In the years following the Great Recession, Wells Fargo bank bought Wachovia, expanded its physical footprint nationwide, and began raking in cash. It was a business success story — with one small but important caveat.
The way Wells Fargo did it was totally illegal.
The bank ramped up profits by creating over 3.5 million unauthorized bank accounts, set up in the names of unwitting customers. They then began hitting those accounts with more fees than Spirit Airlines charges for carry-on bags, paper tickets, non-paper tickets, or legs.
But then Wells Fargo got caught in the act, was slapped with gigantic lawsuits, and suddenly had to behave ethically in order to stay in business. And a funny thing happened.
They started losing a ton of profit.
Now to be clear, this doesn’t mean that Wells Fargo now loses money each quarter. They’re a mega-bank, after all. If they can’t make money, what chance do you stand, sucker? You couldn’t have acquired Wachovia in 2008, no matter how badly you may have wanted to.
So yeah, Wells Fargo still makes billions each quarter, but now it makes far fewer billions than it did when it was cheating its customers. To be precise, its profits fell 19 percent in the third quarter of this year, and in the community banking division — the part of the company that set up the sham accounts — profits fell 31 percent.
So where does this leave us? On the one hand, Wells Fargo is in big trouble with its shareholders — and also Senator Elizabeth Warren, but that’s a given. On the other hand, they still make billions of dollars each quarter and remain one of the most profitable businesses in America, with no executives in jail for their illegal activity.
So it’s sort of a win-some, lose-some situation. But If that sounds outrageous to you — particularly given the extent of Wells Fargo’s deception — maybe it’s time to speak with your feet and move your money to a community bank or a local credit union. They have greater accountability to account holders than to shareholders, and you’ll feel better about supporting people who don’t get chewed out by Congress on an annual basis.
Switching to one of those banks ought to buy you some measure of financial purity. At least, until they get bought out by Wells Fargo.