SCOTT SIMON, HOST:
One billion dollars - that's how much the U.S. has fined Wells Fargo for overcharging customers in its mortgage and auto loan businesses. It is the strongest action yet taken by the Trump administration against the banking sector. Bethany McLean is a contributing editor at Vanity Fair. She's covered Wells Fargo and the financial industry and joins us now from WBEZ in Chicago. Bethany, thanks so much for being with us.
BETHANY MCLEAN: Thanks for having me.
SIMON: We say overcharging customers, but help us understand that. What was going on here?
MCLEAN: So the fine encompasses Wells' misdeeds into separate areas. One is the area of auto insurance, where they were allegedly having customers take out and pay for insurance they didn't need. And this led to multiple thousands of consumers having their vehicles repossessed because they couldn't pay. That's one area of the overcharging. And the other is in the area of mortgage insurance - that Wells was improperly charging customers to lock in an interest rate on their mortgages when the customer had already locked in that interest rate.
SIMON: But let me ask. A billion dollars for a company that has assets reportedly of over a trillion dollars. Is that just the kind of money Wells Fargo loses in the cushions of their sofas?
MCLEAN: (Laughter) Well, in the context of some of the finds that have been paid by banks after the financial crisis, it's not that big a number. But it is a satisfying number. It's less, perhaps, than people thought Wells might have had to pay after President Trump tweeted about Wells' bad behavior at the end of 2017. But it's more than the number that was floating around before Mick Mulvaney became the head of the Consumer Financial Protection Bureau.
SIMON: And, of course, that's one of the agencies responsible for the fine. This is an agency that's kind of - if I might put it this way - in the crosshairs of the Trump administration, isn't it?
MCLEAN: Well, it's interesting because when the bad news surrounding Wells Fargo first began, the Consumer Financial Protection Bureau really lagged behind. It was not their case. They had actually missed it. And now from what I've been told, the CFPB actually really did lead the charge here despite the fact that its acting head is Mick Mulvaney, who has made no secret of his disdain for the very bureau of which he is the acting head.
SIMON: Will consumers wind up paying this fine, really?
MCLEAN: No. I don't think so. The question is whether consumers will get any benefit from the fine being paid. Separately, Wells is supposed to make restitution for consumers. And half the fine is supposed to go to the CFPB to help educate consumers. I think the question is how much good this fine will actually do.
SIMON: Well, and that's my next one. Does it have the capacity to change behavior not only of Wells Fargo but other banks which might be engaging in similar behavior and just haven't been found out yet?
MCLEAN: Look. I think what Mulvaney is saying here is that, I might not believe in a lot of the things the bureau was doing beforehand to protect consumers. But if you really screw up, I'm going to come down hard on you. So I think that that's good news. In terms of the power of fines, which are really paid by a bank's shareholders to change a bank's behavior, I think all you need to do is look at the huge amounts - billions of dollars in fines that have been paid by the big banks in the last decade or 15 years and ask if it's really changed behavior. So I'm a little more skeptical on that front.
SIMON: Is there anything else you'd suggest might change their behavior?
MCLEAN: You know, some people do believe that the only thing that will change the banks' behavior is if there's a threat of their being broken up. I think, you know, we've gone from kind of too big to fail, which was the mantra in the wake of the financial crisis and is still a problem - but to too big to manage, where these bad behaviors take root. And management doesn't even necessarily know what's happening under their very noses.
SIMON: Bethany McLean, contributing editor at Vanity Fair, thanks so much for being with us.
MCLEAN: Thanks for having me.
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