Wells Fargo’s fraud ensures survival of the CFPB
Since its inception, the CFPB has been under attack by the financial industry. The huge Wells Fargo fraud ensures it’s survival.
The financial elites in the United States hate the Consumer Financial Protection Bureau (CFPB) because the CFPB opposes those who want to rape and pillage the American people. The would-be criminals operating our too-big-too-fail institutions spend millions lobbying Congress and buying politicians like Jeb Hensarling to spout nonsense about the problems caused by the CFPB.
After the financial elites destroyed the economy and nearly brought down our entire financial system with reckless risk taking and foolish lending, legislators were forced to act for the greater good; thus we have Dodd-Frank and the CFPB.
Why the Consumer Financial Protection Bureau is necessary
First, people are not willing to accept the consequences of their actions. People want the right to do what they want and obtain the benefits of their decisions when things go well, but as soon as things go badly, they want the government to bail them out. This goes for individuals, organizations, and entire industries.
When things go wrong, nobody steps forward and says, “I made a mistake, and I don’t want help from the government.” If we privatize gains collectivize losses, then we need a paternalistic government regulator with the power to restrict the choices of individuals and organizations.
Second, even if people accepted the consequences of their actions, sometimes these consequences impact others who had nothing to do with the original decision. If every delinquent borrower accepted foreclosure, and if every lender accepted the losses without pleading for a government bailout, the economic consequences of their foolishness would still hurt all of us who didn’t participate in the transaction. When people accepting responsibility for their actions still causes excessive collateral damage, then the activity should be regulated to save the rest of us.
Third, on a more basic level, after years of getting away with ripping off people without substantive consequences, the behavior of large financial institutions deteriorates to the point where we need protection from them. When an entire corporate culture enjoys rewards for bad behavior and avoids any negative consequences, they become emboldened to behave in ways dangerous to everyone else — even their own customers.
$185 million fine erases goodwill earned by industry since the crisis
For many people, their trust in the country’s financial system was broken (perhaps irreparably so) by the financial crisis.
…. the $185 million fine levied against megabank Wells Fargo for thousand of its employees opening more than two million fake accounts in customers’ names in order to get sales bonuses shows that Wall Street hasn’t learned its lesson. …
Any of you who do business with Wells Fargo should go down to your branch and investigate whether or not Wells Fargo opened any accounts without your knowledge or permission. This practice was so widespread that 5,300 Wells Fargo employees already lost their jobs over it.
This is how the CFPB, which slapped Wells Fargo with the largest fine ($100 million) in the short history of the agency, describes what Wells Fargo’s employees were doing:
Spurred by sales targets and compensation incentives, employees boosted sales figures by covertly opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often racking up fees or other charges. According to the bank’s own analysis, employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers.
“Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses,” CFPB Director Richard Cordray said.
This practice began in 2011, not long after Wells Fargo and many other financial institutions received government bailout money to stay afloat — afloat in a crisis created by Wall Street’s reckless behavior.
“Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed,” Cordray added. “Today’s action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences.”
Cordray’s words, as they often due, carry a vaguely worded warning to the financial industry: If another company tries to pull a stunt like this, we fill find you. And we will fine you.
Does the fine really accomplish that? Is $180 million enough? How hard do these companies need to be slapped before they stop acting this way?
Now, say what you will about the CFPB (and many have), situations like this prove why the agency’s existence is critically important for consumers.
Over the five years the CFPB has existed, many in the financial industry have bemoaned the CFPB and its actions. The Republican Party basically stated in its national platform that it wants to abolish the CFPB. A Republican-crafted plan to abolish Dodd-Frank is due to be considered in Congress next week.
… an agency designed to protect consumers is absolutely necessary. Why?
Because things like this Wells Fargo situation keep happening.
And this is exactly why Wells Fargo just ensured the continued survival of the CFPB.
What politician (other than the corrupted Jeb Hensarling) would vote to kill the agency that’s so obviously needed for our protection.
Here are Bove’s thoughts on the far-reaching impact of Wells Fargo’s actions:
While there has been tremendous pressure put on the banking industry in the past 8 years by the politicians and the press, the public has voted with its money to increase its commitment to the banks. … It certified the claims by the politicians and the press that banks are run by questionable people who need to be thoroughly controlled by government or the public will not be protected.
Yes, any support for ending the CFPB will evaporate.
And as Brown notes, this apparently started in 2011, just as the crisis was ending.
Here’s Brown again:
Are you f***ing serious? Was the Great Financial Crisis so long ago that all chasteness and propriety are already out the window? This scam has been apparently going on for five years, according to the articles covering the story. Which means it began within a few months of the end of the crisis and all of the congressional hearings and investigations that occurred in its wake. These people are fearless.
That’s bold, bordering on shameless.
They have no shame. They are too-big-too-fail.
“To open more than 1.5 million likely unauthorized consumer deposit accounts and more than 500,000 credit card accounts is despicable, and it’s flat-out fraud. Someone needs to go to prison,” Berger added.
Prison? A banker? Not very likely.
But will any of the bank’s senior executives be held responsible?
Probably not, as is par for the course with these types of situations.
The bank pays a big fine, promises changes, and moves on.
And the rest of us are left to sift through the rubble.
Same as it ever was. And probably the same as it ever will be. And that’s depressing as hell.
The continuing bad conduct of American Bankers is depressing, but I take comfort in knowing their bad behavior just made their watchdog invincible.
If we’re really lucky, it may even shut up Jeb Hensarling for a while.