 “The best way to rob a bank is to own one.” - William K. Black “The second-best way is to get caught... and watch nothing happen.” - Me To Whom It May Concern (You): On March 5, the Federal Reserve Board officially terminated its 2018 enforcement action against Wells Fargo (WFC). That was the final piece of the Fed’s 2018 enforcement action. All gone… In June 2025, the Fed lifted the asset cap… the order that had frozen Wells Fargo’s balance sheet at $1.95 trillion. This was the first time the Federal Reserve had ever imposed an asset cap on a major U.S. bank. That means the bank couldn’t grow until it fixed its internal controls. Well, now the enforcement action is over. The Fed has said that the bank met “all required conditions.” The Fed said the remediation work had “spanned nearly a decade.” A decade… It wasn’t a life sentence (although, it should have been)… And now they have a press release that reads like a graduation ceremony. Congratulations… You’ve been rehabilitated. For my friends in the back… It’s important to remember the bank's misconduct, which should have been shattered into 1 million little pieces. It wasn’t one incident. It wasn’t a single rogue employee. It wasn’t even a product line. It was a pattern… one that survived several CEOs, consent orders, congressional hearings (performance theater), and $28 billion in fines. The names on the corner offices changed. The behavior over decades didn’t. That wasn’t a compliance failure. It was a strange form of inheritance. If the same misconduct survives several rounds of management, settlements, and regulatory hammering… the pattern tells you things you don’t see in the financial news or in press releases. You’ve uncovered an institution that the system has little interest in having the crime match a deserved punishment. That’s not just Too Big to Fail… That’s Too Big to End. On March 5, the Fed just told one of the worst financial actors in banking history… “You’re good to go play again...”
The Ways They TakeThis is a publication about extraction. And this is a new form of it. One that we haven’t fully explored. To understand why the Wells Fargo asset cap existed, you have to look at the company’s record. All of it requires examination… in one place. This was not a company that made bad mistakes. This was a company that made choices. Before the asset cap came… There was a story that required an understanding of the company’s character and the regulator’s very pathetic efforts to regulate. And it’s not a very comfortable story. 2002-2009: “Ghetto Loans”Before the Great Financial Crisis (and before the asset cap event), there was a Justice Department complaint. The complaint said that Wells Fargo loan officers steered Black and Hispanic borrowers into subprime mortgages… even when those borrowers qualified for prime rates. Internal emails from loan officers referred to minority customers as “mud people.” Subprime loans in minority communities were called “ghetto loans.” According to allegations in the case, some employees believed Black borrowers were easier to exploit. The DOJ complaint alleged the bank targeted Black churches and community organizations, sending loan officers to conduct “wealth building” seminars that were really just subprime sales events dressed up in Sunday clothes. According to the DOJ, more than 30,000 minority borrowers were charged higher fees or rates than similarly qualified white borrowers. More than 4,000 were improperly steered into subprime loans they never should have been sold. In 2012, the DOJ settled for $175 million. That was the second-largest fair lending settlement in history at the time. It was only… $175 million. Remember… that was the fine for what amounted to the systematic destruction of wealth in Black communities during the worst housing crisis in 80 years. Hold that number. Because it’s going to look small by the time we’re done here. 2011-2016: The Fake AccountsThis is the same company with the same incentives… but a different product line. And this is where we start the next chapter of Wells Fargo’s culture. During those years, employees opened up to 3.5 million unauthorized accounts… deposit accounts, credit cards, lines of credit… without customer knowledge or consent. They did it to meet aggressive internal sales targets set by their leaders. The bank charged customers fees on accounts they never opened. Customers’ credit scores were damaged by activity they never authorized. Some reports suggest that customers may have lost their homes due to this. The pressure was so intense that employees who refused to participate were pushed out, according to reports. The ones who stayed opened fake accounts because their compensation, careers, and livelihoods depended on it. CEO John Stumpf called it “cross-selling.” The bank called it a “retail strategy.” Federal prosecutors alleged that the conduct was fraud. They saw $3 billion in combined criminal and civil penalties. Stumpf was fined $17.5 million and banned from banking. Five additional executives were fined a combined $36 million. The bank paid another $480 million to settle shareholder lawsuits and $142 million in customer class actions. Now, this $3 billion sounds enormous until you stack it against the revenue machine underneath it. But Wells Fargo generated over $80 billion in revenue the year the settlement was announced. The fine was a few weeks’ income. And their incentive to keep extracting never went away. So don’t worry… it just gets worse. 2012-2017: Forced Auto InsuranceHere we go… the same bank with the same logic and different victims… Between 2012 and 2017, Wells Fargo partnered with National General Insurance to automatically deduct collision insurance premiums from customer accounts… whether or not the customer already had coverage. Over 800,000 customers were affected. In this case… 274,000 were pushed into delinquency because of charges they never authorized. Nearly 25,000 vehicles were wrongfully repossessed… many belonging to active-duty military members and veterans. If an ordinary business owner pulled this on 25,000 customers, prosecutors would not call it a customer-service issue. Wells Fargo paid a settlement. Same story… different day… But… It Keeps Going…
Multiple regulators have imposed fines on this company over the past two decades. The total, according to the Violation Tracker database: $27.86 billion in penalties since 2000. That’s the GDP of Lebanon… But let’s have some fun… Let’s calculate $28 billion over 25 years, which comes to about $1.1 billion per year. Wells Fargo earns roughly $15 billion in net income per year. Two and a half decades of systemic misconduct cost them 7% of annual profit. If a punishment aims to change behavior, you measure it by what happens after the punishment ends. Substantial progress.
