It’s taken public complaints, legal action, public shame, and congress to address an issue that has been the “business model” for years.


I recall the year was 2003, when Washington Mutual was in business.  They had various retail mortgage branches here in Miami.  I often consulted with their mortgage brokers or employees because they referred clients with credit problems to my firm.  Now, these were honorable people who just wanted to have a steady job to support their families.   Even back then, they had sales quotas that meet.  So, for me none of what is happening in Wells Fargo is new.  Banks are in the lending business.  To make decisions, the lender looks at your income, assets, debts, and credit history.  This is a neutral “non-discriminatory” way to determine if you’re a good candidate.


I recall going to a particular Washington Mutual office in Coral Gables, Miami, FL to have lunch with a friend working there.  She told me the stress she had.  The higher ups wanted her to produce 1 million in loans every month.  To put that in perspective, a regular home was about $150,000-$250,000 and a condo was $80,000-$150,000.  To keep it simple, it meant 6-10 new customers per month.  That is a lot of work.  Most bankers I met were not sales experts.  To be in sales, it takes a certain personality.  If they didn’t meet their quotas, eventually they were put on probation or terminated.


I believe this contributed to the real estate melt down in 2007.   So many people were qualified based primarily on their credit history and score. There were many programs that didn’t request tax returns because the credit score was excellent.


I know there is outrage and it’s understandable.  But, what is the solution?


Elizabeth Warren questioned executives, scolded them, fined them, and even threatened to jail them. Sadly, it continues today and not just with Wells Fargo.  The reality is that Wells Fargo got caught, but this business model is used by so many lenders and so many other businesses.  For example, auto dealers implement sales expectations and goals on their employees.


The solution is not as simple as locking up the CEO of Wells Fargo.  In my opinion it’s going to take a united effort to redefine success in business.  Especially those that are expected to produce results for Wall Street–where companies values are determined on the value of their stock—which is determined by their net yearly profits.

I don’t see this problem disappearing.  As consumers, the more we understand the system, the more financially independent we can become.