While the Republican Party tries to rob the American people and give to the already wealthy, big financial institutions continue to show the world how corrupt an unregulated marketplace can be. The Wall Street Journal has a report showing that scandal-riddled bank Wells Fargo has another scandal to contend with. This time it’s the big bank’s handling of their foreign exchange clients.
An internal review showed that out of roughly 300 fee agreements based on anything from informal handshakes to emails to signed documents, only about 35 companies were charged the actual price they had been offered for currency trades handled by Wells Fargo, the employees say.
How and why did this happen? Unlike the retail employees that Wells Fargo created unrealistic goals for, leading to the massive fraudulent activities that resulted in millions of fake accounts, the foreign exchange bankers make their bonuses based solely on the revenue they bring in. As the WSJ explains, this is a unique business model in the banking industry, and it’s led to not so unique fraud.
Foreign-exchange employees got bonuses based solely on how much revenue they brought in, say more than a dozen current or former Wells Fargo employees. No other big bank in the U.S. calculated bonuses of currency traders in such a defined and individual way. Wells Fargo said Monday that it began making changes to those compensation plans earlier this year.
The bank also charged some of the highest trading fees around, according to current and former employees. For more than a decade, customers were sometimes charged anywhere from 1% to 4% on basic transactions such as converting euros to dollars and complicated trades like hedging.
Those numbers are supposed to be at the very least, twice as much as the going rates. However, according to the report, when clients would ask why the fee they were being charged was so much higher than they had been told previously, Wells Fargo employees would blame the fluctuation of the marketplace. And like all Wells Fargo stories, there are the scapegoats who tried to sound the alarm and were summarily shut down—even though now the too big to manage bank pretends they are “fixing” everything.
During a meeting of foreign-exchange managers in the mid-2000s, Cathy Witt said it wasn’t right to celebrate high fees by ringing a bell, people familiar with the situation say. Ms. Witt, an employee in the bank’s Chicago foreign-exchange group, warned that Wells Fargo could become known as a “bucket shop,” a derisive term for a disreputable finance firm, some of the people say.
A few weeks later, Ms. Witt was summoned to a meeting in St. Louis, told that her comments had been offensive and demoted on the spot, according to people familiar with the matter. She also was told to apologize to other managers for her unprofessional behavior, the people say. She later left the bank.
These guys need a tax cut. Amiright?
