Wells Fargo May Not Be Done Paying for Its Misdeeds

Wells Fargo, from 2012 to 2016, made $3.1 billion from auto lending. Its consumer bank in the same time made over $60 billion, and overall the bank netted $100 billion. You can make the case that at least some portion of those profits came from the fact that what Wells Fargo was spending on oversight wasn't what it should have been. So fines to profits, rather than just what customers were overcharged, is likely the right comparison, and on that scale what Wells Fargo is paying isn't that large. After all, the Consumer Financial Protection Bureau is fining Wells Fargo not just for the abusive practices (which is says have stopped), but also for the lack of oversight of its business.

And that's the problem. It's not clear that the oversight issue has been fixed. This past February, the Federal Reserve sanctioned Wells Fargo for not having the correct risk management controls in place. The CFPB isn't convinced either. The settlement agreement includes a large action plan so the bank can prove to regulators that it has the right compliance system in place to make sure the bank's incentive structures don't spin it out of control in the future. That's going to take money, and there has been little evidence that Wells Fargo has dramatically increased what it spends on its risk management, even in the wake of these many scandals.

There's this, too: While Tim Sloan has repeatedly said Wells Fargo's problems are in the past, it's not clear management actually believes that. According to the bank's most recent financial statement, it still expects future legal fees and fines could result in billions more in charges.

Investors have been looking for Well Fargo to cut costs.  In fact, the bank has pledged it will. That may please shareholders, but likely not regulators. And right now pleasing regulators may be the best way the bank can eventually please investors.

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Stephen Gandel is a Bloomberg Gadfly columnist covering equity markets. He was previously a deputy digital editor for Fortune and an economics blogger at Time. He has also covered finance and the housing market.