Wells Fargo CEO Tim Sloan at conference in Aspen, Colorado in 2017. / Stuart Isett/Fortune Brainstorm Tech

Bankers’ Robberies

Is Wells Fargo America's most odious bank?

Wells Fargo CEO Tim Sloan at conference in Aspen, Colorado in 2017. / Stuart Isett/Fortune Brainstorm Tech
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It’s rare that our overheated news cycle grants pauses amid its many Trumpian derangements to grant us a vision of the shape of things to come. But just as the Senate was moving in cloddish bipartisan concert last week to repeal the quite minimal regulatory protections against financial-industry fraud and thievery enacted in the 2010 Dodd-Frank law, the board of Wells Fargo—one of the nation’s largest, and undeniably the worst, mortgage lender—moved to boost compensation for CEO Tim Sloan by a cool 35 percent, or $4.6 million. For mere civilians in the mogul-led financial sector, it’s worth noting Sloan’s total compensation of $17.6 million a year works out to $48,219 a day. By way of edifying comparison, the median household annual income in the United States peaked just north of $59,000 in 2016.

This metric is especially telling in Wells Fargo’s case, since an average day’s work for the bank’s executives usually involves shaking down middle-class and minority borrowers and account holders for all they can. The bank pursued this mandate with particularly striking brio when the clients in question were other than white; a government investigation in the wake of the 2008 mortgage meltdown determined that the bank charged higher fees to 34,000 African American and Hispanic mortgage borrowers compared to the costs assessed on white borrowers with similar credit profiles. In 4,000 such cases, the government found, bank officials steered minority borrowers into subprime mortgages—yes, the loan packages that ignited a good deal of the meltdown, while disproportionately sinking African American borrowers into unrecoverable debt—when they could readily have obtained cheaper and more secure loans via conventional mortgages. In a 2012 consent decree permitting the bank to issue a pro forma denial of culpability, Wells Fargo agreed to pay $125 million to African American and Hispanic borrowers victimized by its predatory lending practices between 2004 and 2009, while giving another $50 million to homebuyer assistance programs in eight metropolitan regions hardest hit by discriminatory lending.

Wells Fargo agreed to pay $125 million to African American and Hispanic borrowers victimized by its predatory lending practices between 2004 and 2009.

Oh, but that was then, you might be thinking. CEO Tim Sloan surely must have understood that he was appointed as a change candidate, charged with instituting thoroughgoing reforms to the bank’s rancid record when he took charge in 2016. Well, let’s roll the tape, shall we? Just last month, Sacramento, California, filed a federal suit alleging that the bank “intentionally steered minority borrowers into higher cost loans because of their race or ethnicity.” According to the suit, black borrowers in Sacramento with credit ratings above 660 are 2.8 times more likely than their white counterparts to be saddled with a high-risk or high-cost loan; Hispanic borrowers were 1.8 times likely to end up in the riskiest and costliest stretch of the mortgage market. Philadelphia is pursuing similar legal actions against the bank, as Baltimore and Miami previously have. Wells Fargo officials of course are denying any wrongdoing, but it’s a funny thing; in each of these suits, former bank employees are claiming that they were instructed by superiors to redline and generally gouge and defraud African American and Hispanic borrowers.

Or consider Jesse Eisinger’s bracing ProPublica report on the bank’s common practice, in its L.A. regional offices, of piling application fees on borrowers from lower-income backgrounds (who were, far from coincidentally, less likely to question bank loan protocols waved before them on the fly) for delays in mortgage applications that Wells Fargo itself was responsible for. A whistle-blowing former Wells Fargo loan officer named Frank Chavez exposed the price gouging in a letter to the Senate banking and House financial services committees last November. The basic hustle marks one of the few instances in which the overworked modifier “Kafkaesque” actually applies:

Anticipating that it couldn’t close on time, the bank adopted a variety of strategies to shift responsibility to customers. The “most blatant methods of attempting to transfer blame onto customers for past and expected future delays,” Chavez wrote, included having loan processors flag “the file for ‘missing’ customer documentation or information that had already been provided by the borrower.” The customers would have to refile, blowing the deadline.

Sometimes loan officers would ask customers to submit extra documents that Wells Fargo did not need for its initial assessments, burdening them with paperwork to ensure they wouldn’t meet the deadline. On occasion, employees built in a cushion, quoting a higher fee at the beginning. That way, they didn’t have to go back to tell the customer about the extra fee at the end.

Yes, Wells Fargo also denies wrongdoing in this case; and yes, three other former bank mortgage officers have come forward to confirm Chavez’s account and explain that such practices were tied to the L.A. region’s performance bonus payouts.

When they’re not feeling especially bigoted, the lords of Wells Fargo have overseen some truly disruptive modes of shaking down their client base. Since 2009, the bank has enrolled 3.5 million of its own account holders in fake credit card accounts—another shameless exercise in price gouging for the sake of price gouging. (In a nice flourish of felonious efficiency, the bank also enrolled some 528,000 account holders in automatic-draft payments for the credit cards without their consent.) Meanwhile, around 570,000 Wells Fargo clients were forced by bank officials to take out unnecessary auto insurance—a scam that resulted in 20,000 repossessed cars for the hapless marks. Since company officials can’t very well deny corporate brigandage on a scale this vast, they blamed the scandal on what Sloan has dubbed “unacceptable sales practices at our retail banks,” making it seem like a handful of overzealous bad apples at local branches got out of hand.

In reality, former bank employees report, shaking down the Wells Fargo client base was executive-sanctioned policy under the company’s oafishly named “Gr-eight program,” which set out to pile each beggared Wells Fargo account holder with eight different financial instruments of dubious-to-negative value. “There would be days when we would open up five checking accounts for friends and family just to go home early,” former personal banker and sales representative Anthony Try told CNN Money reporter Matt Egan. Another unnamed former Wells Fargo worker said that the rolling heist took place entirely at the behest of bank higher-ups, who instructed him to open up bogus accounts in clients’ names, and if confronted about the practice later, to claim it was all a mistake: “This was not done by employees trying to hit their sales numbers,” he said, “it was more of threats from upper management.”

Yes, upper management like Tim Sloan, who’s earned, oh, $15,000 or so in the time it’s taken me to review the abysmal recent doings of the Wells Fargo power elite. And recall that the bulk of all this wrongdoing has taken place under the already loose strictures of the Dodd-Frank reforms. If the House of Representatives proceeds as expected with the formal repeal of the law, Tim Sloan’s reign of idiot terror will likely once more be the de facto industry standard in a banking sector poised to give a brash new meaning to the expression “race to the bottom.” How confident can we be in such prophesying? Well, remember whistleblower Frank Chavez, who exposed the fee-gouging regime of Wells Fargo in L.A. in a letter to Congress? It turns out Congress never bothered to write him back.

Chris Lehmann is editor in chief of The Baffler and author of Rich People Things. His latest book, The Money Cult, is out now from Melville House.

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