The Consumer Financial Protection Bureau last week slapped Wells Fargo with $185 million in fines for creating fake accounts and secretly issuing credit cards without customers’ consent. Included in the ruling was a $100 million penalty, the largest ever levied by the agency.
The shady practices of one of the nation’s largest banks, which date back to 2011, first gained national attention through the work of former Los Angeles Times business reporter E. Scott Reckard.
Reckard, who has since retired from journalism, worked the business beat at the Times for almost two decades. In CJR’s 2009 post-collapse autopsy of the financial press, Dean Starkman singled out Reckard’s work as one of the few positive examples of a reporter doing the dogged work to hold Wall Street responsible for the practices of its lender-clients. Starkman called Reckard’s 2005 exposé of mortgage lender Ameriquest, “the real thing, a 3,220-word investigation that kicks in the door.”
The day after Wells Fargo was chastised by federal banking regulators, Reckard spoke to CJR about his reporting on Wells Fargo, the satisfaction that comes from seeing real-world outcomes of one’s work, and the state of the financial press in 2016. This interview has been edited and condensed for length and clarity.
When you see this record fine handed down, does it make you step back and consider that impact of your work?
This sort of thing is rare for all of us. I retired last year because it wasn’t as much fun, as you can imagine, working for newspapers these days. It’d be easy to look back and say, “Why the hell did I spend my life doing something?” But when you get a chance to actually see that there was some action that resulted on something important you covered, it sort of restores your faith in the whole process. This is unexpected and cool.
Going back to the beginning of your reporting on Wells Fargo, what was the process that led to this story?
I got an email from one of the editors, Pat McMahon, saying there was this weird story. I talked to this [Wells Fargo employee] who claimed he had signed people up for accounts and services they didn’t need, but never without them knowing it–he would just talk them into it. Anyway, he told a story about these incredible pressures to make sales numbers and about how the branch had basically been setting records and getting kudos for doing this, but then people started complaining, and some trouble came down. Before too long, all these people got fired, these front line workers. He said all they were doing was responding to pressure from above and coaching from above about how to get the numbers up.
My 2013 LA Times story on Wells Fargo sales schemes https://t.co/NnVwUvgaxw results in largest CFPB penalty ever. https://t.co/Qa2TTONiM1
— E. Scott Reckard (@ScottReckard) September 8, 2016
I had been sort of sensitized to these things [based on a career in business reporting]. I could have told the editor that it’s just some weird deal, but it sounded like a story to me. So we run this story that just said what it said. What I didn’t expect, and what happened, was that the phones started ringing off the hook and the emails started landing from people all over the place. Mainly current and former Wells Fargo employees, but customers too. They wanted to tell stories about what had happened to them.
A lot of credit goes to this editor I had, Brian Thevenot. We started going through this and it became clear that the scope was really quite big. Then the question became, how far do you push this? The main thing we were pushing for at first was to determine whether this was just something in the Southern California operations or whether it was something we saw elsewhere.
We decided that we had anecdotal stories that were so strong that they demonstrated that this was a systemic problem. In discussions with editors we decided to do a complete scrub of the court system, and found a lot of corroboration there, which ended up in the story. The process took the better part of two months, from October to December [2013], when the big story came out.
You mentioned being sensitized to the possibility that this was a big story due to years of reporting on the industry. As newsrooms have shrunk, is that something that’s been lost?
I think absolutely so. There’s been a tremendous brain drain at the Los Angeles Times in terms of people taking buyouts, people leaving to go other places. The cutbacks have been extraordinary, but it doesn’t mean there aren’t good people there. At the LA Times, if you look at the ranks of the editors that are left, they are people with a lot of experience. It’s an over-generalization perhaps, but in the business news department as I look at it, what I’m seeing is the structure has morphed into having some really talented, but not necessarily experienced, young reporters, and then trying to have some editors with more experience to presumably help guide these folks along. Clearly there’s a lot less collective memory at the LA Times, and at a lot of other places as well.
Looking back at two decades reporting on business, do you think we are in a better place in terms of financial coverage? Has the industry responded to the criticisms that it didn’t do enough in its role as a watchdog in the years leading up to 2008?
It’s an interesting question for people who follow this more closely than I do. I will say that the financial industry has shown that it is ingenious in finding new ways and different ways to overextend itself and blow things up. The thing that distinguished the LA Times ties into one thing that is improved. The Times always insisted on having a real consumer focus in their reporting. It was always hard to get the higher-up editors interested in what you might call pure business stories, giant banks creating derivatives and things like that. What it did was forced you to go out and tell stories from the perspective of employees and customers on the front lines.
If you want to really know what’s going on, you have to go out and talk to people who are out in the field. I think that’s where the major business press kind of fell down before the crisis…
If you talk to Mike Hudson, who has been widely lauded for his investigative stuff on a million topics, he’ll tell you it’s the employees that are always the best sources. If you want to really know what’s going on, you have to go out and talk to people who are out in the field. I think that’s where the major business press kind of fell down before the crisis was not able to link sufficiently to the damage that could be done out in the real world.
So the financial press has learned its lesson?
I hope so. The reality is that there is a gigantic financial press that continues to exist. We should be in a position where, if [media] companies are being run properly, there should be more than enough reporters and editors to spot these stories and look into therm. So one would hope, but shit, I don’t know [laughs].
Finally, you retired from the LA Times in 2015. Why leave if you were still able to do these types of stories? What are you doing now?
I turned 65, and an interesting thing happens. You no longer have to worry about health insurance because you have Medicare, and I had worked for news organizations back at a time when they had pensions as well as 401(k) plans. That puts things in a slightly different perspective.
For me, it just wasn’t as much fun, and the trends I saw at the newspaper–not to blame anybody; everybody was trying to deal with a situation that was not good–but it just wasn’t nearly as much fun. It had changed; it was a very different place to work. I felt good that I didn’t have to take a buyout. I just retired.
Now, I’m consulting for a financial technology firm that is trying to get loans out there to folks who have little or no credit history. It’s a responsible substitute for payday loans. I’ve got a little sailboat that I can go on, and I’ve got this consulting gig. I’m really lucky.
Pete Vernon is a former CJR staff writer. Follow him on Twitter @ByPeteVernon.