Wells Fargo, ‘a Reckless Megabank’, Gets Bailout Money and Is Allowed to Distribute Government Cash to Main Street

Written by Dr. Leon Tressell exclusively for SouthFront

Wells Fargo has been selected by the Small Business Administration (SBA) to distribute billions to small businesses so they can pay employees and survive the coronavirus lock down. As 17 million Americans have joined the dole queues Wall Street’s fourth largest bank, which has subjected its customers to numerous illegal practices, is participating in this programme to help main street.

The mainstream media has glossed over the outrageous decision to allow a criminal enterprise such as Wells Fargo, to become involved in distributing tax payer funds to small businesses. This too big to fail bank has been repeatedly caught breaking the law and never faced criminal prosecution. Instead, it has been forced to pay fines by regulators that are far less than the money it has made from numerous acts of fraud.

Wells Fargo cannot be trusted with the important responsibility of distributing tax payer money to small companies. Never mind the fact that federal oversight of all the stimulus money being distributed will be minimal.

The ‘main street’ section of the bail out package opens up a Pandora’s box of opportunity for massive fraud. Neil Barofsky, the Special Inspector General for the 2008 TARP bail out, commented in a recent interview that there will be billions of dollars worth of fraud committed:

“There will be S&L-type frauds, absolutely ostentatious frauds. I’d be looking for tens of billions of loss to fraud.”

The mainstream media never raise the question: why doesn’t the government give money directly to small businesses through the IRS? Why is the Federal Reserve allowing Wall Street banks, with long rap sheets for rampant criminality, to act as middlemen in distributing cash to small businesses?

Could it be that the Federal Reserve is owned by the Wall Street mega banks? These same banks will profit handsomely from doing their patriotic duty to provide loans to small businesses courtesy of the Small Business Administration.

Matt Taibi, who is providing excellent coverage of the current bail out of Wall Street, has noted how the criminal mega banks will profit from distributing cash to small businesses:

“Banks are scheduled to earn 1% to 5% to underwrite these loans, which are 100% backed by the government, a nice chunk of essentially risk-free money.”

You could write several books about the crime spree of Wall Street banks since 2008 and how they should never be trusted with distributing taxpayer money to main street. Wells Fargo has excelled at ripping off its customers while being a regular corporate welfare scrounger receiving $36 billion in bail out money and a $25 billion tax break during the last financial crisis in 2008.

Wells Fargo used these rewards for years of criminal behaviour to become America’s fourth largest bank. Matt Taibi explains how this huge amount of public bail out cash was used by Wells Fargo, “to buy a dominating market share – artificially inflating its share price for the next generation, ….’ and enabling its executives to become fabulously wealthy.”

This sets the scene and brings us back to the ongoing Congressional investigation into Wells Fargo whose public hearings have been suspended due to the coronavirus pandemic.

Congresswoman Maxine Waters’, co-sponsor of the report, ‘THE REAL WELLS FARGO: BOARD & MANAGEMENT FAILURES, CONSUMER ABUSES, AND INEFFECTIVE REGULATORY OVERSIGHT‘, has asserted that the bank has failed to comply with 5 regulatory orders and, “clearly demonstrated an unwillingness and inability to stop harming its customers ….”

The report states in no uncertain terms that Wells Fargo should have restrictions placed upon its activities:

“… there are bolder remedies available to prudential regulators that have been rarely used when a bank egregiously harms consumers and repeatedly breaks the law, including: placing limitations on the activities and functions of a bank, ….the potential for widespread consumer abuse at Wells Fargo remains.”

Yet the Federal Reserve announced last Wednesday that it will allow Wells Fargo to distribute cash from its overwhelmed small business loan programme. The same programme that is being scammed by hedge funds claiming that they are small businesses in need.

Will the Fed provide oversight of how Wells Fargo distributes this public cash?

I doubt that very much.

The comments of Congressman Al Green, Chairman of the House Subcommittee on Oversight and Investigations and co-sponsor of the above report, illustrate how Wells Fargo has no place in distributing tax payer funds and reveals the extent of the corruption in America’s political/administrative system:

“This report underscores federal regulators’ repeated failure to hold Wells Fargo accountable for admitted wrongdoing that has harmed millions of Wells Fargo customers. When wrongdoers agree to settlements to make their victims whole, we rely on federal regulators to enforce the terms of those agreements. This report demonstrates not only that Wells Fargo is failing to comply with the terms of multiple settlement agreements dating back to 2016 and 2018, but also that our federal regulators have simply failed to enforce those agreements, despite having ample tools and authorities under existing law to do so.”

Sound familiar? It should do.

