California-based Wells Fargo Co. has come under regulatory scrutiny due to the creation of more than 2 million fake accounts, personal and commercial. More than 5,000 bank employees have been fired for scamming consumers by opening accounts without their knowledge, chief executive John Stumpf has declined $41 million in unvested stock awards and the company faces multiple lawsuits.
Yet Iowa Treasurer Michael Fitzgerald, says he’ll keep the state’s Wells Fargo account open, funneling more than $3 billion daily in “idle cash” through the institution. He should reconsider his decision.
Fitzgerald missed the point when he said Iowans need not worry about risk to public investments because state workers are more diligent than average citizens and “do the math on every single transaction, so we know we’re being treated correctly.” The state should cut ties with the company as a matter of principle.
We understand this is no simple request. Wells Fargo is a large employer in Iowa. State officials across party lines have long fostered a relationship with the institution. A little more than a decade ago, Iowa taxpayers provided Wells Fargo with $54 million in incentives to open offices in West Des Moines.
But in the years since those incentives were awarded, Wells Fargo has been repeatedly scrutinized for questionable practices ranging from discrimination to unethical mortgage servicing to illegal student loans to excessive overdraft fees. Even while paying out multimillion dollar settlements in such cases, the institution experienced years of record profits — a net income of $5.6 billion in the second quarter of 2016 alone.
Last year, the state of Iowa paid the company nearly $300,000 in fees. Iowa taxpayers have a right to be angry that their hard-earned money was being given to a company that apparently has forsaken integrity and trust in the unscrupulous pursuit of profit at customers’ expense.
Until Iowans can be assured that the company has fixed the systemic internal problems that have led to poor business practices and abuse of customers’ trust, the state should cease doing business with Wells Fargo. If monetary repercussions exist to the state breaking its contract, Fitzgerald should submit a request for proposal that includes that consideration.
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