Transcript of Kissinger Economic Policy Meeting

The below recently declassified transcript of an internal meeting between Kissinger and his advisers shows an alarming degree of incompetence from all sides.  Remember, this was during a period of great economic turmoil, after the Nixon Shock, and the infancy of the modern Forex market as we know it.

There are those who believe in conspiracy theories, that Kissinger with international advisers spent the weekend with Nixon plotting to default on the Gold obligations thus creating the floating currency system, in order to implement a one world currency decades later.  What this transcript indicates, if not proves, is that there is no conspiracy, and the people who created the modern Forex market have no clue what they are doing, and had no model or even a plan for that matter, when they created the Forex market.


FOREIGN RELATIONS OF THE UNITED STATES, 1973–1976
VOLUME XXXI, FOREIGN ECONOMIC POLICY, DOCUMENT 63


63. MINUTES OF SECRETARY OF STATE KISSINGER’S PRINCIPALS AND REGIONALS STAFF MEETING 1

Washington, April 25, 1974, 3:13–4:16 p.m.
[Omitted here is discussion unrelated to international monetary policy.]
Secretary Kissinger: Now we’ve got Enders, Lord and Hartman. They’ll speak separately or together. (Laughter.)
Mr. Hartman: A trio.
Mr. Lord: I can exhaust my knowledge of gold fairly quickly, I think.
Secretary Kissinger: Now, I had one deal with Shultz—never to discuss gold at this staff meeting—because his estimate of what would appear in the newspapers from staff meetings is about the same as mine.
Are you going to discuss something—is this now in the public discussion, what we’re discussing here?
Mr. Enders: It’s been very close to it. It’s been in the newspapers now—the EC proposal. 2
Secretary Kissinger: On what—revaluing their gold?
Mr. Enders: Revaluing their gold—in the individual transaction between the central banks. That’s been in the newspaper. The subject is, obviously, sensitive; but it’s not, I think, more than the usual degree of sensitivity about gold.
Secretary Kissinger: Now, what is our position?
Mr. Enders: You know what the EC proposal is.
Secretary Kissinger: Yes.
Mr. Enders: It does not involve a change in the official price of gold. It would allow purchases and sales to the private market, provided there was no net purchase from the private market by an individual central banker in a year. And then there would be individual sales between the central banks on—
Secretary Kissinger: How can they permit sale to the private market? Oh, and then they would buy from the private market?
Mr. Enders: Then they would buy.
Secretary Kissinger: But they wouldn’t buy more than they sold.
Mr. Enders: They wouldn’t buy more than they sold. There would be no net increase in gold held by the central banks that was held by the EEC. It could be held by others.
I’ve got two things to say about this, Mr. Secretary. One is: If it happens, as they proposed, it would be against our interests in these ways.
Secretary Kissinger: Have you accepted it or is this just a French proposal?
Mr. Enders: It’s an informal consensus that they’ve reached among themselves.
Secretary Kissinger: Were they discussed with us at all?
Mr. Enders: Not in a systematic way. They’re proposing to send over to Washington the Dutch Finance Minister and the Dutch Central Governor would talk to the Treasury.
Secretary Kissinger: What’s Arthur Burns’ view?
Mr. Enders: Arthur Burns—I talked to him last night on it, and he didn’t define a general view yet. He was unwilling to do so. He said he wanted to look more closely on the proposal. Henry Wallich, the international affairs man, this morning indicated he would probably adopt the traditional position that we should be for phasing gold out of the international monetary system; but he wanted to have another look at it. So Henry Wallich indicated that they would probably come down opposing this. But he was not prepared to do so until he got a further look at it.
Secretary Kissinger: But the practical consequence of this is to revalue their gold supply.
Mr. Enders: Precisely.
Secretary Kissinger: Their gold reserves.
Mr. Enders: That’s right. And it would be followed quite closely by a proposal within a year to have an official price of gold—
Secretary Kissinger: It doesn’t make any difference anyway. If they pass gold at the market price, that in effect establishes a new official price.
Mr. Enders: Very close to it—although their—
Secretary Kissinger: But if they ask what they’re doing—let me just say economics is not my forte. But my understanding of this proposal would be that they—by opening it up to other countries, they’re in effect putting gold back into the system at a higher price.
