unmatched. Since the crisis WFC has floated low double digits percentage wise around their market cap, while all its peers have doubled and tripled in market cap. Wells holders have missed the boat they waited ten years for, and probably will live in purgatory for another 4 or 5 years because of this mess.
    - agency 8y ago
      Won’t somebody please think of the shareholders?
deleted 9y ago
[deleted]
ribosometronome 9y ago
>I bet none of those people will be made whole. At this level of fine? Probably not. $1,000,000,000 is a substantial amount of cash but that would only be ~$37,000 a person if 100% of the fine went to the only the victims who lost their vehicles. Certainly enough to replace a lost car but far from adequate to cover damages from the effects of losing a vehicle and living with that repossession on your credit history. And that doesn't even account for that 27,000 was only the number that suffered repossessions, not the number victimized by Wells Fargo.
- stjohnswarts 8y ago
  They also have to pay back the people they snookered all their money plus interest. That's been stated in the articles that I've ready about the matter.
openasocket 9y ago
> I bet none of those people will be made whole I don't think this is about making them whole, it's just about fining them. I could be wrong, but I believe those victimized are still welcome to conduct a civil action against Wells Fargo.
- stjohnswarts 8y ago
  You're wrong, in addition to the fine paid to the Feds, they also have to pay back the people they lied to along with interest.
  - TheCoelacanth 8y ago
    They have to pay back the direct damages that they caused. They don't have to pay all of the damages resulting from the initial damage. If the money they took caused someone's car to be repossessed which caused them to lose their job, they don't have to pay for the lost income from the job.
    - openasocket 8y ago
      Well, under this ruling they don't have to. But the victims didn't sign off on this, they are perfectly entitled to sue for whatever they think they deserve. (Though if they intend to do so they should absolutely not accept the money they try to give them as a result of this deal, as that will make their case that much harder to win)
sillysaurus3 9y ago
Cars are really essential things: lose your car and you may be unable to take a child to school, unable to shop for food, or even unable to get to work. It's a pity that can't be undone. There's an app called Getaround (https://www.getaround.com/ https://www.getaround.com/) which works really well for this, if you live in a big city.
MichaelApproved 8y ago
Fines don’t seem to be preventing these cheats from ripping off consumers. When a bank cheats its customers, they should be prohibited from providing those services for several years. Shut down their mortgage division and force them to sell it off. That is the only real penalty that has teeth.
- dingo_bat 8y ago
  What about the people currently having a mortgage with the bank? You wouldn't want to hurt them.
  - fiddlerwoaroof 8y ago
    Don’t banks generally bundle and sell mortgages anyway?
  - wnevets 8y ago
    fannie mae probably owns the mortgage anyway
- avaika 8y ago
  Well, that's shooting own leg for government and people: 1. This is a business which generates taxes 2. This is a business which generates employment 3. This is a business which provides a service to people and current clients will suffer from shutdown. If you can simply fine it hard enough to make them stop cheating like that in future, that should be more than enough. Simple fines to make cheats unprofitable should do the thing. Also the rule "to shutdown" the entire division might be misused on the wrong way or to blackmail the business. Once you shut down the division, it's much harder to reverse it, than simply to return a fine.
  - Retric 8y ago
    If it's sold off then the buyer is going to serve the costumers and pay taxes so no real loss for society. The larger issue is it's a minimal impact on the company and the people who actually commit ed the crimes.
chiefalchemist 8y ago
Will fines dissuade future dishonesty? Not likely. But jail time of the guilty decision makers would. Steal a candy bar? Go to jail. Knowingly ruin someone's life? No problem. The shareholders pay for it.
- freddie_mercury 8y ago
  Actually there is a lot of real world evidence that fines dissuade honesty.
  - rbanffy 8y ago
    Were the decision makers involved adequately punished? Will they ever do something like it again? Fines dissuade from making exactly the same thing but that doesn't seem to prevent different kinds of scam.
    - keganunderwood 8y ago
      ZTE apparently paid bonuses to 30+ people even though that were involved in some kind of violation. I bet Wells Fargo well also pay the CEO and the board very handsomely.
      - andrepd 8y ago
        As it was in 2009 where me and you and every John Q Taxpayer contributed to the yacht and private jet fund for the Wall Street execs that stole pension money from millions of Americans, tripled unemployment, caused hundreds of thousands of excess deaths in the subsequent economic downturn... Nothing pitchforks, molotovs, and sturdy rope wouldn't solve, but I guess we're just too comfortable to do anything but passively let them f*ck us in the butt.
    - freddie_mercury 8y ago
      "dissuade" does not mean "completely prevent forever in all circumstances" Dissuade means something more like "reduce the chances of it happening". If the OP had written "fines do not completely prevent forever the chances of a bad thing happening" everyone would have realised that was a nonsensical bar because even putting in jail doesn't do that.
adityasheode 8y ago
I actually agree with you on this, Wells Fargo was doing this malpractice for years and the fine is really disproportionate. I mean even with the fine they still have a net income of over $4 billion. The regulator needs to levy a more stringent penalty. The puny penalty alludes to a bonhomie between the company and the regulators
thetruthseeker1 8y ago
Fines are usually multiple times more than the value they cheated which seems to be the case here( ~100M$ ) - so it is fair in some sense. Just because they are still profitable doesn’t mean the fine was unfair. There might be other divisions were people worked honestly, let’s not paint everybody with a broad brush or sound despondent.
perpetualcrayon 8y ago
I think it could be looked at another way also. What amount of potential earnings did they lose out on over the course of several years because the public are now aware they are potentially a dishonest (at least extremely careless) company to be avoided? I still don't fill my gas tank at BP stations...
mcintyre1994 8y ago
HSBC only got $1.9bn for money laundering for terrorists and cartels, there's no intention anywhere in financial regulation to punish big banks.

