Wells Fargo's reputation has taken a major hit on Main Street, and now Wall Street is jumping on the bandwagon.
Analysts have been ganging up on an institution that not so long ago had arguably the most pristine reputation of all the big banks in the U.S. Revelations that the bank for years had duped millions of customers into taking out products they didn't want or didn't know they were getting has sullied Wells Fargo and led for calls from Congress that officials be prosecuted criminally.
Ultimately, though, the actual price tag for Wells Fargo's transgressions is small, at least compared to the damage done by its counterparts during the 2008 financial crisis and other similar missteps. Due to its aversion to risk-taking and the high-flying Wall Street atmosphere that led to the crisis, Wells Fargo avoided the damaging fallout and need for government bailouts.
So why all the vitriol over a scandal that cost the bank fines of just $185 million, a total that practically amounts to a rounding error on an expected $5.5 billion quarterly profit?
Fitch analyst Julie Solar summed up the situation in one clear sentence:
While (Wells Fargo) emerged from the financial crisis in a much better position than similarly sized peers, Fitch believes this issue creates reputational risk given the issue and allegations are understandable to the general public, in a way that misdeeds at other banks are not.
It's easier to grasp someone selling you a credit card you didn't want than it is trying to grasp the complex world of financial derivatives that led to the 2008 crisis or other bank controversies — JPMorgan Chase's "London Whale," for instance, or the capital concerns that are bedeviling Deutsche Bank.