Fake Accounts Still Haunt Wells Fargo

Oh Wells Fargo.

The Wells Fargo & Co. fake-accounts scandal is one of the highest-profile cases of banking villainy since the financial crisis, but it is an odd kind of villainy. If you were a cartoon-villain banker, this is pretty much the last thing you would do. Wells Fargo’s retail bankers were under a lot of pressure to open accounts, so they responded by opening fake accounts. This angered customers and the public, but it’s not like it did Wells Fargo any favors. Wells Fargo’s goal in pressuring its employees to open lots of accounts for customers was to open lots of real accounts, to get customers to make deposits and take out loans and do transactions and generate revenue for Wells Fargo. The thing about fake accounts is that they mostly don’t bring in any money: At least 95 percent of Wells Fargo’s fake accounts brought in zero dollars, while the rest seem to have brought in about $2.4 million in fees, a rounding error for a bank with $88 billion of net revenue last year, and orders of magnitude less than the fines Wells has had to pay. The fake-accounts scandal is not a story about a clever greedy bank exploiting customers for money; it is a story about a dumb greedy bank with poorly designed incentives and inadequate supervision harming customers without making any money.