Editorial: When big bank mergers go bad

Ever since it acquired First Interstate Bank in 1996, Wells Fargo has made blunder upon blunder in dealing with its customers in Nevada. Wells Fargo may love its big customers, especially those in California, but those who have smaller accounts seem to be an irritant for the banking giant.

The latest bungling from Wells Fargo comes in the wake of its pending merger with Norwest Bank. Wells Fargo promised last week to make $15 billion in loans available to low-income and minority borrowers in California over the next three years if the government approves the merger.

That's great for California. But what about Nevada? There's no word yet on what level of financial commitment will be made here. A spokeswoman for Wells Fargo told the Sun that while no specific dollar amount has been determined, it was planning to make similar promises for the other 20 states that will be served by the new company.

Wells Fargo's fawning over California, however, makes all too clear its lack of concern for the other smaller states it serves. If Wells Fargo was able to make a commitment to California last Wednesday, it at least owed the same consideration to the rest of its customers in other states. But Wells Fargo's inaction isn't a surprise to Nevadans.

After its merger with First Interstate Bank was completed, Wells Fargo abruptly ended check guarantee cards for its customers. Lines got longer at bank branches as staffing was reduced. Some accounts got misplaced. Even Nevada state government agencies that had banking accounts with Wells Fargo dumped the bank last year because of poor customer service.

Nevada's not alone, though. Other small Western states noticed a decline in customer service. The Arizona state treasurer told Bloomberg News in May 1997 that Wells Fargo customers were leaving in droves and that the bank was "having a major hemorrhage in Arizona." Oregon's top banking regulator said complaints kept coming into his office.

Mergers are great for the newly formed corporation's bottom line. But the emphasis on streamlining operations and cutting staffing to the bone often is disastrous for customers. When the definitive book is written on the merger mania of the 1990s, a chapter should be devoted to Wells Fargo, using it as an example of a merger gone bad.

The Federal Reserve, which has the final say on the Wells Fargo-Norwest merger, should take a close look at how Wells Fargo has performed outside of California following its takeover of First Interstate Bank. Nevada's Wells Fargo customers should be worried that if the past is any indication, there may be some rough times ahead, unless government regulators mandate a minimum level of competent customer service.

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