The Wall Street Journal
The resignation of Wall Fargo CEO John Stumpf will boost entrenched politicians more than it will protect consumers. By Holman W. Jenkins, Jr. | 733 words The Wells Fargo scandal, an embarrassing one for a bank whose reputation and business is built on retail consumers, ought to prod other institutions to reassess their employee incentive and monitoring systems. Low-level employees illegally opened accounts in the name of real or fake customers to meet unrealistic sales goals. Over several years, such behavior led to 5,300 firings. Now it has cost the bank’s CEO, a 34-year veteran of the firm, his job. And yet does anybody think the scandal would have blown up in the political sphere the way it did if this weren’t an election year? If the vehement person of Sen. Elizabeth Warren hadn’t raised the ante for her fellow politicians by demanding CEO John Stumpf’s head and a criminal investigation? If Sen. Warren’s status and fame didn’t depend on her periodically re-enacting the anti-banker tirades that lofted her to prominence in the first place? The Los Angeles Times rightly receives credit for highlighting the bank’s problems in December 2013, prompting action by an L.A. city prosecutor. But as the paper itself pointed out, the illicit practices were already being aired out in private litigation going back to 2009. Of particular note, seven employees in the bank’s Bluffton, S.C., branch sued after being fired in 2012 for improperly opening accounts in the names of 31 Chinese exchange students. The employees argued they were merely following a common Wells Fargo practice (and that their branch manager was a cocaine abuser). From the other side of the counter, David Douglas of Los Angeles, a customer, filed a lawsuit in 2013 with a narrative as compelling as any the Times would eventually produce. He described fake accounts opened without his authorization in the name of nonexistent businesses like “David E. Douglas Painting and Design”and “David Douglas Landscaping.”The point is, we have civil and criminal laws that cover such matters, and courts ready to offer redress, and local prosecutors eager to bring charges in the public’s name. They did their jobs. The scandal, for all practical purposes, was already two years in the past when it suddenly became convenient for Congress to show up and orchestrate hearings so it could bank some video of itself blow-torching a CEO. To get in on the act, Republicans even extended the outrage to the Consumer Financial Protection Bureau, the superfluous agency that Ms. Warren spawned as part of Dodd-Frank. The agency fell down on the job, they said, because it piggybacked on the work of the L.A. prosecutor, fining the bank $100 million on top of the $50 million imposed by local prosecutors (for a scandal that produced $2 million in improper fees, less than $1 per affected customer). Republicans hereby merely lend support to the fallacy that adding new law-enforcement agencies on top of old ones, and piling up more laws, will stop bad things from happening or serve any purpose other than undermining the rule of law itself—which is exactly what the CFPB has been doing in its short life. Just ask the U.S. appeals court that this week found the agency’s leadership structure unconstitutional. Mr. Stumpf’s abrupt resignation as Wells Fargo chief on Wednesday was a necessary gesture to get Ms. Warren off the bank’s back. The hiring and firing of CEOs does not operate on principles of justice but on what’s good for the business. Wells Fargo, under his tenure, was known for its successful avoidance of the subprime frenzy, its high JD Power customer satisfaction ratings, its unusually strong stock-market performance, its status as one of the top five payers of the U.S. corporate tax. Now the company will be known for the foreseeable future for signing up unwitting customers to sham accounts. Failing to phase out Mr. Stumpf’s now-devalued visage and replace it with somebody else’s—in this case Chief Operating Officer Timothy Sloan’s—would in these circumstances have been board malpractice of a high order. Especially given the likely re-empowerment of Democrats, and Ms. Warren, after November’s election. But if any of this leaves you admiring Washington’s attention to the public interest or believing that it was Congress that somehow exposed and corrected the Wells Fargo mess, you have missed the point. The charade has nothing to do with fixing any problem and everything to do with helping to keep the bums in office so they can continue to enjoy their perks and status.
