The Hole dug by Wells Fargo Bank

Wow, what can I say about the chicanery at the Wells Fargo Bank! It is shocking us here in the States. Here’s one version of the fraud story as reported by Reuters.

The Bank is iconic “Americana.” The Wells Fargo Company dates way back (1852) to the “Wild West” days of the United States. Even the Wells Fargo logo reflects its western heritage with its stagecoach imagery. Funny thing about the illegal activities which employees performed at Wells Fargo, I don’t think even the Glass Steagell Act would have protected the Wells Fargo customers! You see Glass Steagall helped to put a “wall” between the retail and commercial activities that a bank could legally execute and perform. Glass Steagell was revoked by Congress and signed “out of law” by President Clinton around the year 1999.

The “magic” of the Glass Steagall Act was that it protected the retail bank customer from illegal bank activities that probably caused the stock market crash in 1929. The Dodd-Frank Act was enacted in 2008 to create protections and decrease risks in the financial and banking system in the United States after the housing crash in 2008/09. However, in the year 2016 there are still parts of the Dodd-Frank Act which have not been completely executed or installed within the financial/banking system of the U.S.

I don’t know if Dodd-Frank implementations would have prevented the dishonest activities performed by employees of Wells Fargo Bank. It seems to me that integrity, honesty, ethical behavior, and honest business practices are the “fall guys” in this debacle or should I call it a “too aggressively executed marketing program being used at the bank. It would appear that the illegal activities of the employees were driven by “incentives” and “market goals.”

What shocks me the most is the vast extent of the illegal activity and why it was not detected and stopped by management?

I don’t know what scares me more: the idea that bank employees can “play” with my money, or that negative interest rates will sap my money from my bank account. From news that I watch and articles that I read, the world’s financial and banking system is not as healthy as it should be. The repercussions from the financial and banking crash in 2008/09 are still being felt, the “war” in the Middle East still rages, and even container ships of commerce (Hanjin) and trade are adrift in the middle of the International waters of the World.

Guess what I’d like to say to the employees of Wells Fargo…what were you thinking!!! And, to the management of Wells Fargo…where were you when these illegal activities were happening, why didn’t you stop it!!! I worked in the business world and it’s all about bonuses. Wow, they had to flow up the ladder “a-ways”. Gee did it get to the Board Room?

We are worried about Identity Theft these days; I guess this is an example of it on a massive scale. What are the banks going to do to get our trust back? Maybe we will have to keep our savings “under the mattress” or “behind a loose brick” in the basement. Oh, wait, some of us don’t have a basement any more because a basement is part of a house!

———————————-
Stump
Generous

Banks and Banking in Year 2016

Here’s what’s happened to the “big” banks and banking in general since the Great Recession. Bloomberg.com has published a piece by Yalman Onaran called “Citigroup, HSBC Jettison customers as Era of Global Empires Ends.”

Executive Summary of article

• Citigroup®
  Since crisis has doubled derivatives contracts to $56 trillion dollars.
  Focuses on trading.
  Focuses on richest customers—high-net-worth individuals
• HSBC Holdings PLC®
  Quits “retail” banking and stops serving 80 million customers
  Relys more on investment banking.
  Eliminated 1,600 U.S. locations in U.S.
  Closed 500+ branches in U.K.

“All this retrenchment hasn’t silenced calls to break up big banks. In the U.S., both the Republican and Democratic platforms call for reinstatement of the 1933 Glass-Steagall Act, which separated consumer and investment banking” writes Onaran.

Onaran mentions Internet banking in his article and “that near-zero interest rates have made traditional banking less profitable,” quoting KBW’s Cannon.

All in all, I guess using the U.S. Postal Office as a bank is a pretty good alternative. See my posting entitled “Back to the Future, using the USPO as a bank.” What do you think?

Author’s note, 9/24/16: Here’s a couple of articles on the Wells Fargo fiasco:
Hole dug by Wells Fargo Bank
How fragile is our Financial System?
—————————————
Panic
Value

In Defense of Glass-Steagall Act

The Volcker rule, named for former Federal Reserve Chairman Paul Volcker, attempts to modernize the Glass-Steagall firewall between commercial and investment banks for the 21st century. As written by Merkley and Levin, it would stop banks that take customer deposits and borrow cheaply from the Federal Reserve from also running big-bet, high-risk trading operations. The goal is to push that activity out to hedge funds and other private investors, who would pose less of a threat to the financial system. Regular banks would engage in the lending activities critical to a strong economy, rather than gambling with their customers’ money.

Quote from New Republic article written by David Dayen and published 12/10/2013.

The Volcker Rule has been proposed, revised, and finally passed into law on January 14, 2014. The Volcker Rule is a response to the damage inflicted upon our economy by the revoking of the Glass-Steagall Act.

On July 26, 2010, John Cassidy of the New Yorker wrote an extensive article on the Volcker Rule. The article is a blow-by-blow account of Paul Volcker’s efforts to create the Volcker Rule. This is a lengthy article of 17 pages.

To paraphrase from James B. Stewart’s article of the New York Times entitled “Volcker Rule, Once Simple, Now Boggles“:

• Paul Volcker outlined his proposal in a three-page letter
• when the Volcker Rule became part of Dodd-Frank Act, the Volcker Rule took up 10 pages
• when Volcker Rule emerged for public comment, the text swelled to 298 pages accompanied by more than 1,300 questions and about 400 topics

CNBC has a short summary of the status of the Volcker Rule: Volcker Rule. This was written in the year 2012.

The Glass-Steagall Act was between 33 and 37 pages long! It kept our banking system “safe” for 60 years. Yes, times have changed. Technology plays a vital roll in our personal lives and our financial and economic systems. I’m with those who wish the U.S. Government would at least temporarily reinstate Glass-Steagall while we figure out a “better can opener” or perhaps a better “mouse trap” is more appropriate!

Humpty Dumpty had a great fall even though there wasn’t a Wall!

During the video The Warning, there were references to:

the demise of Lehman Brothers http://www.pbs.org/wgbh/pages/frontline/meltdown/themes/lehman.html

Procter & Gamble suing Bankers Trust for selling P&G toxic derivatives http://www.pbs.org/wgbh/pages/frontline/warning/etc/warnings.html?utm_campaign=videoplayer&utm_medium=fullplayer&utm_source=relatedlink

The Procter & Gamble  situation was the “canary in the mine shaft” for Brooksley Born and her agency, the CFTC, Commodity Futures Trading Commission. It brought the “black box” derivatives investment scheme strongly to her attention.

The Glass-Steagall Act was created by the U.S. government to shield the American citizen from the disasters of the 1929 stock market crash. The Act was only 33 pages in length! But it sure seemed to work protecting the American investor by creating a wall between investment and commercial banking. Below are two links, one references the repeal of Glass-Steagall in 1999 and the other is a link to the actual Act document.

The repeal of Glass-Steagall Act
Glass-Steagall Act – timeline of existence and its repeal
http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

The actual Glass-Steagall bill:

Click to access 21stCenturyGlassSteagall.pdf

Two banks are mentioned in The Warning video. Lehman Brothers was “allowed” to fail but Bear Stearns was engineered to be purchased by another bank. Lehman Brothers was considered an investment bank versus being a commercial bank or a retail bank. Bear Stearns was also an investment bank. Here’s an article about the bailout of Bear Stearns http://www.wsj.com/articles/SB124182740622102431. There has been speculation about why one investment bank was chosen to be saved and the other allowed to fail.

If you have not viewed the video The Warning, here’s the link to it on my blog entry entitled: Regulate derivatives? No way!!!. https://bjfopinion.wordpress.com/.
————————————
Edge