Mr. Enders: Correct.
Secretary Kissinger: Now, that’s what we have consistently opposed.
Mr. Enders: Yes, we have. You have convertibility if they—
Secretary Kissinger: Yes.
Mr. Enders: Both parties have to agree to this. But it slides towards and would result, within two or three years, in putting gold back into the centerpiece of the system—one. Two—at a much higher price. Three—at a price that could be determined by a few central bankers in deals among themselves.
So, in effect, I think what you’ve got here is you’ve got a small group of bankers getting together to obtain a money printing machine for themselves. They would determine the value of their reserves in a very small group.
There are two things wrong with this.
Secretary Kissinger: And we would be on the outside.
Mr. Enders: We could join this too, but there are only very few countries in the world that hold large amounts of gold—United States and Continentals being most of them. The LDC’s and most of the other countries—to include Japan—have relatively small amounts of gold. So it would be highly inflationary, on the one hand—and, on the other hand, a very inequitable means of increasing reserves.
Secretary Kissinger: Why did the Germans agree to it?
Mr. Enders: The Germans agreed to it, we’ve been told, on the basis that it would be discussed with the United States—conditional on United States approval.
Secretary Kissinger: They would be penalized for having held dollars.
Mr. Enders: They would be penalized for having held dollars. That probably doesn’t make very much difference to the Germans at the present time, given their very high reserves. However, I think that they may have come around to it on the basis that either we would oppose it—one—or, two, that they would have to pay up and finance the deficits of France and Italy by some means anyway; so why not let them try this proposal first?
The EC is potentially divided on this, however, and if enough pressure is put on them, these differences should reappear.
Secretary Kissinger: Then what’s our policy?
Mr. Enders: The policy we would suggest to you is that, (1), we refuse to go along with this—
Secretary Kissinger: I am just totally allergic to unilateral European decisions that fundamentally affect American interests—taken without consultation of the United States. And my tendency is to smash any attempt in which they do it until they learn that they can’t do it without talking to us.
That would be my basic instinct, apart from the merits of the issue.
Mr. Enders: Well, it seems to me there are two things here. One is that we can’t let them get away with this proposal because it’s for the reasons you stated. Also, it’s bad economic policy and it’s against our fundamental interests.
Secretary Kissinger: There’s also a fundamental change of our policy that we pursued over recent years—or am I wrong there?
Mr. Enders: Yes.
Secondly, Mr. Secretary, it does present an opportunity though—and we should try to negotiate for this—to move towards a demonetization of gold, to begin to get gold moving out of the system.
Secretary Kissinger: But how do you do that?
Mr. Enders: Well, there are several ways. One way is we could say to them that they would accept this kind of arrangement, provided that the gold were channelled out through an international agency—either in the IMF or a special pool—and sold into the market, so there would be gradual increases.
Secretary Kissinger: But the French would never go for this.
Mr. Enders: We can have a counter-proposal. There’s a further proposal—and that is that the IMF begin selling its gold—which is now 7 billion—to the world market, and we should try to negotiate that. That would begin the demonetization of gold.
Secretary Kissinger: Why are we so eager to get gold out of the system?
Mr. Enders: We were eager to get it out of the system—get started—because it’s a typical balancing of either forward or back. If this proposal goes back, it will go back into the centerpiece system.
Secretary Kissinger: But why is it against our interests? I understand the argument that it’s against our interest that the Europeans take a unilateral decision contrary to our policy. Why is it against our interest to have gold in the system?
Mr. Enders: It’s against our interest to have gold in the system because for it to remain there it would result in it being evaluated periodically. Although we have still some substantial gold holdings—about 11 billion—a larger part of the official gold in the world is concentrated in Western Europe. This gives them the dominant position in world reserves and the dominant means of creating reserves. We’ve been trying to get away from that into a system in which we can control—
Secretary Kissinger: But that’s a balance of payments problem.
Mr. Enders: Yes, but it’s a question of who has the most leverage internationally. If they have the reserve-creating instrument, by having the largest amount of gold and the ability to change its price periodically, they have a position relative to ours of considerable power. For a long time we had a position relative to theirs of considerable power because we could change gold almost at will. This is no longer possible—no longer acceptable. Therefore, we have gone to special drawing rights, which is also equitable and could take account of some of the LDC interests and which spreads the power away from Europe. And it’s more rational in—
Secretary Kissinger: “More rational” being defined as being more in our interests or what?
