Over the last few weeks, you may have heard about Wells Fargo in the news. More recently, the Illinois government has decided not to invest with them, cutting a $30 billion agreement that had been in place. While initially this sounds bad, this is absolutely the right thing to do.
It’s important to understand what caused all this.
The bank has been caught opening multiple accounts for some customers, moving funds without their knowledge. Apparently, they opened well-over one million fake accounts, making millions by charging fees that customers didn’t realize they were paying.
The practice of opening multiple accounts for one customer is called “cross selling,” which is perfectly legal. This means that they can collect fines from multiple accounts. Using this technique, Wells Fargo has become one of the most profitable banks in the world.
Opening fake accounts, however, is not legal.
Wells Fargo has been on defensive, trying to prevent as much damage as possible. They have agreed to pay about $190 million in fines, but have not admitted fault.
Other than the fact that Wells Fargo has’t admitted fault, there’s still problems with how this is being handled.
Wells Fargo made far more money during the time that they admitted to knowing about this fraud (since about 2013) than they paid in fines. And while people are being fired, all 5,300 of them are people on the bottom of the food chain.

This leads to an incentive for the company to break the law. Those at the top, like CEO John Stumpf, leave situations like this with a net gain in cash. In the end, trying to prevent this behavior is incredibly hard to do, but Illinois is trying.
By cutting ties with Wells Fargo, we actually punish a bank for breaking the law. Illinois, as well as California, is making clear that not only do the American people have options, but that big banks will have to answer to those that they have been lying to.
To be clear, the $30 billion connection that is being cut will be replaced by another bank, and will not cost taxpayers anything.
Alone, these two states make only a small dent in the bank’s revenue by doing this. If other states begin to do the same, however, the damages may begin to add up.
Some suggest that this wasn’t the bank’s fault, that the 5,300 employees (which were working $12 an hour wages) were acting independently. Evidence suggests, however, that Wells Fargo was incredibly aggressive about opening multiple accounts, pushing their employees too far. Many felt that they had no other option.
From the outside, it’s clear that executives who had millions to gain, like Stumpf, knew that their actions would lead to these fake accounts.
While it’s fair to give them the benefit of the doubt, the fact remains that they knew for several years that they were making enormous profits while breaking the law.
There needs to be a way to hold those which had the most to gain from this scandal accountable, not the low-wage workers just trying to keep their jobs. California and Illinois thought so, too. The states have an opportunity to exercise some control over a business superpower that is profiting by taking honest Americans for a ride, and it’s right that they do.