Wells Fargo Must Be Broken Up-- Too Big AND Too Much Failure
I spent yesterday morning watching-- and tweeting about-- the House Financial Services Committee "examination" of Wells Fargo's crooked CEO John Stumpf. Exasperating! Without an Elizabeth Warren or an Alan Grayson, these kinds of hearings don't shed much light on anything. Keith Ellison, Maxine Waters and Gwen Moore made some excellent points but, over all, there was never any chance anything of substance would take place since nearly all the members of this cesspool of a committee take immense bribes from the Financial Sector. During the hearing-- and this was announced by Ranking Member Waters-- Jesse Hamilton and Tom Schoenberg from Bloomberg reported that the Department of Justice and the the Office of the Comptroller of the Currency, are finally getting tough on Wells Fargo. While the anti-regulation Republicans who dominate the bankster-friendly committee were trying to make a case for fewer regulations-- one of the dumbest of the freaks on the committee, New Hampshire teabagger Frank Guinta, tried floating a a crackpot conspiracy theory about Stumpf conspiring with the CFPB-- the Department of Justice revealed that Wells Fargo had been very illegally ripping off military families.
By the end of the hearing, Ranking Member Maxine Waters had come to the conclusion that Wells Fargo is too big to manage effectively and has to be broken up. I suspect that most of the Democrats-- though probably few of the corrupt New Dems on the committee like Himes and Delaney-- agree. Here's how she kicked off the serious (non-Republican) part of the hearing:
Federal prosecutors and the bank’s regulator, the Office of the Comptroller of the Currency, are planning to punish the San Francisco-based lender for alleged violations of the Servicemembers Civil Relief Act, said the people, who asked not to be named because the investigation isn’t public. A penalty of as much as $20 million is expected from the OCC, one of the people said. That’s an unusually large fine for abuse of this law, which in most cases requires that firms obtain court orders before seizing vehicles from soldiers, sailors, airmen and Marines who are delinquent on their loans.
These enforcement actions against the bank follow a $185 million settlement in which employees of the firm opened more than two million accounts that customers may not have been aware of with the aim of meeting internal sales targets. The matter has sparked weeks of sharp criticism, congressional hearings and the forfeit of tens of millions in bonuses for top executives.
...Shielding soldiers from financial stress has been a priority for lawmakers, and the Justice Department has recently stepped up enforcement actions against banks for taking assets illegally. Banco Santander SA’s U.S. unit agreed to pay $9 million last year over allegations that it improperly confiscated more than 1,000 vehicles from military members, the largest settlement ever obtained in a case involving repossessions of automobiles with delinquent loans.
Wells Fargo-- which was the world’s most valuable bank before the account scandal hurt its stock price-- has branches on eight U.S. military bases, include Fort Bliss in Texas, Georgia’s Fort Benning, Fort Dix in New Jersey and Hill Air Force Base in Utah. On its website, the bank says it has “a history of making banking easier for our servicemen and servicewomen.”
The bank has previously been accused of not adhering to the military lending law, which Congress approved decades ago to protect soldiers from legal hassles while they’re on active duty. Wells Fargo agreed to pay $28 million along with four other mortgage servicers that were fined for improper home foreclosures, according to a statement issued by the Justice Department last year. It didn’t admit or deny the allegations.
Before Hensarling convened his committee yesterday, David Cay Johnston published a post at HuffPo calling for bankster imprisonment. I agree with him, and I feel members of Congress like Jeb Henslarling, Sean Duffy, Bruce Poliquin, Frank Guinta, Roger Williams, Robert Pittinger, Ann Wagner, et al deserve a life behind bars even more than the banksters. They, after all, swore an oath and are supposed to be working for the public good. Johnston's point was that "our government continues to look the other way as many top bankers thumb their noses at fraud laws. There is a term," he wrote, "for the criminality that infects our biggest banks and damages the economy, and there is a solution to this problem. But there is also an obstacle. The term is “control fraud.” That’s when executives use their control of a corporation to run frauds because they make much more money that way."
President Obama has explained away his failure to prosecute Wall Street crooks by saying what they did was wrong, but not illegal. Eric Holder, when he was attorney general, lied again and again, saying that many prosecutions were underway even though an inspector general’s report showed he knew that was not so.
We need a government that will prosecute corrupt bankers without fear or favor-- and the top candidate at the moment should be Stumpf, who wants us to believe that low-level bank workers were the problem, not top executives.
No one can seriously believe that the 5,300 low-level employees Wells Fargo fired were rogues. They did what top management didn’t just order, but hounded them to do for years, as E. Scott Reckard reported in the Los Angeles Times in 2013. His exposé cited the daily dread experienced by Wells Fargo branch manager Rita Murillo each time her phone rang:
Regional bosses required hourly conferences on her Florida branch's progress toward daily quotas for opening accounts and selling customers extras, such as overdraft protection. Employees who lagged behind had to stay late and work weekends to meet goals, Murillo said.
American Banker’s Kate Berry described a “cutthroat sales culture,” with 20 different Wells Fargo management reports tracking cross-sales, even as no one in upper management was held accountable for the frauds then committed by low-level employees told to do the impossible or lose their jobs.
Wells Fargo, [former bank regulator and now Professor William K.] Black told me last week, is “a clear example of control fraud. It was the defining policy of Wells Fargo. Indeed, it was the defining policy of Norwest before it acquired Wells Fargo.”
...Wells Fargo illustrates what I have long written about: a major breakdown of ethics at the top of American society, especially in accounting and law. A good illustration of this is what N. Gregory Mankiw, the Harvard economics professor who was President George W Bush’s top economic advisor, says about bankers who loot the banks they control.
Mankiw says we should expect bankers to be thieves. Seriously. Here is what he told a 1993 Brookings Institution conference on the S&L scandals and all the prosecutions resulting from Black’s diligence: "Given the incentives that regulators set up, it would be irrational for operators of the savings and loans not to loot."
Black derides this as “Mankiw morality,” and says government is failing in its duty to enforce the laws against corrupt bankers.
Mankiw is not alone in looking at everything and anything but crime and lack of punishment. Consider how Priyank Gandhi, an assistant professor of finance at the University of Notre Dame, described the issues right after the Senate hearings in a commentary for CNBC:
If the [Wells Fargo] fraud is not more widespread than it currently appears, and if further investigation does not reveal any new material facts, I would think that in time, pessimism about the bank will peak, the share price will stabilize (or dare I say even rebound), and there will be no serious repercussions or consequences from the scandal.The focus should not be on the stock price, but on integrity.
For more than a quarter of a century the news has been filled with tales of top bankers who abused their positions of trust to cheat, lie and steal, including all the mortgage securities fraud that sank the economy in 2008.
Congress created the Financial Crisis Inquiry Commission to find out how the 2008 economic collapsed happened. The commission laid it all out in detail in a report that no one has ever shown contains a single error. It is a story of corrupt bankers, dishonest brokers and liars everywhere-- as well as sightless sheriffs who saw the evidence of criminality and did nothing.
Congress threw the report into the trash. It did nothing to enforce the law, only to enact new rules that bankers continue to flout.