johnwheeler 9y ago

No, they made 22 billion. You're probably reading their quarterly figures. source: https://www.nasdaq.com/symbol/wfc/financials?query=income-statement https://www.nasdaq.com/symbol/wfc/financials?query=income-st... The scams in themselves were not profitable. For the cross-selling, they made an extra 100 million or so over the course of many years, I don't recall the figures I read.

perseusprime11 8y ago
This billion dollar fine is like a small change for them. Warren Buffet has a lot of exposure to this company and he has been influencing to let them go for a long time. Go figure!
- johnwheeler 8y ago
  Well, the shareholders have suffered outsize to the amount of damage to the victims in dollar terms by orders of magnitude. Probably 100-150 billion, conservatively, wasn’t realized. Wells didn’t get in trouble during the financial crisis because they stuck to conventional banking instead of investment banking, like their peers. Their reputation was unmatched. Since the crisis WFC has floated low double digits percentage wise around their market cap, while all its peers have doubled and tripled in market cap. Wells holders have missed the boat they waited ten years for, and probably will live in purgatory for another 4 or 5 years because of this mess.
  - agency 8y ago
    Won’t somebody please think of the shareholders?

deleted 9y ago

[deleted]

ribosometronome 9y ago

>I bet none of those people will be made whole. At this level of fine? Probably not. $1,000,000,000 is a substantial amount of cash but that would only be ~$37,000 a person if 100% of the fine went to the only the victims who lost their vehicles. Certainly enough to replace a lost car but far from adequate to cover damages from the effects of losing a vehicle and living with that repossession on your credit history. And that doesn't even account for that 27,000 was only the number that suffered repossessions, not the number victimized by Wells Fargo.

stjohnswarts 8y ago
They also have to pay back the people they snookered all their money plus interest. That's been stated in the articles that I've ready about the matter.

openasocket 9y ago

> I bet none of those people will be made whole I don't think this is about making them whole, it's just about fining them. I could be wrong, but I believe those victimized are still welcome to conduct a civil action against Wells Fargo.

stjohnswarts 8y ago
You're wrong, in addition to the fine paid to the Feds, they also have to pay back the people they lied to along with interest.
- TheCoelacanth 8y ago
  They have to pay back the direct damages that they caused. They don't have to pay all of the damages resulting from the initial damage. If the money they took caused someone's car to be repossessed which caused them to lose their job, they don't have to pay for the lost income from the job.
  - openasocket 8y ago
    Well, under this ruling they don't have to. But the victims didn't sign off on this, they are perfectly entitled to sue for whatever they think they deserve. (Though if they intend to do so they should absolutely not accept the money they try to give them as a result of this deal, as that will make their case that much harder to win)

sillysaurus3 9y ago

Cars are really essential things: lose your car and you may be unable to take a child to school, unable to shop for food, or even unable to get to work. It's a pity that can't be undone. There's an app called Getaround (https://www.getaround.com/ https://www.getaround.com/) which works really well for this, if you live in a big city.

