Skip to main content

BankThink: Waters is right to make Wells Fargo a poster child for bad practices. William Michael Cunningham. March 11, 2020

Wells Fargo will testify several times this month before the House Financial Services Committee, under the leadership of Rep. Maxine Waters, D-Calif.

And Waters is no radical, despite what right-wing propagandists say.

She is an experienced, capable legislator with a solid track record of protecting the public. Yet Waters is also not to be trifled with.

Both the independent chairman and lead director at the board of Wells Fargo resigned Monday after Waters called for their resignation. Interestingly, those same two leaders are the only witnesses scheduled to testify at Wednesday’s hearing. (It’s long overdue that the entire board be replaced, as noted in 2018.)

In 2019, Wells Fargo reported net income of $19.5 billion. That was lower than the $22.4 billion the bank earned in 2018, as the cost of litigation started to impact profits. Wells recently agreed to pay regulators an additional $3 billion to cover fines for violating consumer protection laws.

The bank has a long and sordid history of engaging in unethical behavior. As noted in June 2009, Wells set up special sales offices to steer risky subprime loans to predominantly black communities, including in Prince George's County and Baltimore city, according to statements by two former Wells Fargo loan officers.

These former bank employees state that Wells "targeted black churches” and neighborhoods by offering escalating-interest mortgages, which some loan officers called “ghetto loans.”

Further, the former employees testified that if a loan officer referred a prime borrower to a subprime loan, that loan officer received a bonus.

Conventional wisdom praises U.S. banking organizations as engines of growth, providing economic opportunity to millions. But this cannot be the entire truth, since these organizations bear some responsibility for economic disparities.

For example, the black median net worth dropped 50% from 2005 to 2011, based on Census data. From 1983 to 2013, the median wealth of black and Latino households declined by 75% and 50%, respectively. Meanwhile, median white household wealth rose by 14%.

It is the lack of regulation in the public interest that is the issue. Over the past 45 years, banking institutions like Wells Fargo, operating in the most materially advantaged country ever to exist, has repeatedly abandoned ethical principles in the pursuit of material well-being.

To be fair, however, at the March 10 hearing, the megabank announced that it is looking to invest up to $50 million in black-owned banks. Given the impact of Wells’ past behavior on the black community, for this investment, it is critical that the bank get authentic, creditable advice from those outside the traditional set of community development advisors. Still, this is regarded as a positive development.

Wells also recently announced a $6.3 million donation for global efforts to prevent the coronavirus, as well as a $5 million donation for local community-specific needs.

Trust is central to the proper functioning of a banking system.

To mitigate the risk of the U.S. banking industry either damaging the public or falling into a position of competitive disadvantage, Waters is asking regulators to take aggressive, innovative and disruptive steps — and to start with Wells Fargo.

She is absolutely right.

Popular posts from this blog

Projected Impact of Gun Laws on Corporate Profits in Texas

More Fortune 500 companies are located in Texas than in any other state. Texas successfully used low taxes and minimal regulations as bait to recruit companies like Tesla and Oracle. The state promoted these “advantages” in ads highlighting their “free-market” environment and criticizing the "tax and spend policies of liberal leadership" in Democrat-run states. Four million people migrated to Texas over the past ten years. Our economic models predict a reversal, however. State of Texas corporations on the Fortune 1000 list generate $2.2 trillion in revenue, $158 billion in profit. They have a market value of $3.8 trillion and employ 2.5 million people nationwide. We continue to believe this increased corporate presence in Texas imposes a tax on the nation as a whole. Texas allows anyone 21 or older to carry handguns without training or licenses, and maintains lower gun purchase age limits. Beyond the recent abortion bill, which allows people to sue those who "aid and abe


The Inflation Reduction Act of 2022 (IRA) is a law passed by the 117th United States Congress in August 2022. It "includes a first-time provision that would allow the U.S. Department of Health and Human Services to negotiate prices of certain prescription drugs in Medicare and Medicaid. Savings would be generated by requiring drug manufacturers to pay a rebate for drugs whose prices increase faster than inflation under Medicare, and would create several reforms in the Medicare drug program, also known as Part D, including a cap on out-of-pocket drug spending for seniors beginning in 2025. It also extends by three years the expanded and enhanced Affordable Care Act tax credit ahead of planned premium increases set to take effect in 2023." We estimate the impact on the African American community to be significant, on the order of 8% of the total. (For a detailed analysis, email The law's climate provisions consist of "subsidies for energy that

March FOMC Minutes: Federal Reserve Policy Errors Continue

We note that, according to the minutes of the March 15-16 2022 Federal Open Market Committee (FOMC) meeting, the Federal Reserve Board "reached consensus..that they would begin reducing the central bank balance sheet by $95 billion a month, likely beginning in May. There also were strong indications that half-percentage point, or 50 basis point, interest rate increases are ahead." This action is consistent with past policy errors: on July 15, 2015, Janet Yellen, then Chair of the Federal Reserve stated that "the Fed's concerns about inflation limit its ability to address high African-American unemployment."  This is indicative of the continuing inability of Fed policy makers to successfully balance social and financial policy when social policy goals do not serve the interest of non-minority, non-wealthy populations. As the Fed itself noted "the..balance sheet has grown to $8.9 trillion from $8.1 trillion in July, reflecting continued net asset purchases of