Wells Fargo
Wells Fargo & Company, founded in 1852 and headquartered in San Francisco, is a prominent multinational financial services firm that offers a wide range of services including banking, insurance, investment, and mortgage solutions. With a workforce of over 247,000 and serving more than seventy million customers across more than thirty-five countries, Wells Fargo ranks among the top five U.S. banks by assets and customer base. Historically, the company originated as an express shipping service during the California Gold Rush and has evolved through numerous acquisitions, most notably the 2008 purchase of Wachovia National Bank, which bolstered its financial strength following the 2008 financial crisis.
However, the bank's reputation has been marred by scandals, particularly a significant ethical misconduct incident in 2016 involving unauthorized account openings, which led to substantial fines and investigations. Despite these challenges, Wells Fargo has maintained financial success in the early 2020s, continuing to earn accolades for its banking and community service. The company has faced ongoing regulatory scrutiny and additional scandals in recent years, but it remains a key player in the American financial landscape, recognized for both its service offerings and its commitment to customer relationships through cross-selling strategies.
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Wells Fargo
- Date Founded: 1852
- Industry: Financial Services
- Corporate Headquarters: San Francisco, California
- Type: Public
Wells Fargo & Company is a diversified multinational financial services company headquartered in San Francisco, California. Its primary focus is banking, insurance, investment, mortgage, and consumer and commercial financial services. The bank served more than seventy million customers in the early to mid-2020s in more than thirty-five countries with over 247,000 employees.
In terms of assets and number of customers, Wells Fargo continually ranks among the top five US banks. Unlike its rivals, however, Wells Fargo claims to focus its efforts on the proverbial Main Street USA. It engages in traditional lending to local businesses, individual investors, and employees rather than to Wall Street clients. This focus has helped Wells Fargo in an era of increased regulation.
History
Wells Fargo was founded on March 18, 1852, by Henry Wells, William George Fargo, and Johnston Livingston as a company that provided express shipping services. With the California Gold Rush (1848–1855) attracting large numbers of prospectors from the United States and abroad, the rapid transport of gold, mail, and cargo became important. Numerous express-shipping companies that provided services for the rapid transport of trunks, packages, and other articles sprang up to meet this need. Wells Fargo was among the few that rose to prominence.
The three founders had substantial backing from New York financiers, including Edwin B. Morgan, a prominent New York banker of the time. The new firm was officially named Wells Fargo and Company after the two founders, who were already well-known in the field. The concern was termed a joint stock company and was registered under the general incorporation laws of New York State, with a capitalization of $300,000. From the outset, the firm strove to offer a broad line of services. It was not just a bank; it was also an express-freight company like one of its peers, Adams Express.
The overlap between the company's express shipping and financial services parts led to the creation of the original Wells Fargo business model.
The Wells Fargo stagecoach drawn by six horses, which thundered across the rough western terrain at a pace of five to twelve miles per hour, inspired the song "Wells Fargo Wagon" from the movie The Music Man (1962). The iconic stagecoach continues to serve the company as its logo, and this logo also provides a symbol that reminds people that the company has worked hard for its business throughout its history.
Wells Fargo’s express shipping business continued to flourish throughout the latter half of the nineteenth century. By 1900, the Adams Express Company, the American Express Company, the Southern Express Company, and Wells Fargo were the four express-shipping outfits that came to dominate the scene as the rapidly expanding railway network was embraced as one of their modes of transportation.
During World War I, the US government nationalized railroads and express shipping services, consolidating the four major and three minor companies into the American Railway Express Company (AREC). Wells Fargo, American Express, and Adams Express received stock for their operations; this stock served as their investment stakes in the consolidated company.
Wells Fargo has grown to its present size through several acquisitions; one of the more noteworthy acquisitions in the early twenty-first century was its 2008 takeover of Wachovia National Bank. Wachovia was the fourth-largest bank holding company in the United States on the basis of total assets, and its offerings included an extensive range of banking, asset management, wealth management, and corporate and investment banking products and services. The acquisition of Wachovia significantly impacted the bank’s bottom line, helping Wells Fargo report profits every quarter following the financial meltdown of 2008; it weathered this difficult period even as its rivals struggled with losses.
