The day after his Tuesday appearance on Capitol Hill to answer questions from the House Financial Services Committee, banking empire Wells Fargo disclosed it would be giving the company’s CEO, Tim Sloan, a 5 percent raise for 2018.
To repeat, this is the day after Sloan testified before Congress to convince the government that the San Francisco-based, global finance, mega-corporation has turned a corner.
That’s after a string of major scandals starting in 2016 and rocking investor confidence in the company while racking up billions of dollars in fines for Wells Fargo.
Those fines aren’t the only federal sanctions faced by Wells Fargo for improper record keeping, fraudulently overcharging hundreds of thousands of customers, and creating a million and a half “fake” checking and savings accounts and over half a million “fake” credit cards and really issuing these to their customers without their authorization.
Wells Fargo is also currently operating under an asset cap that has been imposed on the bank by the Federal Reserve, an extraordinary intervention by the Fed over these cynically shady business practices and improprieties.
These circumstances are so extraordinary that Tim Sloan’s pay raise disclosed Thursday attracted immediate comment from the Fed. It was an unusual moment for the Federal Reserve to remark on executive compensation at a bank, telling the press:
“The Federal Reserve does not approve pay packages. We expect boards of directors to hold management accountable.”
Is Tim Sloan’s pay raise holding management accountable at Wells Fargo? It may have been an attaboy for his performance in the U.S. House hearing, which he navigated smoothly, but the bank says it’s for 2018.
During 2018, Wells Fargo’s stock fell 22 percent as the company continued to rack up federal fines while it disclosed more improprieties on top of the ones that had left it reeling from 2016.
Instead of watching Tim Sloan move his mouth, Congress could have pulled out their phones and let the experts with money on the line tell them if Wells Fargo had turned a corner or not by looking at its stock price.
Although investors might see this as a buying opportunity for WFC shares because while the scandals have really hurt the bank’s stock, Wells Fargo does continue to grow its business.
In case you’re wondering where the money goes when banks or other organizations are made to pay huge fines to the federal government, the Wall Street Journal made a useful presentation in 2016 explaining that banks like Wells Fargo can often rack up credits that count against their fines for providing consumer relief.
That can mean:
“lowering interest rates for struggling borrowers, demolishing abandoned property or donating to housing counselors and community development groups.”
But, indeed, most of that big bank fine money goes straight to the coffers of the U.S. Treasury.
Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.com.
Last modified: May 20, 2020 2:19 AM UTC