MichaelApproved 8y ago

Fines don’t seem to be preventing these cheats from ripping off consumers. When a bank cheats its customers, they should be prohibited from providing those services for several years. Shut down their mortgage division and force them to sell it off. That is the only real penalty that has teeth.

dingo_bat 8y ago
What about the people currently having a mortgage with the bank? You wouldn't want to hurt them.
- fiddlerwoaroof 8y ago
  Don’t banks generally bundle and sell mortgages anyway?
- wnevets 8y ago
  fannie mae probably owns the mortgage anyway
avaika 8y ago
Well, that's shooting own leg for government and people: 1. This is a business which generates taxes 2. This is a business which generates employment 3. This is a business which provides a service to people and current clients will suffer from shutdown. If you can simply fine it hard enough to make them stop cheating like that in future, that should be more than enough. Simple fines to make cheats unprofitable should do the thing. Also the rule "to shutdown" the entire division might be misused on the wrong way or to blackmail the business. Once you shut down the division, it's much harder to reverse it, than simply to return a fine.
- Retric 8y ago
  If it's sold off then the buyer is going to serve the costumers and pay taxes so no real loss for society. The larger issue is it's a minimal impact on the company and the people who actually commit ed the crimes.

chiefalchemist 8y ago

Will fines dissuade future dishonesty? Not likely. But jail time of the guilty decision makers would. Steal a candy bar? Go to jail. Knowingly ruin someone's life? No problem. The shareholders pay for it.

freddie_mercury 8y ago
Actually there is a lot of real world evidence that fines dissuade honesty.
- rbanffy 8y ago
  Were the decision makers involved adequately punished? Will they ever do something like it again? Fines dissuade from making exactly the same thing but that doesn't seem to prevent different kinds of scam.
  - keganunderwood 8y ago
    ZTE apparently paid bonuses to 30+ people even though that were involved in some kind of violation. I bet Wells Fargo well also pay the CEO and the board very handsomely.
    - andrepd 8y ago
      As it was in 2009 where me and you and every John Q Taxpayer contributed to the yacht and private jet fund for the Wall Street execs that stole pension money from millions of Americans, tripled unemployment, caused hundreds of thousands of excess deaths in the subsequent economic downturn... Nothing pitchforks, molotovs, and sturdy rope wouldn't solve, but I guess we're just too comfortable to do anything but passively let them f*ck us in the butt.
  - freddie_mercury 8y ago
    "dissuade" does not mean "completely prevent forever in all circumstances" Dissuade means something more like "reduce the chances of it happening". If the OP had written "fines do not completely prevent forever the chances of a bad thing happening" everyone would have realised that was a nonsensical bar because even putting in jail doesn't do that.

adityasheode 8y ago

I actually agree with you on this, Wells Fargo was doing this malpractice for years and the fine is really disproportionate. I mean even with the fine they still have a net income of over $4 billion. The regulator needs to levy a more stringent penalty. The puny penalty alludes to a bonhomie between the company and the regulators

thetruthseeker1 8y ago

Fines are usually multiple times more than the value they cheated which seems to be the case here( ~100M$ ) - so it is fair in some sense. Just because they are still profitable doesn’t mean the fine was unfair. There might be other divisions were people worked honestly, let’s not paint everybody with a broad brush or sound despondent.

perpetualcrayon 8y ago

I think it could be looked at another way also. What amount of potential earnings did they lose out on over the course of several years because the public are now aware they are potentially a dishonest (at least extremely careless) company to be avoided? I still don't fill my gas tank at BP stations...

mcintyre1994 8y ago

HSBC only got $1.9bn for money laundering for terrorists and cartels, there's no intention anywhere in financial regulation to punish big banks.