Scandal of 2016
On September 8, 2016, allegations of ethical and fraudulent misconduct by Wells Fargo employees were made known after the Consumer Financial Protection Bureau fined the bank $185 million for establishing millions of checking, savings, and credit card accounts for customers that were never initiated or authorized by customers. Employees at every level in the corporation later reported feeling extreme pressure by the company to meet what they felt were unrealistic sales goals that encouraged the cross-selling of Wells Fargo products, such as checking accounts, credit cards, and overdraft protection services, with threats of loss of employment if goals were not met. Wells Fargo then announced that it had halted the controversial sales goals program and fired over five thousand employees amid the allegations. Within days, the Federal Bureau of Investigation (FBI), several state-level prosecutors, and the Financial Services Committee of the US House of Representatives were opening investigations into possible ethical and financial misconduct by Wells Fargo. Calls for the resignation of chairman and chief executive officer John G. Stumpf came from throughout the US government and the general public. Several senators wrote to the then US Attorney General Loretta Lynch to investigate the responsibility of senior Wells Fargo executives in the scandal. On October 12, Stumpf announced he would retire from Wells Fargo effectively immediately, would not take a severance package, and would refuse retirement benefits for six months. Several weeks later, Wells Fargo launched a nationwide television and radio campaign to restore the country's faith and trust in its brand.
In further fallout from the scandal, the regulating Federal Reserve announced in February 2018 that Wells Fargo was forbidden from growing past its asset base of the year before until it received sufficient proof that the company had made enough changes to its leadership and policies to prevent any similar misconduct in the future. As part of the punishment, the company would have to remove and replace four members of its board of directors by the end of that year. Furthermore, it was reported in April that the US Department of Labor was investigating whether the bank had been pressuring customers into switching to more costly 401(k) retirement plans.
Impact
In 1990, impressed with the bank’s performance, Warren Buffet’s Berkshire Hathaway bought five million shares of Wells Fargo for $289.4 million. Berkshire continued to buy Wells Fargo stock over the years, and by mid-September 2016, Berkshire had acquired over 470 million shares of the bank, a 9.5 percent stake in the banking giant. However, in early 2017, Buffet sold 7.1 million shares to reduce the company's percentage of shares to below 10 percent once more.
Wells Fargo has won numerous accolades in diverse fields. It has been singled out for excellence in providing banking and financial services and praised for its community service and philanthropy. In 2014, the business magazine Barron’s named Wells Fargo the Most Respected Bank. Wells Fargo was also dubbed the Most Admired of the world’s largest banks by Fortune magazine in 2015 and the Best US Bank (2014) by The Banker magazine.
Prior to the 2016 scandal, Wells Fargo’s success had been fueled by a strategy of intensively engaging its customers in what it called its cross-selling strategy that the company claimed would help to forge a close, long-term relationship with its customers by understanding their needs and aspirations and offering financial solutions through its diverse portfolio of offerings. As a result of this relationship, customers often bought more Wells Fargo products, which boosted profitability, and the bank benefited from cross-selling because it cost much less to work with pre-existing customers than to try to acquire new ones. Cross-selling led to improved customer retention and increased revenue per customer. Following the disclosure of fraud surrounding the cross-selling practices, Wells Fargo's reputation suffered, with a decline in visits to bank branches of over 10 percent following the scandal.
Despite the scandals, Wells Fargo experienced continued financial success in the early and mid-2020s, making the Forbes Global 2000 list, the Fortune 500 list, J.D. Power's customer satisfaction list, and the list of America's Best Banks, among others. The bank also experienced significant returns on their investments and great profits. However, Wells Fargo was also subjected to further scandals. From 2020 to 2024, the Department of Justice and the Federal Reserve fined and investigated the bank several times.
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