Will Wells Fargo’s Reputation Ever Bounce Back?

Wells Fargo is being raked over the coals for its shady practices and for very good reason. In five years, the bank fraudulently opened up more than 2 billion bank accounts and credit cards without customers’ permission. That’s a breach of trust, but it’s not the worst thing about the scandal. That the bank was charged only $185 million in fines despite raking in billions in annual revenues also isn’t the worst thing.

What’s arguably most troubling in all of this was that Wells Fargo created an environment where employees were incentivized to defraud their customers. Employees who didn’t go along with the fraud were allegedly blacklisted. With management like that, what sort of deeper problems could there be at the company? That toxic environment, coupled with the tarnished brand name, has devastated Wells Fargo’s reputation.

Right now, Wells Fargo is public enemy number one, and it appears their reputation will never bounce back. In a just world that would be true, but logic doesn’t always apply to the banking industry.

As previous banking scandals have shown, people tend to have a short memory especially when another scandal from another company erupts. Wells Fargo might be at its nadir, but there’s a good chance they can make a reputational recovery.

Looking Back to Another Scandal

As more and more details of Wells Fargo’s misdeeds come to light, it’s apparent that they deserve all the criticism they’re receiving. There are even allegations that the bank retaliated against whistleblowers who pointed out the misdeeds, which is illegal under the law. However, Wells Fargo isn’t the first financial institution to behave badly. The bar of ethical standards is set low in the financial industry, and that’s a benefit for Wells Fargo.

During the height of the financial crisis, all sorts of appalling behaviors came out from various banks. One of the worst offenders was Bank of America. This mega-bank was accused of a variety of things, but one of the most costly was how it mislead the government and the public about their financial health. Ultimately, an incredible $17 billion settlement was reached with the federal government.

While that’s a huge amount of money, it wasn’t enough to truly slow down Bank of America. The troubled bank continued its slow recovery from the financial crisis and is now in strong shape both financially and with its reputation.

Other banks also had to pay huge settlements due to their behavior leading up to the financial crisis. All told, $110 billion in fines were paid. Now it seems like most of the public has forgotten those misdeeds.

Trust Stays High

In the wake of the financial crisis, anger toward the financial institutions reached an apex. Occupy Wall Street, the Tea Party and non-affiliated people rose up in anger at the role banks played in damaging the economy. Protests were everywhere, but things have since cooled down.

While attacking banks is still a popular move for politicians trying to get votes, the truth is that people aren’t nearly as fired up as they once were. Here’s what one 2016 survey showed 22 percent of people have zero trust in banks to give unbiased advice to customers, but 93 percent of people trust banks to keep their money safe.

Loss of Money

For people looking for justice, it should be noted that Wells Fargo’s reputation is just the tip of the iceberg. While Wells Fargo’s misdeeds may fade from public memory, the company will pay a huge price that goes beyond the fairly paltry $185 million fine. One pessimistic study predicts that Wells Fargo could lose $99 billion in deposits and 30 percent of its customers.

That’s a huge loss in money that could set the company back years. As devastating as that is to the bank, odds are they can make a partial recovery as time goes on. It’ll be a long road but perhaps not as long as it seems at this moment. Some worse behavior will inevitably come out from another company, and then the outrage will be focused elsewhere.

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