Wells Fargo and its Enablers are Whining

New Orleans     News reports, partially attributable to banking giant, Wells Fargo, indicate that they are about to face an additional fine of $1 billion dollars from a variety of governmental agencies including the largely de-fanged Consumer Financial Protection Bureau for their high crimes and misdeeds.  As everyone should be ceaselessly reminded in the case of this criminal enterprise, they were found to have opened accounts without permission for consumers and in other cases, jacked up interest rates for different consumers on auto loans, and a handful of other practices called mildly “customer abuse,” but really plain stealing from their customers.  This one billion is on top of more than four billion that they have also been fined by the Federal Reserve in addition to a public slap down administered by Janet Yellin, former head of the Federal Reserve, as she dropped the microphone in one of her final acts before surrendering the post to Trump’s appointed successor.

In my view Wells Fargo has long been a criminal and near criminal conspiracy that has permanently damaged countless neighborhoods and millions of families.  All of these penalties are past due recognition of the outrageous, litigate and coverup, money first before all things culture that has characterized the bank for years.  The fact that none of the executives were criminally charged is a testament to the coziness of class in America and the huge corporate legal shield built around banks and other businesses.  Real regulators would have seized the bank, taken away their charter, put them on permanent supervision, or any number of other steps that would have forced change rather than allowing them to pay some and charge off the rest of these billions of dollars’ worth of fines on their books and taxes.

Amazingly, a columnist in the New York Times, James Stewart, has summoned a bunch of business school professors for statements that maybe Wells Fargo has been “punished too much.”  He mentions that no executive was criminally charged.  I would have been all for that as well, but they were shielded by the corporation itself.  Liability exists for the corporation when the practices are systemic, which is why it is just that the corporation be fined for its front-to-back rip-off culture.

Stewart, with the professors, tries to plead for the poor shareholders, mainly big timers and institutions which dominate all of these markets, as being the ones punished.  Incredible!  Where were the shareholders, as they rubber stamped board and management practices annually while all of this abuse was happening?  Did the shareholders demand board changes and board resignations?  No, that was the Federal Reserve, not the shareholders.

Stewart and other bank apologists want to argue that the bank is taking great steps to change.  Another billion dollars fine seems like a good way to make them move even faster and more forcefully to change their culture.  Maybe even permanently.

The shareholders looked the other way when Wells Fargo was padding its books with these practices and enjoyed the good times.  There’s some justice in the shareholders having to also pay a price for the bank’s grand larceny in these times.

The business school professors might want to take some of the ethics classes at their colleges.  They can invite Stewart to audit those classes as well.

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Banks and Their Buddies Learned Little to Nothing from the Great Recession

New Orleans     When we can muster up the attention span to read past the latest Mueller investigation activity and the Trump tantrums, we can see what Congress is doing to try to make life easier for the banks and gut Dodd-Frank requirements that force them to pay more attention in class rather than going the “greed is good” route.  It turns out that there is little relief in revisiting the lessons our old friends, the banks, have learned from their reckless behavior that led to the real estate bubble and the Great Recession only a long decade ago.

Of course, they certainly learned to be careful in dealing with the subprime lending market and its exorbitant and often predatory interest rates.  Wrong!  They only learned that they shouldn’t lend in their own names and through direct subsidiaries, but instead should supply nonbank middlemen with billions so that they can take the first fall when that bubble crashes.  The Wall Street Journal calculates that between 2010 and 2017, yes within 2 years of the meltdown and their repeated mea culpas to politicians and customers, they jumped in hard and collectively have made $345 billion in loans to such companies.  Many of these subprime loans are not in real estate, but in auto financing and similar areas that are even more unstable, if that’s possible.   Don’t for a minute think that this is just something the smaller fry are feeding on, because the big fish are goring on these loans.  Major bank loans to nonbank financial companies that loan money to subprime borrowers include Wells Fargo at $81.1 billion, Citigroup at $30.5 billion, Bank of America at $30.2 billion, JP Morgan Chase at $28.1 billion, Goldman Sachs at $22.2 billion and Morgan Stanley at $16.3 billion.

That’s not all that banks and their buddies haven’t learned.  On the wild right there are still pundits and posers who claim that loose credit standards, ACORN and the Community Reinvestment Act triggered the real estate meltdown and the recession, rather than their own activity.  Two researchers from the Urban Institute, which is the real estate industry and developers own think tank, in a working paper plainly state that the blame game is misplaced.

we … show that First-Time-Home-Buyers have similar loan performance as that of repeat buyers. This evidence indicates that the expansion of lending to include more marginal borrowers may not be the main cause of the financial crisis. Instead, the poor performance of the cash out refinances and refinances more generally, are more important contributing factors.

They put the shoe firmly on the foot of cash out refi’s that were popular for hordes of speculators and investors trying to take money out of properties as the bubble got bigger and then being caught short in their ability to pay as the market became overloaded and crashed.  In plain language speculators, big and small, with the help of bank’s emphasis on refinancing, were a much larger factor.

When banks won’t even admit to themselves what their role was in the crisis, how can they learn the lessons to avoid the next disaster?  Playing button-button on subprime loans and having their lobbyists dissemble in Congressional hallways about where the blame really lies are both signs of more meltdowns to come by the refusal to learn the lessons of the last one.

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