The 113 page report issued by Waters’ and Green, which took a year to compile, paints a devastating picture of the corruption at the heart of American capitalism. It brings into sharp relief the dichotomy of American society between the super rich who are the benefactors of past and present bailouts running into the trillions while the rest of the population is left to suffer mass unemployment, homelessness and rapidly declining living standards.

The report details how key Wells Fargo board members and senior executives profited handsomely from the banks illegal activities which continued in the face of 5 federal consent orders during 2016-2018.

The current chair of Wells Fargo Board of Directors is Ms. Elizabeth ”Betsy” Duke who, previous to joining the bank in 2015, served on the Board of Governors of the Federal Reserve System from 2008-2013. She has also served as Chair of the Federal Reserves Committee on Consumer and Community Affairs.

Ms. Duke was a Fed governor while Wells Fargo was committing numerous crimes and then went onto become chair of Wells Fargo Board of Directors where the bank continued to break the law. In 2018 Ms. Duke was paid $631,004 for her contribution to the banks defiance of 5 federal consent orders while overseeing the banks crime spree against its own customers. Who said crime never pays?

The crime spree committed by Wells Fargo shows what a set of banksters sat on the board of directors. The rap sheet of this ‘systemically important bank’ is quite breathtaking.

Racist Discrimination

In 2012 the Department of Justice announced that Wells Fargo was going to pay $184 million in compensation to black and Hispanic homeowners for the systematic discrimination that they received at the hands of their own bank. Wells Fargo foisted sub-prime mortgage deals onto tens of thousands of its black and Hispanic customers. Meanwhile, white customers with the same credit rating were being given prime mortgage deals which had much lower term costs. The Department of Justice noted that this systematic discrimination between 2004 and 2008 caused significant harm to customers of colour:

“Subprime loans generally carried higher-cost terms, such as prepayment penalties and adjustable interest rates that started with low initial teaser rates, and then increased significantly after two or three years, often making the payments unaffordable and leaving the borrowers at a much higher risk of default or foreclosure.”

Industrial scale fraud

From January 2011 to September 2016 Wells Fargo opened 1,534,280 deposit accounts in the name of existing customers without their knowledge or consent. Then the bank transferred money from customers authorised accounts into their unauthorised accounts. About 85,000 of these accounts racked up over $2 million in fees.

Not satisfied with this level of fraud the bank went on to submit applications for 563,000 credit card accounts that were not authorised by customers. Roughly 14,000 of these credit card accounts incurred $403,000 in fees.

These fees included things such as annual fees and overdraft protection fees and late fees.

Its gets worse. Wells Fargo used email addresses not belonging to customers to enrol them in on-line banking services without their knowledge or consent. Besides this, the bank requested debit cards and created pin numbers for thousands of customers without their knowledge or consent.

The settlement order for these egregious acts of criminality imposed a paltry $100 million fine on Wells Fargo and ordered it comply with various regulations to prevent such acts of fraud in the future.

The misnamed Consumer Financial Protection Bureau (CFPB) imposed a consent order on Wells Fargo that makes no mention of any kind of criminal prosecution for these multiple acts of fraud.

Unnecessary auto insurance

Between October 2005 and September 2016, Wells Fargo, ‘forcibly placed duplicative or unnecessary insurance‘ on hundreds of thousands of its customers with auto-loans. This was done despite the fact these customers had obtained adequate insurance on their cars. If customers refused to pay this force-placed insurance then Wells Fargo imposed additional fees leading to many customers experiencing, ‘delinquency, loan default, and even repossession.’

At least 27,000 customers had their cars repossessed following defaults that arose from the added fees imposed by Wells Fargo.

Abuse of service members

In 2016 the Treasury Department’s Comptroller of the Currency issued a consent order to Wells Fargo for its violations of the Servicemembers Civil Relief Act (SRA).

The Comptroller found that Wells Fargo was systematically ripping off service members. Between 2007 and 2014 the bank was charging service members higher rates of interest than allowed under federal law. Federal law stipulates that there is a 6% interest cap for service members.

To add insult to injury, between 2006 and 2011, Wells Fargo failed to disclose service members active duty status when filing affidavits seeking to evict them from their homes. Under the terms of the SRA banks that seek to evict service members on active duty must notify the court that the service person is on active duty.

Wells Fargo’s patriotism knew no bounds when it repossessed many service members cars without a court order between 2007 and 2016.

Unfortunately, the consent order from the Comptroller of the Currency does not specify how many service members had their cars repossessed or were evicted by the illegal actions of Wells Fargo.

As always, with these consent orders imposed on Wells Fargo for fraudulent behaviour there is no mention of any attempt to criminally prosecute the bank. Indeed, towards the end of the consent order regarding the abuse of service members there is a clause which has to be read several times to be believed:

“The Bank, without admitting or denying any wrongdoing, consents and agrees to issuance of the accompanying Consent Order by the OCC.”

