Wells Fargo layoffs: Why it's happening and what it means for Des Moines

Kevin Hardy | The Des Moines Register

Show Caption Hide Caption Wells Fargo might be in trouble…again This time for its 401k practices.

Wells Fargo will lay off 400 Des Moines-area workers as the beleaguered bank works to shed tens of thousands of jobs across the country — and company officials aren't saying how many more of the bank's 15,500 Iowa jobs might be cut in the future.

But experts say the cutbacks have more to do with Wells Fargo's mistakes than weaknesses in the economy.

"Wells Fargo made some serious blunders in their corporate governance, and that's cost them quite a bit," said Iowa State University economist Peter Orazem. "Now employees are paying for those sorts of decisions, even if they weren't directly involved with it."

With about 14,000 workers, Wells Fargo is the single largest private employer in the Des Moines metro area. Iowa's capital city is home to the bank's home-mortgage division and the company's third-largest concentration of workers, behind only Charlotte and Minneapolis-St. Paul.

The San Francisco-based bank announced in September that it would reduce its overall workforce of 265,000 people by 5 to 10 percent across the country — meaning losses could rise to as many as 26,500 jobs — over the next three years.

At the time, CEO Tim Sloan said the bank was evolving to do business in "a more streamlined and efficient manner" and to better "deliver what customers want."

Local bank spokesman Steve Carlson said those losses would come from layoffs and normal attrition, but he didn't say whether Thursday's announcement of 400 layoffs would be the end of losses in Des Moines.

"We do not have a detailed breakdown as we expect this to occur enterprise-wide within the next three years," Carlson said in a written statement. "We cannot comment on any impact related to a specific business unit, geography, or job type."

News of the local layoffs came just days after Nationwide insurance, another major Des Moines employer, announced it would cut 80 local jobs.

Neither changes the overall story of Iowa's economy or its ultra-tight labor economy, Orazem said.

Iowa's unemployment rate of 2.4 percent in October was the second-lowest in the nation. And businesses from fast food to factories have struggled to find qualified workers in recent months.

Orazem said he expects other local employers will absorb the laid-off employees.

"There are lots of firms in Iowa that are anxious to find good workers," said Orazem, an expert in labor economics. "If you want a job in the Des Moines market, this is not a bad time to be looking."

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On Thursday, Wells Fargo cut about 1,000 positions across the country, including 400 in the home-lending department in Des Moines.

"This very difficult decision was made following much thought and careful consideration," Carlson said. "It in no way reflects the quality or performance of these team members. The team members affected by these changes have each been an essential part of our success."

The bank has been under fire since it was revealed in 2016 that employees had fraudulently opened millions of fake accounts to meet sales goals.

In February, the Federal Reserve bank handed down what one analyst called a "shocking penalty" by prohibiting Wells Fargo from growing total assets beyond their levels at the end of 2017 until the bank showed the Fed it had made reforms.

Protesters rally against Wells Fargo Dozens of protesters rallied in downtown Des Moines as Wells Fargo held it's annual shareholders meeting in Iowa.

Orazem said it's hard to predict the long-term future of the bank. A newly elected Democratic minority in the U.S. House of Representatives could drag in bank executives for hearings, he said.

"How many more fiascos is Wells Fargo going to be announcing in the future, right? Hopefully, they’re done with that," he said. "Hopefully, they've taken their lumps and they’re going to be able to right their ship."

Brenna Smith, the spokeswoman for Iowa Gov. Kim Reynolds, acknowledged that losing jobs, particularly in the holiday season, is "incredibly difficult." But she said Iowans are well positioned to find new work quickly.

"Right now, Iowa’s unemployment rate is at an 18-year low, and there are jobs looking for people," Smith said in a statement. "Gov. Reynolds is confident that Iowa will continue to lead in the important industries of insurance and finance and that there are still many opportunities for people with these skills."

With few exceptions, most of Wells Fargo's 400 cuts in Des Moines came from those workers who service insurance and investor claims and default accounts payable groups.

Carlson said that the volume of claims managed by the team is down nearly 70 percent since January 2017 because of improvements in the housing economy and fewer delinquent customers.

Many laid-off employees received pre-notice, meaning they won't receive an official 60-day notice until next year. Other workers on the home-lending team received 60-day notices Thursday that their positions were being eliminated.

Carlson said the bank has more than 350 open jobs in Iowa, most of them in the Des Moines area. Leaders also expect to post nearly 300 new job openings in the next 30 days.

Affected workers were encouraged to apply for those openings.

Jay Byers, CEO of the Greater Des Moines Partnership, said the company remains one of the region's "strongest and most vital employers" and is committed to retaining as many affected workers as possible.

"Additionally, our market is a major financial services and insurance hub with a low unemployment rate and a number of job openings," Byers said in a statement. "As always, the partnership will work with Wells Fargo and with those who are affected by displacements to try to help these individuals find new opportunities."

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