Mr. Enders: More rational in the sense of more responsive to worldwide needs—but also more in our interest by letting—
Secretary Kissinger: Would it shock you? I’ve forgotten how SDR’s are generated. By agreement?
Mr. Enders: By agreement.
Secretary Kissinger: There’s no automatic way?
Mr. Enders: There’s no automatic way.
Mr. Lord: Maybe some of the Europeans—but the LDC’s are on our side and would not support them.
Mr. Enders: I don’t think anybody would support them.
Secretary Kissinger: But could they do it anyway?
Mr. Enders: Yes. But in order for them to do it anyway, they would have to be in violation of important articles of the IMF. So this would not be a total departure. (Laughter.) But there would be reluctance on the part of some Europeans to do this. We could also make it less interesting for them by beginning to sell our own gold in the market, and this would put pressure on them.
Mr. Maw: Why wouldn’t that fit if we start to sell our own gold at a price?
Secretary Kissinger: But how the hell could this happen without our knowing about it ahead of time?
Mr. Hartman: We’ve had consultations on it ahead of time. Several of them have come to ask us to express our views. And I think the reason they’re coming now to ask about it is because they know we have a generally negative view.
Mr. Enders: So I think we should try to break it, I think, as a first position—unless they’re willing to assign some form of demonetizing arrangement.
Secretary Kissinger: But, first of all, that’s impossible for the French.
Mr. Enders: Well, it’s impossible for the French under the Pompidou Government. Would it be necessarily under a future French Government? We should test that.
Secretary Kissinger: If they have gold to settle current accounts, we’ll be faced, sooner or later, with the same proposition again. Then others will be asked to join this settlement thing.
Isn’t this what they’re doing?
Mr. Enders: It seems to me, Mr. Secretary, that we should try—not rule out, a priori, a demonetizing scenario, because we can both gain by this. That liberates gold at a higher price. We have gold, and some of the Europeans have gold. Our interests join theirs. This would be helpful; and it would also, on the other hand, gradually remove this dominant position that the Europeans have had in economic terms.
Secretary Kissinger: Who’s with us on demonetizing gold?
Mr. Enders: I think we could get the Germans with us on demonetizing gold, the Dutch and the British, over a very long period of time.
Secretary Kissinger: How about the Japs?
Mr. Enders: Yes. The Arabs have shown no great interest in gold.
Secretary Kissinger: We could stick them with a lot of gold.
Mr. Sisco: Yes. (Laughter.)
Mr. Sonnenfeldt: At those high-dollar prices. I don’t know why they’d want to take it.
Secretary Kissinger: For the bathroom fixtures in the Guest House in Rio. (Laughter.)
Mr. McCloskey: That’d never work.
Secretary Kissinger: That’d never work. Why it could never get the bathtub filled—it probably takes two weeks to fill it.
Mr. Sisco: Three years ago, when Jean 3 was in one of those large bathtubs, two of those guys with speakers at that time walked right on through. She wasn’t quite used to it. (Laughter.)
Secretary Kissinger: They don’t have guards with speakers in that house.
Mr. Sisco: Well, they did in ’71.
Mr. Brown: Usually they’ve been fixed in other directions.
Mr. Sisco: Sure. (Laughter.)
Secretary Kissinger: O.K. My instinct is to oppose it. What’s your view, Art?
Mr. Hartman: Yes. I think for the present time, in terms of the kind of system that we’re going for, it would be very hard to defend in terms of how.
Secretary Kissinger: Ken?
Mr. Rush: Well, I think probably I do. The question is: Suppose they go ahead on their own anyway. What then?
Secretary Kissinger: We’ll bust them.
Mr. Enders: I think we should look very hard then, Ken, at very substantial sales of gold—U.S. gold on the market—to raid the gold market once and for all.
Mr. Rush: I’m not sure we could do it.
Secretary Kissinger: If they go ahead on their own against our position on something that we consider central to our interests, we’ve got to show them that that they can’t get away with it. Hopefully, we should have the right position. But we just cannot let them get away with these unilateral steps all the time.
