In the aftermath of the financial crisis a decade ago, Wells Fargo was one of the few major banks to emerge untarnished. But the gleaming reputation didn’t last.
A few years later a parade of scandals emerged, starting with the discovery that thousands of bank employees had created 2 million fake deposit accounts and credit cards in the names of its customers in a systemic scheme to boost revenues.
The San Francisco-based company paid $185 million in fines and promised to curb the kind of sales goals that inspired the fraudulent behavior. The scandal seemed like a rare misstep by a storied institution.
Yet examples of abusive treatment of customers just kept on emerging and making headlines. Yahoo Finance even created a timeline of what Wells had been accused of doing: repossessing the cars of military service members, firing a whistleblower, overcharging small-business operators, discriminating against black and Latino borrowers, and several more allegations.
Late last month, CEO Timothy Sloan, a 31-year employee of Wells Fargo, abruptly stepped down in the face of increasing scrutiny of the banking company by Washington regulators and elected officials. He was the second CEO to depart in the midst of the scandals, after John Stumpf, another Wells veteran.
Now the company says it’s looking outside its corporate culture for its next leader. In case there was any doubt of the need for an outsider to take the reins, Wells Fargo’s largest investor, Warren Buffett, drove the point home in an interview this week with the Financial Times.
“They just have to come from someplace [outside Wells] and they shouldn’t come from Wall Street,” said Buffett, who owns 10% of the company, worth about $22 billion. “They probably shouldn’t come from JPMorgan or Goldman Sachs.”
Hiring a leader from one of the big Manhattan-based banks would be sure “to draw the ire of a significant percentage of the Senate and the U.S. House of Representatives, and that’s just not smart,” he said.
Buffett added that he believes Wells Fargo is still in a strong competitive position, and that consumers have generally stuck with the bank, despite the scandals. “One household out of every three does business with Wells one way or another,” he said.