The Corporate Death
Penalty for Wells Fargo?
Wells Fargo’s
seemingly endless transgressions have reached the point that there is growing
discussion of a possibility rarely considered even in some of the most
egregious corporate scandals: putting it out of business.
Rep. Maxine Waters,
the top ranking Democrat on the House Financial Services Committee, recently
issued a report that recounted the banks sins
(including a reference to the $11 billion Violation Tracker tally of its penalties), saying that
Wells has “demonstrated a pattern of egregiously harming its customers.”
Such statements have
been heard frequently since the Wells bogus account scandal came to light last
year. But Waters goes on to argue: “When a megabank has engaged in a pattern of
extensive violations of law that harms millions of consumers, like Wells Fargo
has, it should not be allowed to continue to operate within our nation’s
banking system, and avail itself of all of the associated privileges afforded
to it.”
A similar sentiment is expressed in a letter just submitted to the Office of the Comptroller of the Currency by the AFL-CIO, Americans for Financial Reform and five other groups. The letter asks the OCC to consider whether, “in light of the bank’s pattern of law breaking,” the bank “should forfeit its national banking charter.”
The issue was even
brought up in a recent Congressional hearing in which Wells CEO Tim Sloan was
being grilled by members of the Senate Banking Committee. Sen. Elizabeth Warren
said that Sloan should be fired, while Sen. Brian Schatz of Hawaii went further
by asking Sloan: “Why shouldn’t the OCC
revoke your charter?”
“We serve one out of
every three Americans, we have 270,000 team members,” Sloan responded before
Schatz cut him off, saying: “So, you’re too big.”
Those comments
encapsulate how a debate about the possible shutdown of a bank or other company
as large as Wells Fargo would play out. The corporation would emphasize the
disruptive effect on its customers and employees, suggesting they would be the
unintended victims. Of course, in the case of Wells it was the bank itself that
victimized customers and staff.
Schatz’s comment
points to the direction any serious effort to penalize a rogue corporation
should take: the emphasis should not be a precipitous shutdown but rather a
breakup into smaller entities that would be subjected to rigorous regulation
and scrutiny. Care should be taken in the process to protect the interests of
customers and employees, though upper level executives should be shown the
door.
Discussions of the
corporate death penalty have come and gone over the years. The need to deal
with a brazen recidivist such as Wells may finally bring more serious
consideration to a tool that could be more effective than billions in penalties
in ending the ongoing corporate crime wave.