Mr. Lord: Does the Treasury agree with us on this? I mean, if this guy comes when the Secretary is out of the country—
Secretary Kissinger: Who’s coming?
Mr. Enders: The Dutch Finance Minister—Duisenberg—and Zijlstra. I think it will take about two weeks to work through a hard position on this. The Treasury will want our leadership on the hardness of it. They will accept our leadership on this. It will take, I would think, some time to talk it through or talk it around Arthur Burns, and we’ll have to see what his reaction is.
Mr. Rush: We have about 45 billion dollars at the present value—
Mr. Enders: That’s correct.
Mr. Rush: And there’s about 100 billion dollars of gold.
Mr. Enders: That’s correct. And the annual turnover in the gold market is about 120 billion.
Secretary Kissinger: The gold market is generally in cahoots with Arthur Burns.
Mr. Enders: Yes. That’s been my experience. So I think we’ve got to bring Arthur around.
Secretary Kissinger: Arthur is a reasonable man. Let me talk to him. It takes him a maddening long time to make a point, but he’s a reasonable man.
Mr. Enders: He hasn’t had a chance to look at the proposal yet.
Secretary Kissinger: I’ll talk to him before I leave. 4
Mr. Enders: Good.
Mr. Boeker: It seems to me that gold sales is perhaps Stage 2 in a strategy that might break up the European move—that Stage 1 should be formulating a counterproposal U.S. design to isolate those who are opposing it the hardest—the French and the Italians. That would attract considerable support. It would appeal to the Japanese and others. I think this could fairly easily be done. And that, in itself, should put considerable pressure on the EEC for a tentative consensus.
Mr. Hartman: It isn’t a confrontation. That is, it seems to me we can discuss the various aspects of this thing.
Secretary Kissinger: Oh, no. We should discuss it—obviously. But I don’t like the proposition of their doing something and then inviting other countries to join them.
Mr. Hartman: I agree. That’s not what they’ve done.
Mr. Sonnenfeldt: Can we get them to come after the French election 5 so we don’t get kicked in the head?
Mr. Rush: I would think so.
Secretary Kissinger: I would think it would be a lot better to discuss it after the French election. Also, it would give us a better chance. Why don’t you tell Simonthis?
Mr. Enders: Good.
Secretary Kissinger: Let them come after the French election.
Mr. Enders: Good. I will be back—I can talk to Simon. I guess Shultz will be out then. 6
Mr. Sonnenfeldt: He’ll be out the 4th of May.
Mr. Enders: Yes. Meanwhile, we’ll go ahead and develop a position on the basis of this discussion.
Secretary Kissinger: Yes.
Mr. Enders: Good.
Secretary Kissinger: I agree we shouldn’t get a consultation—as long as we’re talking Treasury, I keep getting pressed for Treasury chair-manship of a policy committee. You’re opposed to that? 7
[Omitted here is discussion unrelated to international monetary policy.]
1 Source: National Archives, RG 59, Transcripts of Secretary of State Kissinger’s Staff Meetings, 1973–1977, Entry 5177, Box 3, Secretary’s Staff Meeting, April 25, 1974. Secret. According to an attached list, the following people attended the meeting: Kissinger, Rush, Sisco, Ingersoll,Hartman, Maw, Ambassador at Large Robert Mc-Closkey, Assistant Secretary of State for African Affairs Donald Easum, Hyland, Atherton, Lord, Policy Planning Staff member Paul Boeker,Eagleburger, Springsteen, Special Assistant to the Secretary of State for Press Relations Robert Anderson, Enders, Assistant Secretary of State for Inter-American Affairs Jack Kubisch, andSonnenfeldt.
