At the end of March, Wells Fargo CEO Tim Sloan took a voluntary early retirement. Despite a stellar track record and support from his board chair, Sloan felt he had become too much of a distraction to the bank as the target of misplaced political attacks.
“About damn time,” tweeted Senator Elizabeth Warren in response, adding, “By the way, getting fired shouldn’t be the end of the story,” implying jail time should follow.
Her tirade was reminiscent of the disdainful and reckless grandstanding of Maximilien Robespierre, the bloodthirsty lawyer/politician who gleefully slayed the innocent along with the guilty following the 1792 French Revolution. The quiet hero of Wells Fargo, Sloan led reforms after taking the reins from former CEO John Stumpf, who presided over the creation of millions of false accounts, wrongful foreclosures on hundreds of homeowners, auto loans overcharges and other misdeeds, including the unjust termination of whistleblowers.
While Senator Warren properly called for accountability, including the firing of Stumpf, she wrongfully concluded that Sloan, then CFO, was guilty by association. Sloan had replaced most of the company’s top management, sparking profound shifts in business practices and culture. Any scandals that came to light in the past two years were not the result of continued deceit under his leadership but rather the internal investigations that he led. The bank’s 110-page independent outsider investigators, in fact, cleared Sloan of any knowledge of or complicity in his predecessor’s wrongdoing.
Interestingly, the Stumpf-era misconduct originally surfaced in 2016 due to bold journalists at the Los Angeles Times and crusading Los Angeles prosecutors—not internal bank processes or board oversight. Nor were more recent revelations unveiled by the platoons of government bank examiners on site through the Office of the Comptroller of the Currency, the Federal Reserve or Senator Warren’s brainchild, the new Consumer Financial Protection Bureau, nor any legislative bodies.
Instead, Sloan and his new management team were the singular force turning over rocks to discover and address old problems. He led the bank to the highest profit in its 161-year history, a 75 percent jump over the previous year, a surge of rising genuine new bank accounts and an independent consumer rating by JD Power that placed it No. 3 among U.S. retail banks.
Yet, all those agencies and legislators formed a chorus condemning the very management installed to fix the problems they had missed. Senator Sherrod Brown, Congresswoman Maxine Waters and Senator Warren joined Republican legislators, such as Congressman Patrick McHenry of the House Financial Services Committee, in a bipartisan hanging party. Even President Trump and Mick Mulvaney, as new head of the CPPB and budget director, weighed in with threats of tougher sanctions.
Similarly, punitive regulatory moves like the $1.95 trillion asset cap imposed by the Fed last year and the Office of the Comptroller of the Currency’s recent public rebuke were ingratiating acts meant to please politicians rather than the consequence of any new misconduct.
The failed boards of Enron, WorldCom and Freddie Mac wrongly installed insiders with mud splattered on their shoes, immediately after the fall of corrupt CEOs. These ill-considered successors quickly failed. At the same time, informed insiders have brilliantly risen to save the enterprise following scandals at such far-ranging settings as General Motors, Xerox and Penn State.
Bipartisan political grandstanding has created a dangerous haze confusing the good guys with the bad guys, which could have the unhappy effect of discouraging future heroic insiders like Tim Sloan from stepping up to the plate.
Read more: Tim Sloan And The Dirty Job of Cleaning Up