The New Jersey Star-Ledger editorially condemned Wells Fargo for its fraud against customers (Justice? Wells Fargo execs keep their jobs, fat bonuses after scamming public). But its position is one-sided.
Not that Wells Fargo should be excused in any way or to any extent. From what I can see right now, the bank committed classic fraud. The problem is that the Star-Ledger finds fault only with top executives—and a chance to demagogue an entire industry.
Here’s an example:
Indeed, two weeks after the world learned of Wells Fargo's sales culture – where employees so desperate to keep their jobs committed a $2 billion fraud – this question lingers: How does a board allow a CEO who created this culture to remain in the corner office?
This was the Wells Fargo culture, cultivated by Stumpf and his lieutenants, and force-fed to $12-per-hour junior salesmen who took the fall while executives cashed their bonuses.
Don watkins responds to this line of thinking over at the Voices for Reason blog:
If you watched the Senate’s questioning of Strumpf, two things are clear. First, most of the senators gave the employees opening fake accounts a free pass, blaming their actions on managers who gave them unrealistic cross-selling goals. That is insane. Management clearly dropped the ball here, but, no, if your boss gives you sales goals you can’t meet, it’s still your responsibility to follow your company’s stated policies to say nothing of adhering to basic moral standards.
The bank had an ethics policy. These employees violated it. They are not victims. They are not “taking a fall” for their superiors. They are perpetrators, plain and simple. But just as the Left wrongly gives a pass to the consumers who voluntarily took out mortgages they couldn't repay, so they wrongly peddle the myth of the helpless, blameless Wells Fargo fraudsters.
Then there is the blaming of “Wall Street,” as if the entire financial services industry is guilty for what one bank did. Asserting that “greed is part of the Wall Street ethos,” the Star-Ledger says. “Eight years after the same parasites nearly incinerated the world economy, we have learned little.”
This is classic anti-business bias. Note how the Star-Ledger continues to peddle the Leftist, anti-capitalist line that ignores the government’s massive primary role in pushing the entire banking system into fulfilling the Washington politicians’ “affordable housing” goals at the expense of long-established sound mortgage lending standards.
I left these comments, slightly edited for clarity:
“Eight years after the same parasites nearly incinerated the world economy, we have learned little.”
Some of us have learned. The regulated financial system—the unfree market—is a failure. From the Great Depression to the Great Recession, government regulation and market interference is the fundamental cause. But these disasters are followed by more of the same with each new crisis that the previous regulation was designed to prevent. E.G: 15 years ago, we got Sarbanes-Oxley in response to the Enron/Worldcom accounting scandals. We ended up with Bernie Madoff. In response to the 2008 financial meltdown, we got Dodd-Frank and the so-called “Consumer Financial Protection Bureau.” We get Wells Fargo.
Every major bank today is crawling with regulators, who have offices embedded right in the banks’ corporate offices. And yet the bank and financial crises keep happening, seemingly with increasing frequency. Wells Fargo is the latest. What’s wrong with this picture? Today, virtually every banking practice right down to mundane fees and lending fine print is regulated by the government. While the Wells Fargo regulators were busy micromanaging every little detail of the bank’s business in the name of “consumer protection,” the fraud slipped by right under their noses.
The statists will always blame everybody but the government—Wall Street or “private greed” or free market failure—unless, of course, it’s to say the government didn’t regulate enough. I say it’s time to recognize the failure of the regulated, unfree financial market, and demand that the government stop regulating legitimate business and start focussing on prosecuting actual fraud. I would start with repealing the “Dodd–Frank Wall Street Reform and Consumer Protection Act” in its entirety. It is obviously a failure at consumer protection.
I think also that a hidden cause of the Wells Fargo fiasco is the widespread acceptance of pragmatism. Pragmatism holds that principles don’t matter, that no one can be sure of anything, and so one should do what “works” in the here and now. No need to worry about tomorrow (the longer term consequences). Once you’ve abandoned principles, there’s no way to think long term. “Hey,” some of these Wells Fargo employees may have been thinking, “the guy at the next cubicle is getting rewarded for opening fake accounts. If it works for him, it’ll work for me.” Management may have been afflicted similarly. All of these fake accounts, which had been going on for some five years, inflated revenue figures. That “works.” Why rock the boat?
Government Regulations Punish the Innocent for the Wrongdoing of the Few