2 Meeting in Zeist, the Netherlands, on April 22 and 23, EC Finance Ministers and central bankers agreed on a common position on gold, which they authorized the Dutch Minister of Finance, Willem Frederik Duisenberg, and the President of the Dutch central bank, Jelle Zijlstra, to discuss with Treasury and Federal Reserve Board officials in Washington. (Telegram 2042 from The Hague, April 24, and telegram 2457 from USEC Brussels, April 25; ibid., Central Foreign Policy Files)
3 Jean Sisco was Joseph Sisco’s wife.
4 From April 28 to 29, Kissinger was in Geneva for talks with Soviet Foreign Minister Andrei Gromyko.
5 France held a Presidential election on May 19.
6 George Shultz’s tenure as Secretary of the Treasury ended on May 8, when he was replaced byWilliam Simon.
7 The summary attached to the front page of the minutes notes that “The Secretary is inclined to oppose the proposal on grounds of non consultation by the Europeans as well as on the proposal’s merits. The Secretary agreed to talk to Arthur Burns in this sense.”

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By 
Emily Glazer
The whispers among employees had been around for years. They finally heard some facts during a conference call in June led by managers in Wells Fargo WFC +3.17% & Co.’s foreign-exchange operation: Some of its business customers had been cheated, according to two employees who were on the call.
An internal review showed that out of roughly 300 fee agreements based on anything from informal handshakes to emails to signed documents, only about 35 companies were charged the actual price they had been offered for currency trades handled by Wells Fargo, the employees say.
The phone call was part of a continuing cleanup that has led Wells Fargo to fire four foreign-exchange bankers and federal prosecutors to open their own investigation of the operation, people familiar with the matter have said.
“Wells Fargo remains committed to our foreign exchange business,” the bank said in a statement Monday. “If we find a problem, we fix it.” The bank said its foreign-exchange business is “under new management.”
The business is tiny compared with foreign-exchange operations at J.P. Morgan Chase & Co. and Citigroup Inc. but could become another huge headache for the San Francisco bank, still grappling with fallout from the sales-practices scandal in its retail operations. The scandal led to last year’s abrupt retirement of Wells Fargo’s chief executive, a $185 million regulatory settlement and numerous federal and state investigations, which are continuing.
Wells Fargo retail employees had to hit lofty goals to keep their jobs or get bonuses, which led some employees to open potentially 3.5 million accounts with fictitious or unauthorized customer information from 2009 to 2015.
Foreign-exchange employees got bonuses based solely on how much revenue they brought in, say more than a dozen current or former Wells Fargo employees. No other big bank in the U.S. calculated bonuses of currency traders in such a defined and individual way. Wells Fargo said Monday that it began making changes to those compensation plans earlier this year.
The bank also charged some of the highest trading fees around, according to current and former employees. For more than a decade, customers were sometimes charged anywhere from 1% to 4% on basic transactions such as converting euros to dollars and complicated trades like hedging.
Those percentages can be at least two to eight times higher than the middle-market industry average of 0.15% to 0.5%, depending on the trade, customer and volume, according to foreign-exchange bankers throughout the industry.
Wells Fargo disputes the descriptions of its foreign-exchange fees by current and former employees. The bank said Monday its fees in 2016 had a weighted average of 0.09 percentage point across all transaction sizes. Clients served by its middle-market banking team were charged a weighted average of 0.18 percentage point, according to Wells Fargo.
Some foreign-exchange bankers at Wells Fargo relied on the fact that customers often didn’t bother to double-check how much they were charged, fee levels weren’t straightforward, and complaints could be batted away, the current and former employees say.
‘Time fluctuation’
One former Wells Fargo manager says employees would tell customers who expressed surprise at the size of a trading fee that market prices were different at the moment when the transaction was executed and blame “time fluctuation” for any difference.
The bank’s foreign-exchange customers have included telecommunications firm CenturyLinkInc., vehicle-parts supplier Federal-Mogul Holdings Corp. and nonprofit groups such as the National Bone Marrow Donor Program.
Regulators have been investigating the foreign-exchange business at Wells Fargo, including a big trade involving Restaurant Brands International Inc., the owner of Burger King, Tim Hortons and Popeyes Louisiana Kitchen, according to people familiar with the matter.
A Burger King in Tokyo. The fast-food chain’s owner got a refund from Wells Fargo after disputing a trade handled by the bank.
A Burger King in Tokyo. The fast-food chain’s owner got a refund from Wells Fargo after disputing a trade handled by the bank. PHOTO: KIM KYUNG-HOON/REUTERS
The trade resulted in a loss to Restaurant Brands, people familiar with the matter have said, which led to a dispute between the Oakville, Ontario, company and the bank. The dispute centered on how bank employees handled the trade, rather than its pricing. Wells Fargo refunded about $900,000 to Restaurant Brands, people familiar with the refund say.
