The only reason banks are backed by governments and taxpayers – and why they were bailed out in 2008 – is because they are supposed to serve an essential public function: providing financial support to the real economy and Main Street families and businesses. For many years, Wells Fargo was a commercial/retail bank that did just that, in stark contrast to Wall Street’s too-big-to-fail megabanks that too often focus too much on boosting bonuses by gambled in the capital markets with derivatives and investments.
As has been seen too often, there is a lethal corporate culture clash between the swashbuckling, push-the-envelope trading bankers and traditional commercial/retail bankers. While the former juices executive bonuses, the latter fuels the economy, helps creates jobs and makes the American Dream possible for millions of Americans. That was a big part of Wells Fargo’s 160+ year history and it should be the core focus of its future.
Unfortunately, there is too often an inevitable bias to the dangerous high-risk trading model because it is also — comparatively — a high margin business, which often creates higher revenues, profits, share prices and executive compensation (at least in the short term). However, it is also frequently unstable, systemically dangerous, and prone to predatory if not outright illegal conduct. Therefore, if the Wells Fargo Board of Directors is serious about returning the bank to the heights of its storied past, it needs to resist that bias and reject CEO candidates with primarily capital markets, investment banking and trading experience.
Wells Fargo’s Board needs to pick a bank leader deeply experienced in retail and commercial banking. It has to be someone obsessively focused on the customer who can restore their trust and confidence in the bank.