Wells Fargo was hit with more scandal. But does anyone care?
Earlier this month, Wells Fargo disclosed that it had mistakenly foreclosed on hundreds of homes over a five-year period. And yet, where was the outrage?
The announcement was just the latest in what’s amounted to a two-year streak of bad news for the bank, dating to its first admission regarding its phony-accounts scandal in September 2016. But unlike the storm of criticism directed at the bank nearly two years ago, which resulted in a change of CEO at Wells, the media reaction to the most recent revelation was barely a blip. And the bank’s stock price has been unaffected; Wells’ share price has dropped just 1.7% since the foreclosure-related news.
As the negative headlines pile up, a question arises: Has Wells fatigue set in?
It’s been an extraordinarily rough two years for the bank. In addition to the fake-accounts scandal, which drew the loudest public response, Wells has experienced problems involving abuses in its mortgage and auto lending operations, the repossession of service members' cars, a wealth management probe and refunds for add-on products including pet insurance, among other issues. And it’s finally settled a $2 billion case with the government over the origination and sale of faulty mortgage-backed securities in the run-up to the crisis.
The notice about the erroneous foreclosures, which was detailed in a securities filing, also included information about another ongoing Department of Justice investigation concerning the handling of tax credits for low-income-housing projects.
As government agencies wrap up pending inquiries and as the bank conducts its own internal reviews, more such headlines may well be coming. But whether policymakers, let alone the public, have the appetite to track the play-by-play is not yet clear.
“The public and lawmakers tend to have short attention spans, which inherently lessens the willingness to follow the extended ticktock of continued regulatory concerns,” said Isaac Boltansky, director of policy research at Compass Point Research & Trading.
As a result, it’s possible that the worst scrutiny for the megabank could be behind it, at least from an optics perspective.
Perhaps the biggest threat to the bank remains the midterm elections, which are just around the corner. If Democrats win control of the House, as some politicos are predicting they could, Rep. Maxine Waters, D-California, and other Wells critics can be expected to turn up the heat on the bank once again.
Waters, now the ranking member of the House Financial Services Committee, would likely chair the panel in a changeover of party control. She could pursue additional hearings with Wells executives and regulators about how they are responding to the numerous problems that have come to light.
“If the House flips, I think you’ll see quite a lot of zeal and pent-up demand,” said Bart Naylor, a financial policy advocate at the consumer group Public Citizen. “This latest Wells episode will simply be part of a fairly lengthy critique of that company.”
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Yet it seems like the response to each individual problem is potentially becoming more muted — despite the tangible harm to the 625 customers who erroneously had requests for loan modifications denied, including the 400 who were hit with a foreclosure.
For example, just a few policymakers have weighed in this time. Sen. Brian Schatz, D-Hawaii, sent a letter asking for more details, while Sen. Elizabeth Warren, D-Mass., fired off an angry tweet, in contrast to the waves of condemnation that have followed earlier announcements from the bank or regulators, particularly in the wake of the bogus-accounts scandal.
Of course, this particular disclosure landed in the middle of August, when Congress was on recess and when many staffers, consumer advocates and journalists were traveling on vacation. And while the problem had a very real impact on the hundreds who lost their homes, it was far less widespread than the fake-accounts issue, which affected millions of customers. In contrast to the high regulatory costs of past scandals, the bank has set aside just $8 million in restitution for homeowners who were affected.
Still, the bank has apologized for the accidental foreclosures, saying in a statement that “we’re very sorry that this error occurred and are providing remediation” to affected customers. A spokeswoman would not comment more broadly on the public attention the bank has faced in recent years.
Of course, this is not to say that Wells’ time in the negative spotlight is ending. Those concerned about Wells Fargo’s internal controls are likely to see the latest announcement as simply more of the same.
“It just reinforces the narrative,” said Edward Mills, a policy analyst at Raymond James.