After the Consumer Finance Protection Bureau levied a $185 million fine against Wells Fargo last week for thousands of its employees opening more than two million fake accounts in customers’ names in order to get sales bonuses, big banks haven’t learned their lessons from the financial crisis, writes HousingWire staffer Ben Lane.
The illegal maneuvers were done to boost the bank’s “cross selling” statistics and its bottom line. Cross selling is quite prevalent among the big banks especially, as employees are encouraged to push new accounts onto existing customers.
Josh Brown, vice president of equity research at Rafferty Capital Markets had this to say on the cross selling culture:
When I first read the story, I almost couldn’t believe it. Almost. But then I remembered everything I’ve been told by people working at the major banks. How they’re regularly whipped to cross-sell loans to their wealth management customers, credit cards to their banking clients, insurance products to their brokerage accounts, etc. It’s bad.
These are the metrics that Wall Street wants to see and they’re the yardstick by which executives are judged. So the decree goes out across the land and the rank-and-file employee incentives are set accordingly. And then, as these things always go, someone takes it too far. In this case, a lot of someones.