Following the 2008 financial crisis that transformed the banking industry, Wells Fargo (WFC) emerged as one of the few, relatively unscathed good guys. But now these good guys have found themselves in their own banking scandal after creating 2 million phony accounts.
“The losses in comparison to, say, even the JP Morgan London Whale trading scandal a few years back, are minor,” said TIME’s assistant managing editor Rana Foroohar during a Fortune Live session. “But people can understand this. This isn’t something like crazy spliced and diced collateralized debt obligations blowing up—this is just straight up fraud.”
The 2012 London Whale trading losses added up to over $6 billion, and resulted in J.P. Morgan Chase (JPM) paying $920 million to settle the case with global entities. In comparison, Wells Fargo’s settlement was $185 million.
The scandal could again force regulators to take a deeper look at bank culture. Banks have been increasingly pressured to widen profit margins despite low interest rates and heavier regulation since the financial crisis. And advocacy groups have also noted aggressive sales tactics, similar to those that led Wells employees to create fake accounts, at Bank of America, J.P. Morgan Chase, and SunTrust among others.
Foroohar told Fortune‘s assistant managing editor Leigh Gallagher that Fed chair Janet Yellen likely plans to look closer at how banks are run in the future while upping capital requirements, making banks “look a lot more like utility than they did ten, twenty years ago.” And public sentiment seems to support further investigation.
Wells Fargo CEO John Stumpf and Carrie Tolstedt, the executive formerly in charge of the department where the fraud occurred, have already relinquished a combined $67.65 million as a result of outrage surrounding the scandal, investment bank Keefe, Bruyette & Woods estimated.
Yet, attention on Wells Fargo’s misconduct have been persistent, partially because Stumpf initially denied that the bank’s culture had anything to do with the scandal when news of the misconduct first broke—instead, he placed the blame on some 5,300 rogue employees. Since then, he has repeatedly apologized and taken full responsibility at both Senate and House hearings.
The clawbacks on Stumpf’s pay are also sending shivers up and down Wall Street. After all, it suggests that corporate boards may become more willing, given the political atmosphere, to use clawbacks when a bank is charged with wrongdoing.