The foreign-exchange business’s problems run far deeper than what is known inside Wells Fargo as “the Burger King trade” or what has been previously reported. The extent of the trouble seems to have become apparent to top Wells Fargo executives earlier this year.
Small FryForeign-exchange spot contracts as apercent of a bank's total derivativesportfolioTHE WALL STREET JOURNALSource: Office of the Comptroller of the Currency
Bank ofAmericaCitigroupJ.P. MorganWells Fargo0%102030
The business was moved in early 2017 from Wells Fargo’s international division into its investment-banking and capital-markets operation. Since then, executives have changed internal systems, added more stringent rules around pricing and required more frequent compliance checks, current and former employees say.
Issues with the Burger King trade were found following those checks and customer complaints, people familiar with the matter say. The continuing internal review of Wells Fargo’s foreign-exchange operation is separate from the review sparked by the sales scandal, some of the people said.
A compliance training session in early November detailed what Wells Fargo called “approved margins” for different volumes of foreign-exchange transactions, according to an internal document reviewed by The Wall Street Journal. Employees say fee levels remain higher than industry norms, and some compensation practices aren’t due to change until next year.

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Foreign-exchange trading has been a problem area for many banks. In 2015, several large U.S. and European banks agreed to multibillion-dollar settlements with U.S. regulators and pleaded guilty to criminal charges filed by U.S. authorities over alleged collusion among currency traders.
Bank of New York Mellon Corp. agreed in 2015 to pay $714 million to resolve allegations it defrauded pension funds and other clients by overcharging them on currency transactions.State Street Corp. agreed in 2016 to pay $530 million to settle similar allegations.
Both banks admitted giving some clients far worse pricing on currency transactions than the banks implied the clients would get.
The Journal reported in October that the U.S. Attorney’s Office for the Northern District of California is investigating the Restaurant Brands currency trade and has subpoenaed information from Wells Fargo.
Potential issues related to that trade also are being examined by the Federal Reserve, the Journal reported. Examiners from the Office of the Comptroller of the Currency are auditing Wells Fargo’s foreign-exchange business, according to employees at the bank. A Wells Fargo executive says the audit is “normal course of business.”

Payment Plans

Some current and former Wells Fargo employees say its charges on foreign-exchange trades encouraged employees to cheat customers.

Fees for some currency trades
Industry average
Wells Fargo
Fee: 0.15 - 0.5%
Fee: 1% - 4%
For a $10 million trade
Fee:
$100,000 - $400,000
Fee:
$15,000 - $50,000
How Wells Fargo compensated bankers
If a banker had a revenue target of $5 million
and brought in $6 million ...
Revenue target: $5 million
Revenue that exceeded target: $1 million
.. the banker would earn a bonus of $100,000,
or 10% of the $1 million
Bonus
Source: People familiar with the bank
Current and former bank employees say its pricing practices were rooted in a culture and compensation system that looked to maximize revenue. Bonuses were defined as 10% of revenues exceeding revenue targets.
If a banker’s revenue target was $5 million and the person brought in $6 million, he or she would earn a $100,000 bonus, or 10% of the additional $1 million in revenue. Bankers typically received such bonuses twice a year in cash, rather than stock, as part of a signed contract, they added.
It’s rare among foreign-exchange groups in other banks to have so-called defined-bonus plans focused on individual earnings, according to people in the industry.
After Wells Fargo moved the foreign-exchange business into its investment bank earlier this year, managers began telling employees that bonuses would become “discretionary” by the end of 2017. Under this more typical arrangement, management would decide employee bonuses, and bankers wouldn’t know exactly how much they would receive. It would be based on a variety of factors, not just revenue.
Wells Fargo has 18 foreign-exchange sales and trading offices, including in New York, San Francisco, Charlotte, N.C., London and Hong Kong. A few hundred people work in the group world-wide.
Current and former employees say Wells Fargo’s foreign-exchange customers are largely midsize businesses that don’t tend to trade in large volumes. As a result, those clients don’t have the same insight into the market as larger firms that are more-active traders.
