Wells Fargo’s Bilt Debacle, is US Banks Bull Case

*This article first appeared on my personal Twitter & LinkedIn

If you haven’t heard, The Wall Street Journal dropped a report detailing Bilt's sweet deal with Wells Fargo. TL;DR: Wells Fargo is hemorrhaging cash every month on this partnership. From a bottom-line perspective, this is chump change. They’re a major US bank; they make money just by breathing. But to someone like me, this points to a much more important point: Wells Fargo has officially transitioned from a “Main Street” west coast bank to a Wall Street East Coast bank. Sure, Wikipedia might still list Wells as a San Francisco bank, but if you ask any insider, it’ll be clear that the HQ’s in SF & Charlotte are void of power and that all decisions go through Hudson Yard. And here's the kicker: this leaves US Bank as the last non-New York-centric bank among the big names.

Maybe someday I’ll delve into how I think this happened, but the why is more pressing. And this Bilt Rewards partnership is the perfect skeleton key to open up all the doors we need.

To most, this story was a hilarious echo of Goldman Sachs bungling of the Apple Credit Card. But I don’t think it’s a 1:1 comparison. Goldman has always loved risk. Wells? Not so much. Wells was always an SF, West Coast bank. Building the business through mortgages, deposits, and wealth management. Not through investment banking and trade desk. Even after merging with Norwest, the Minnesota ethos was a match made in heaven. Unlike the current wild West Coast mentality of San Francisco and Silicon Valley, this West Coast mentality kept the risks and egos of New York Wall Street at bay.

It worked well for Wells... for a while. They cruised through the 2000s and even soared during the financial crisis caused by all the big New York banks. Then they got in trouble. Now, I have lots of thoughts on that, but the short of it is everyone got fired. Politicians hated Wells Fargo, so like any good American Corporation, they copied what worked. They became JP Morgan. They hired Jamie Dimon’s protege, Charles Scharf. And this gets to an important part of the Bilt story. Charles is a JP Morgan guy, and it’s where he cut his teeth. More specifically, he ran One Equity Partners. A place that loves billionaires like Naveen Jain. If you have time, go down the rabbit hole of Naveen, it’s wild! So once you start piecing this puzzle together it’s easy to see how Charles + The Jains = Wells <3 Bilt.

For anyone who has lived in this ecosystem, this just makes sense. This news about Bilt and Wells isn’t about losing a few hundreds of millions of dollars. Who cares?! It’s about a narrative violation! Wells Fargo is now a puppet of JP Morgan, leaving U.S. Bank as the sole holdout. The last Main Street bank that isn’t corrupted by coastal groupthink. Now what does this mean? I have no idea! But just as Wells Fargo blossomed during the 2008 financial crisis, I think you can expect US Bank to blossom or take a contrarian view in the next one.

So, there you have it. Wells Fargo has traded in its Main Street jeans for a Wall Street suit. And with it comes, the same deals, the same kinds of profit, and the same exposure to risk as their counterparts on the street. And US Bank? Well, they might just be the tortoise to Wells’ hare in the next financial race.

Also, just so it’s clear, I think Bilt is awesome. If I were Ankur Jain, I would have done the same thing, even down to having a 100 million-dollar wedding! And the Bilt card is amazing. If you don't have one, pick one up.

Disclaimer: I think I’m supposed to say that this is not financial advice. So, this is not FiNaNcIaL aDvIcE. Elizabeth Warren's CFPB, plz don’t come arrest me.