Wells Fargo Just Kicked Innovation in the Chin

  • JJ Hornblass
  • September 19, 2016
  • 0

canstockphoto17533266It is always doubly upsetting to see vulgar business behavior from a seemingly platinum-plated brand.

We have certainly been among those that have lauded Wells Fargo & Co. in the past, praising its lab and innovation practices, its mobile banking growth, had its executives speaking at our events, and even named it one of the coolest brands in banking in 2013.

Which is why we feel particularly shamed by the rampant dupe that Wells Fargo perpetrated. Yes, Congress will throw some public shame on John Stumpf, Wells’s CEO, tomorrow, but it is not enough.

If you read one blog on the Wells scandal, read this open letter from Terence Roche of Cornerstone Advisors. Roche is a co-founder of the consulting firm, and has the gray beard to back up his lambaste of Wells.

Roche writes that Wells can either “make this go away” or “word hard and transparently to make it right.”

[W]e have a suggestion for you, the senior leaders of [Wells Fargo]. You need to take whatever amount of money each of you made in salary, bonus and options because of this and give it back. Take it out of your pocket and give it back. Or give it to charity. Because you don’t deserve a penny of it. You need to show all of your constituents, in a very concrete way, that you understand this.

The most prescient point from Roche is his point about regulatory compliance. In duping more than 2 million customers, Wells just gave every regulator the right to rake further every bank or credit union’s existence. Here’s how Roche put it:

You also need, in some way, to apologize to your peers and competitors. Two of their biggest fears are the cost of compliance and the [Consumer Financial Protection Bureau] and other regulators overstepping their mandates. Your actions gave the CFPB absolute legitimacy for years. Now we have to worry how much time and money the rest of the banking industry will need to spend to prove that they didn’t do what you did—just like they had to after the mortgage mess of 2008.

This is absolutely true. The regulatory mud just got thicker, and that will put a drain on innovation. All that innovation work and spending Wells has put in over the last several years — and it is significant — is likely negated by the increased regulatory burden it just foisted on banking.

So, yes, give back the money, Stumpf (you, too, Carrie Tolstedt), even if it won’t make a difference to banking or to you. At least, it will be some tangible evidence that unethical behavior has a personal cost.

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JJ started the first iteration of Bank Innovation back in 2007, and has been working on it ever since. He also serves as President & Chief Executive Officer of Royal Media, Bank Innovation’s parent. He founded Royal in 1995 and oversees all aspects of the New York-based diversified media company. Prior to forming Royal, JJ was on the editorial staff of American Banker, the daily newspaper, and worked as an editor of a business magazine in Hong Kong. As a reporter and editor, he has won journalism awards from the National Press Foundation, Newsletter & Electronic Publishers Foundation, and the Reader’s Digest Foundation. He has a BS in Economics from Yeshiva University and a Master’s from the Columbia University Graduate School of Journalism. He was also a Fellow at the University of Wisconsin-Madison Graduate School of Banking. He lives in New York City with his wife, two daughters, and son. He counts among his accomplishments one New York City Marathon, two New York City Triathlons and the 2010 Father’s Day 5K, the first race he ever ran with his daughters. He can be reached at hornblass@gmail.com or 212-564-8972.

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