Last Thursday, Wells Fargo was fined $185 million (including a $100 million penalty imposed by the Consumer Financial Protection Bureau, its largest penalty ever) for engaging in pervasive fraud. What they did will shock you. Since 2011, the bank opened 1.5 million bank accounts and “applied” for 565,000 credit cards that were not authorized by their customers. Bank employees created fake email accounts and issued fake PIN numbers to sign up customers for online banking services and new credit cards without the knowledge or authority of customers.
How did they do it? Wells employees moved funds from customers’ existing accounts into newly-created accounts without their knowledge or consent, regulators say. This practice led to customers being charged for insufficient funds or overdraft fees. Many customers who had unauthorized credit cards opened in their names were hit by annual fees, interest charges and other fees.
Why did they do it? Bank employees were motivated by compensation policies that rewarded them for drumming up new business. Many current and former Wells employees told regulators they had felt extreme pressure to expand the number of new accounts at their branch.
For months now, I have been telling you, dear reader, that you should take money out of the bank and put it in safe keeping outside the banking system. I have told you that the banks and the government are going to take steps to reduce access to cash and then charge you to keep your money in the system. I have told you that new ‘bail-in’ laws passed after the Cyprus fiasco make depositors responsible for keeping their bank in business if it threatens to go into default. Now, here is another reason to keep a significant portion of your wealth outside the system in cash and physical gold; they are crooks, even the biggest ones owned by the likes of Warren Buffet.