PEOPLE respond to incentives. When bankers at Wells Fargo were paid to sign customers up for more and more products, that’s exactly what they did. To a fault. Over around five years, starting in 2011, up to 1.5m deposit accounts and 565,000 credit-card accounts may have been opened without clients’ permission; unwanted debit cards were issued; fake e-mail addresses were created to enroll people for online banking.

The gain to Wells was tiny. America’s second-biggest deposit-taker and biggest mortgage-lender, which earned $5.6 billion in the second quarter, has so far refunded $2.6m in charges for overdrafts, failing to maintain minimum balances on unwanted accounts and so on. The punishment, at first blush, is small too. At $185m, the fines announced by regulators on September 8th are loose change next to the ten-digit penalties coughed up by banks since the financial crisis. But the damage done to Wells’s reputation, on both Main Street and Wall Street, is harder to gauge.

Wells emerged strongly from the financial crisis, spreading across America from its western base after buying stricken Wachovia, once the country’s fourth-largest...Continue reading