Some Wells Fargo clients have complained to the bank. In November 2016, Ecolab Inc., a water, hygiene and energy company based in St. Paul, Minn., bought and sold currency in a so-called swap arranged by the bank, according to people familiar with the deal. These people say Wells Fargo collected 1% on one part of the $100 million deal.
Ecolab contested the fee charged by Wells Fargo on a transaction arranged by the bank.
Ecolab contested the fee charged by Wells Fargo on a transaction arranged by the bank. PHOTO:ARIANA LINDQUIST/BLOOMBERG NEWS
After Ecolab compared the full trade, including fees, to overall market prices, the company contested the bank’s fee. Wells Fargo refunded hundreds of thousands of dollars to Ecolab in December 2016, according to current and former employees.
A spokeswoman for Ecolab confirmed the details of the trade and said it was the only fee issue Ecolab had with Wells Fargo.
Fee issues arose for some Wells Fargo clients even when they had a pricing agreement. The bank agreed within the past 18 months to a specified rate with data-management firm Veritas Technologies LLC, according to bank employees. After making one trade on behalf of Veritas, Wells Fargo bankers told Veritas that the bank’s fee was 0.05 percentage point higher than the agreed rate, the employees say.
Unusually high fees
The result: The bank made an extra $50,000 on a $100 million trade, the employees say. Wells Fargo later made a refund to Veritas, according to people familiar with the matter. A Veritas spokeswoman declined to comment.
Wells Fargo’s foreign-exchange business also charged unusually high fees for trades with different currency conversions, known as “Bswift” transactions, current and former employees say.
“And if anybody did complain, it was an easy tap dance,” one former employee says. He says employees would say the pricing had been done automatically by the bank’s computer system so “there’s no accountability for the spread.”
Wells Fargo sent an internal email Nov. 2 detailing new guidelines for Bswift transactions, according to a copy of the email reviewed by the Journal. The guidelines include specific handling and pricing procedures for those trades.
The operation also charged high fees to other parts of Wells Fargo. Wells Fargo Rail, which leases locomotives and railcars, and the bank’s corporate-trust division are often charged 1% to 1.5% on currency transactions, according to current and former employees.
The bank’s foreign-exchange management often celebrated big trades and the money they made for the bank, the current and former employees say. Sara Wardell-Smith, who led the foreign-exchange group, emailed the group to hail big trades, naming clients and spelling out revenue generated. The employees say managers used to encourage employees to ring a brass bell in the San Francisco office when the bank made a lot of money on a trade.
In mid-October, the bank announced that Ms. Wardell-Smith would lead its financial institutions group in the Americas region, according to a memo reviewed by the Journal and confirmed by a bank spokeswoman.
Current employees say the move was viewed within Wells Fargo as a demotion, coming just months after Ms. Wardell-Smith had been promoted to co-lead the bank’s division focusing on trading of rates, currencies and commodities. She didn’t respond to requests for comment.
The other co-leader, Ben Bonner, now leads that group on his own and is overseeing foreign-exchange trading, a bank spokeswoman confirms.
Mr. Bonner has been working with other executives to fix the problems in the currency business, according to several current employees.
Last month, the bank sent a memo to foreign-exchange employees that instructs them not to create informal or oral pricing agreements. The memo, reviewed by the Journal, also said employees are “responsible for ensuring customers are not misled regarding” pricing.
Current and former employees say some Wells Fargo employees expressed concerns about pricing practices to top executives before the bank’s internal cleanup efforts began earlier this year. Some employees say they were reluctant to press for sweeping changes, citing what they saw happen to one manager in the foreign-exchange operation about a decade ago.
During a meeting of foreign-exchange managers in the mid-2000s, Cathy Witt said it wasn’t right to celebrate high fees by ringing a bell, people familiar with the situation say. Ms. Witt, an employee in the bank’s Chicago foreign-exchange group, warned that Wells Fargo could become known as a “bucket shop,” a derisive term for a disreputable finance firm, some of the people say.
A few weeks later, Ms. Witt was summoned to a meeting in St. Louis, told that her comments had been offensive and demoted on the spot, according to people familiar with the matter. She also was told to apologize to other managers for her unprofessional behavior, the people say. She later left the bank.
—Aruna Viswanatha contributed to this article.

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