The recent Wells Fargo banking scandal wherein 5,300 employees were scapegoated and fired to cover up a company policy of setting up fraudulent bank and credit card accounts for existing Wells Fargo customers (on which the customers paid fees) reeks, and not just because of the illegal behavior of Wells Fargo.
I’m sure that most of us would by now agree that many of the executives of big banks are merely high-class con men doing business as usual. We fully expect them to cheat their government, their clients and their employees with abandon. What reeks is that the United States government continually lets these highly paid con men get away with it.
Think back eight years ago when big banks, brokerage houses, insurance companies—you name it—ruined the financial security of millions and millions of Americans and took the nation and the world into an economic hell from which average men and women are still trying to recover. Think back, and name, if you can, any one of the architects of that debacle who went to jail. Stumped? Yeah, me too.
I was once told by a friend that he thought that the only reason Bernie Madoff—the investment counsellor who defrauded his friends and clients out of $18 billion—went to jail in 2008 was that he robbed from his own kind, the wealthy. I once thought my friend was being kind of radical by saying that. I no longer think it was radical, I think it is true.
In America we send 18-year-olds to prison for life for doing drugs. We tell financial leaders who have knowingly and willfully committed fraud to pay a fine and try to be a better person—to learn from their mistakes.
Large financial institutions do a cost/benefit analysis when planning actions that might be financially risky. Unsurprisingly they do the same cost/benefit analyses when they plan to do something that they know to be illegal. They want to know what the odds are that they will be caught, and if they are caught will the penalties they might have to pay exceed the amount of money they would make by their illegal actions. I doubt if they bother to factor in jail time.
A judge, when determining the bail of an accused person, will take that person’s previous record into account. A government agency with oversight over an industry, one would assume, would also take a company’s previous behavior into account and if it has not been trustworthy in the past one would expect that that government agency would be keeping an eye on them.
One would assume wrong. Let’s look back at Wells Fargo, for instance. Earlier this year Wells Fargo agreed to admit culpability in the 2008 mortgage meltdown and paid the Justice Department $1.2 billion to avoid prosecution. An April 9, 2016, story by Tyler Durden on Zerohedge.com reports:
“According to the settlement Wells Fargo ‘admits, acknowledges, and accepts responsibility’ for having from 2001 to 2008 falsely certified that many of its home loans qualified for Federal Housing Administration insurance. … According to the Justice Department, the shortfalls led to substantial losses for taxpayers when the FHA was forced to pay insurance claims as defective loans soured.”
In 2012 Wells Fargo and others agreed to pay remediation of $6.6 billion for overcharging merchants on credit card fees.
In 2010 Wells Fargo agreed to pay $203 million to settle a case in which it posted debit card charges to an account before it posted clients’ payments received on the same day so that it could generate overdraft fees.
These last two items were posted in a Matt Krantz USA Today story on Sept. 11, 2016.
The treasurer of the state of California suspended the state’s significant financial relationship with Wells Fargo last week over the most recent scandal.
Is anyone in Washington, D.C., going to do anything?
Jim Elliott is a former chairman of the Montana Democratic Party and a former state senator from Trout Creek.