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Wells Fargo Hit With 'Unprecedented' Punishment Over Fake Accounts (cnn.com)
An anonymous reader quotes CNN:
The Federal Reserve has dropped the hammer on Wells Fargo, [handing] down unprecedented punishment late Friday for what it called the bank's "widespread consumer abuses," including its notorious creation of millions of fake customer accounts. Wells Fargo won't be allowed to get any bigger than it was at the end of last year -- $2 trillion in assets -- until the Fed is satisfied that it has cleaned up its act. Under pressure from the Fed, the bank agreed to remove three people from the board of directors by April and a fourth by the end of the year. It is the first time the Federal Reserve has imposed a cap on the entire assets of a financial institution, according to a Fed official. "We cannot tolerate pervasive and persistent misconduct at any bank," outgoing Fed Chairwoman Janet Yellen said in a statement. Friday was her last day on the job....
Wells Fargo admitted that its workers responded to wildly unrealistic sales goals by creating as many as 3.5 million fake accounts. The bank has also said it forced up to 570,000 customers into unneeded auto insurance... About 20,000 of those customers had their cars wrongfully repossessed in part due to these unwanted insurance charges. In August, Wells Fargo was sued by small business owners who say the bank used deceptive language to dupe mom-and-pop businesses into paying "massive early termination fees." The company was in the headlines again in October for charging about 110,000 mortgage borrowers undue fees.
One U.S. congressman argued that the harsh penalty "demonstrates that we have the tools to rein in Wall Street -- if our regulators have the guts to use them."
Wells Fargo has also spent $3.3 billion on legal bills in just the last three months of 2017.
Wells Fargo admitted that its workers responded to wildly unrealistic sales goals by creating as many as 3.5 million fake accounts. The bank has also said it forced up to 570,000 customers into unneeded auto insurance... About 20,000 of those customers had their cars wrongfully repossessed in part due to these unwanted insurance charges. In August, Wells Fargo was sued by small business owners who say the bank used deceptive language to dupe mom-and-pop businesses into paying "massive early termination fees." The company was in the headlines again in October for charging about 110,000 mortgage borrowers undue fees.
One U.S. congressman argued that the harsh penalty "demonstrates that we have the tools to rein in Wall Street -- if our regulators have the guts to use them."
Wells Fargo has also spent $3.3 billion on legal bills in just the last three months of 2017.
This is why everything must be regulated.
Laws are rules for the court, but merely a bottom bar to hit for life. Think beyond laws in your actions always.
In what world is this a harsh penalty, considering the scope and graveness of the transgressions? It's barely even a slap on the wrist!
Just a cap, for screwing over thousands of people? That's not even a slap on the wrist. Management should be in jail and the bank should have to pay penalties to the customers they wronged. Large penalties.
No bank doing business in America, whether it is domestic or foreign or sovereign, should have assets more than 2% of our GDP.
No investment bank should have FDIC insured deposits.
All retail banks with FDIC insure deposits should have equal access to investment banks.
Courts are ruling corporations are people. All the hard won freedoms and liberties of real citizens is being usurped by these corporations. Once these corporations become more powerful than the government, it is game over for real citizens.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Agreed - unprecedented would be the whole thing treated as a RICO operation ending with mass convictions and dissolving the bank with the account balances being assured and the remaining money confiscated. The mob doesn't get to keep their assets just because they organized a front company that also sells pizza to customers in the area.
One U.S. congressman argued that the harsh penalty "demonstrates that we have the tools to rein in Wall Street -- if our regulators have the guts to use them." Uh, no it does not. Wells Fargo has been nailed time and again for abuse yet they continue to do it. The only way to stop it is to make the executives subject to criminal punishment with jail time. Instead, they get away scot-free with a generous golden parachute. This makes me really cheer when the market goes down!
n/c
No, bad. If you want it to matter, you punish the people who made the decisions and the people who should have known about it. You also punish the CEO and possibly other board members--just like you fire the captain of a navy ship that gets in an accident even if it's not their fault. You do NOT punish the shareholding public, because they don't actually have meaningful control over what the bank does. This is just stupid.
If someone fraudulently creates an account in someone's name and then incurs charges on that account, that's at least fraud and probably ID theft. If anyone here reading did that, we'd be talking to a judge or sitting in a cell (eventually). Wells Fargo does it to millions and a few people lose their jobs. If corporations want to be considered "people" then they have to be accountable as "people". Equal Justice Under The Law must be applied to these at least a few of these C level executives before I'll believe that we all can expect the same treatment for the same offense.
Why can't we go back to using jumpers to configure slot adapter cards? Why? I say!
I don't know why everybody doesn't just use a credit union. They're non-profits, so they simply have no reason to pull the kind of crap that Wells Fargo did to hundreds of thousands of people.
If you hate banks, remember: you do have another choice.
Every investment is a gamble. Investing in a company that has stock that tanks or otherwise has to declare bankruptcy and being overextended means the investors get nothing is a risk that one must always accept. Whether they're outright complicit or not, investors (aka owners) are the last on the list for repayment and there's no reason they should expect a dime, especially if the company is criminally liable.
It really is no different than if you invested in the mob and lost all your money because the drugs were confiscated.
"Ideally?"
All those who purchased shares in a publicly traded corporation, even prior to any criminal act, suddenly have their limited liability investment converted into a unlimited liability investment without having committed any wrongful act themselves.
No violation of the fifth, sixth, and eighth amendments there at all.
But we can all be happy that investing for retirement will suddenly place everything that you own, as well as your future wage income, at intolerable risk now that you're a potential general partner in hundreds or thousands of businesses.
The regulations don't deal with the core destructive and problem-causing issues which are also massively profitable. All regulations which have any teeth are walked back by politicians. See "How Wall Street defanged Dodd Frank". Now, Dodd-Frank was a joke for a lot of reasons, but the big reason was its intentional complexity and incompleteness and its unwillingness to deal with core issues. But even the pieces of Dodd-Frank that had small teeth were defanged.
Back in 2008, the big issue was lenders not having 'skin in the game' - they could make loans and shed all repayment risk when they sold off the loan to investors or the government. It's a license to print money and a perverse incentive to create bad debt. If you google "QRM safe harbor and risk retention", you'll get some history (QRM = qualified residential mortgage). There was an attempt to make lenders retain some small portion of repayment risk, instead of the government taking all of it, but that was walked back, as the above search will tell you.
The current Wall Street economic model is "privatize the profits and socialize the losses." Not a thing was done to address that. "Too big to fail" was never addressed - the biggest banks are even bigger today than in 2008 ("In the US, since the crisis, the six largest US banks now control nearly 70 per cent of all the assets in the US financial system, having increased around 40 per cent (against overall asset growth of only 8 per cent). JP Morgan, the largest US bank, has over $2.4 trillion in assets, larger than most countries." -- The Independent)
So. Instead the regulations are along these lines: Instead of just outlawing robbing people, they outlaw robbing people at 12 Noon. The rest of the day is fine. But then they add, 'well you can't rob people at 3 PM either'. And so on. They refuse to deal with the core issues (i.e. "you can't rob people"), instead nibbling ineffectually around the edges.
"Complexity breeds loopholes." That's the point of complex regulations - to breed loopholes. It's fantastic because it keeps competitors out of the business, because you need vast legal and accounting departments to stay abreast of the regulations. And it does little to stop the destructive behavior.