September 8, 2016 (Update September 21) – Today, Wells Fargo announced it has terminated 5,300 (!!!) employees that created fake accounts and generated fees from the likes of you and me.
In the Summer of 2008, the OCC asked me two questions – 1) Did I think banks had learned their lesson, and 2) What would the OCC need to do to stop the bad behavior at banks.
The first answer was an emphatic ‘No.’ I said once the cycle went back to lending, banks would make the same mistakes and break the same laws. Today is evidence of that.
The second question instantly brought China to my mind. Hang the CEOs in the Square:) I told the OCC they needed to enforce their FIRREA fines to the maximum dollar amount. But, more importantly, they needed to place the violators in prison. Until CEOs and senior managers and loan officers and so on see their peers being led out of their buildings in handcuffs, they will not change. My audience was shocked at the answer. But, I still believe it today. And I think most of America does, too.
(UPDATE – The manager of the 5,300 employees is being given a $125 Million (!!!) severance package. I doubt any of the 5,300 employees that got axed received a huge severance package. Why would they pay her $125 Million after she caused them a $185 Million fine? I would say it is hush money. Just imagine how many managers above her she can take down. They say everyone has a price. Also, the CEO apologized, but said he would not resign. Why not? Maybe when he is taking out in handcuffs he will resign. The only way to apparently punish this, and any other bad banks, is to stop banking with them.)
As a friend asked when I shared the Wells Fargo story today – will the government prosecute any of those 5,300 employees? I seriously doubt it. But, more importantly, why hasn’t the CEO, President, Board of Directors and so on resigned by this evening?
(UPDATE – Whether you are a fan of Elizabeth Warren or not, she was 100% on target with the following:
Wells Fargo CEO John Stumpf told the Senate Banking Committee he was “deeply sorry” Tuesday over allegations the bank opened millions of accounts without customers’ permission in order to meet aggressive sales quotas.Sen. Elizabeth Warren was having none of it.The Massachusetts senator has built a reputation for being tough on shady Wall Street dealings and the executives she believes are responsible. But she took it to the next level with Stumpf.”OK, so you haven’t resigned. You haven’t returned a single nickel of your personal earnings. You haven’t fired a single senior executive,” Warren said. “Instead, evidently, your definition of accountable is to push the blame to your low-level employees who don’t have the money for a fancy P.R. firm to defend themselves. It’s gutless leadership.”)
The $185MM fine is a few weeks of profit probably. I propose that companies give up ALL of their income for a year or more. Once they have no profits and management gets no bonuses and shareholders get no dividends and so on, maybe, and only maybe, will change come about.
Also, as I have mentioned over the years, we must get rid of the FDIC deposit insurance. Once that is gone, the public would only place their money in banks they can trust. Right now the FDIC deposit insurance does two things – it let’s banks have our money to do risky things with and it places most of our wealth in a place that the US Government can one day ‘freeze’ instantly and either just take it or limit what we can do with it going forward.
Having worked on the inside and seen the evils of the financial industry, I continue to tell the masses that if they only knew how corrupt most banks were they would put their money elsewhere. My experience is it is usually a few dozen senior managers that are criminal and a certain number of their employees follow suit. I never expected to see 5,300 employees in the same bank rob the public so blatantly and for so long. I should be surprised, but I am no longer surprised by the evil doings of the financial industry.
The only surprise is Wells Fargo may have displaced Jamie Dimon and Chase as the most crooked bank on Earth:)
Lastly, let me be clear that there are tens of thousands of GOOD, HONEST bank and credit union employees in this country. Community banks especially help the local people greatly. These are the people of Main Street as they call us. That is very different from the people of Wall Street which commit most of the crimes and make an entire industry look bad.
One key point is that we should not blindly trust banks. They do not have our interest in mind, no matter how much they say otherwise. Their goal is to make more and more money and to do that they must take it from us. Regretfully, many times they break the law to take it from us. Like any business, be careful. Ask a lot of questions. Only you can take care of yourself. Don’t trust someone else to do what is in your best interest. Caveat Emptor is somewhat appropriate in this situation.
Also, for those who want to get rid of the Dodd-Frank Act., remember it gave us the Consumer Financial Protection Bureau (CFPB). The CFPB caught Wells Fargo. They have caught many other banks that are robbing the innocent public every day. Banks complain about added regulation. No wonder! They get caught virtually every day violating a number of laws! The more crimes they commit, the more regulation they deserve. Earn the public’s trust and regulation will go away. Continue to deceive us and you get what you deserve.
Accountants, Bankers, Politicians…..they all scare me and it isn’t even Halloween, yet:)