What’s Beneath the NoiseThe enforcement system doesn’t end institutions like this. It manages them. The fines are overhead. The consent orders are timeouts. And the graduation ceremony at the end tells you everything you need to know about who the system was designed to protect. We were never on the guest list. We were the main course. In every previous volume of Postcards, I’ve mapped an extraction mechanism. We’ve covered energy, debasement, insurance, time demographics, the kill chain, copper, and land. All of those mechanisms extract resources. But none of them work without permission. And I haven’t named the one that grants it… That’s the enforcer. Every financial system has one. The institution that decides which violations are survivable. Wells Fargo survived all of them. Every extraction mechanism I’ve mapped requires permission to operate at scale. Someone has to sign the consent order, wait nearly a decade, and then sign the release. Someone has to call $28 billion in fines “substantial progress.” That’s the enforcer. The enforcer doesn’t prevent extraction. It regulates it… in the original sense of the word. It makes the extraction orderly. It provides boundaries that are wide enough to be profitable and narrow enough to be defensible in a press release. In ordinary industries, repeated misconduct eventually ends a company. States might revoke a license… Regulators might shut a firm down. In banking… however… the system uses settlements, consent orders, and fines instead. The institution survives, and the behavior adapts. The bank tends to emerge bigger, more profitable, and less constrained than ever. Wells Fargo isn’t the real story here. Wells Fargo is just the most visible example. The real story is that our system absorbs misconduct at the top and imposes fatal regulatory burdens at the bottom. It can’t end the largest banks… It just steadily reduces the number of smaller ones over time. The Fed can’t end the largest banks. It has steadily eliminated the smallest ones. Now here’s the deeper point… and it’s the one I’ve been building toward across 14 volumes. Culture is family.You’ve seen this idea before. The Norman Conquest families in Volume 8 are still holding English land 960 years later. The Cantillon Effect in Volume 3. The Debasement Index in Volume 11, compounding across generations. Institutional culture works the same way. It isn’t a set of values printed on a wall in the break room. It’s what gets passed down through incentive structures, hiring practices, and the stories people tell new employees about “how things really work here.” At Wells Fargo, the culture of customer extraction predates the fake accounts scandal. It predates the subprime steering. It predates the forced auto insurance. John Stumpf didn’t invent cross-selling pressure… he just inherited it and then amplified it in pursuit of all-time share prices. When he was removed, the culture survived him… because cultures always do. Individuals rotate, and incentives remain. It’s always been that way. It’s the engine… not the people… that extracts. The compensation structures reward volume over integrity. Promotion pipelines select for compliance on internal standards, not what the regulators say… And our enforcers treat each scandal like it’s new… not like it’s part of a broader cultural rot that affects everyone who walks in the door. Forced auto insurance was unrelated to the money laundering failures? Sure… The Everyday HustleNow, I want to pivot a bit… Because Wells Fargo showed you the prototype. They opened 3.5 million fake accounts, and that was back when it still took a person to do it. Technology scales those incentives. In 2024, the FTC logged 449,032 identity-theft reports. Total fraud losses exceeded $12.5 billion. Synthetic identity fraud is now the fastest-growing financial crime in the country, costing the financial system billions annually. You may already have accounts open in your name that you don’t know about. And the regulators who are supposed to protect you just spent nearly a decade giving the biggest offender a timeout before sending it back to class. If the enforcers protect scale, and scale protects extraction… then neither the largest institutions nor their regulators are built to protect you. So you have to protect yourself. Your Sovereign Moves (Household)When the enforcement system manages misconduct rather than ends it… You need to defend yourself. Doesn’t matter if it’s a hacker or a trusted bank that’s regulated by the FDIC, I’m going to be honest about this new age… These are things you can do right now to focus on protecting yourself… 1. Freeze your credit. Today. The Big Three are Equifax, Experian, and TransUnion. It’s free and prevents new accounts from being opened in your name. Do it before you finish your coffee. 2. Audit your credit reports. AnnualCreditReport.com. You can get all three bureaus. Look for accounts you don’t recognize and inquiries you didn’t authorize. Accounts can be opened in your name by institutions you trust… not just criminals. 3. Set up an early warning system. Wells Fargo opened 3.5 million accounts without consent. That playbook is now automated and running at scale. Credit Karma is free. Aura and LifeLock are paid. The point is the same… You need to know when someone opens a line in your name before it shows up on a statement. 4. Check the CFPB complaint database. Before you trust an institution with your money, look it up at consumerfinance.gov. The pattern is always visible before it becomes a headline. 5. Know your banker. If no human being at your bank knows your name, you are not a customer. You are a revenue line. My point is that community banking still matters. The Sovereign Move (A Pick I Own)I am going to talk about a stock that I own… as in, I have skin in the game. I am disclosing this because I have it in a retirement account, and I have given shares to my daughter for the long term. It is something I do not ever plan to sell… In May 1938, a banker named Ben Stefanski opened a small savings and loan in Cleveland’s Polish Slavic Village neighborhood with $50,000 in capital. ... Continue reading this post for free in the Substack app
|
Subscribe to:
Post Comments (Atom)
0 Response to "Too Big to End..."
Post a Comment