(my emphasis in bold)

Let’s not beat about the bush here. The rap sheet of this bankster outfit is huge. The above examples highlight just a few of the criminal frauds committed by Wells Fargo with the collusion of federal regulators.

Waters’ and Green’s report gives 7 examples of fraud committed by Wells Fargo. They make it clear that:

“These aforementioned consumer abuses highlight only a portion of the misconduct that has occurred across Wells Fargo.”

Systemic collusion between Wells Fargo and Federal regulators

The crime wave emanating from Wells Fargo since the last financial crash of 2008 has taken place under the noses of the Office of The Comptroller of the Currency (OCC) and the Federal Reserve. Waters’ and Green’s report exposes how from 2009 onwards the OCC was well aware of what Wells Fargo was up to but did nothing to alert the public or take any effective action to stop this white collar crime wave.

Waters’ and Green’s report notes:

“From 2009 through 2016, the OCC failed to take serious action to address Bank sales practices that the OCC knew posed danger to consumers.”

It wasn’t until 2016 that the OCC was finally forced to take ineffective action against Wells Fargo issuing numerous compliance consent orders against the bank. It is also worth mentioning that Wells Fargo was also receiving ‘supervision’ from the Federal Reserve from 2012 onwards.

Once the federal regulators were forced to issue a series of compliance consent orders between 2016 and 2018 Wells Fargo kept failing to comply thus breaking the law. In effect leaving the banks customers exposed to further acts of fraud. Waters’ and Green’s report notes:

“More alarmingly, Wells Fargo’s failure to date to establish effective mechanisms for identifying and mitigating risks within the Company after reaching settlements with its regulators leaves consumers exposed to countless potential abuses that may be unknown to the firm’s management, board, regulators, or the public.”

In 2016 the Federal Reserve sent a letter to the board of directors of Wells Fargo admonishing them for their consistent failure to comply with the consent orders and stop breaking the law:

“The [Federal Reserve] considers the board and senior management’s failure to address the sales practice issues over a prolonged period of time (resulting in significant damage to WFC’s reputation, public enforcement actions, fines and additional litigation exposure), as a significant compliance breakdown and a prime example of the impact that uncontrolled risk can have when compliance issues are not comprehensively dealt with in a timely fashion (emphasis added).”

Not surprisingly, the Fed failed to take any effective action against Wells Fargo. Were the board of directors threatened with prosecution for repeatedly breaking the law? Yes you guessed it. Nothing, Nada.

The Federal Reserve and the OCC together with their buddies on the board of Wells Fargo are all inextricably linked at the hip. They are part and parcel of the same corrupt oligarchy that presides over the people of slavelandia i.e. the United States.

The Waters’ and Green report goes into forensic detail exposing how Wells Fargo was engaged in back channel communication with regulators, its CEO lied to a congressional committee, withheld information from regulators, repeatedly failed to comply with federal consent orders. The list of crimes just goes on and on.

Let’s face it if any ordinary person fails to comply with legal directives such as the terms of their bail or parole then they get whisked off to jail. Apparently, such consequences don’t apply to the executives who run a ‘systemically important’ bank.

As I write this tens of thousands of U.S. citizens are lining up patiently, at risk to their health, in long queues to apply for unemployment or get a food parcel.

Meanwhile, a rampantly criminal organisation such as Wells Fargo not only gets bail out money from the Federal Reserve but is allowed to add insult to injury and get paid fees for distributing taxpayer cash to small businesses. This criminal entity is of course going to be left free to commit further fraud through its distribution of this public money. You couldn’t make this stuff up if you tried.

Wells Fargo customers still in jeopardy

Meanwhile, the long suffering customers of Wells Fargo are still in jeopardy.

Waters’ and Green’s 4 March 20202 report notes that in 2018 the misnamed Consumer Financial Protection Bureau (CFPB) had come to a cosy agreement with Wells Fargo in 2018 that delayed until July 2019:

“… any decision on whether to resolve seven matters requiring the Bank to take corrective action, including remediating consumers through public enforcement actions or through the Office of Supervision.163 These matters involved potentially thousands of consumers and millions of dollars in consumer harm.164 Resolving these matters non-publicly through the Office of Supervision prevents consumers from learning the true extent of the Bank’s misconduct.”

To cap it all off the CFPB, like all of the other federal regulators over the last 11 years, has let Wells Fargo off the hook:

“The CFPB extended the July 20, 2019 deadline until June 2020, further delaying any potential disclosure of additional consumer abuses committed by Wells Fargo.16”

Waters’ and Green’s report does an exemplary job of exposing the rampant criminality of America’s fourth largest bank and the complete failure of federal regulators, including the Federal Reserve, to do their job and enforce the law against an organised crime entity such as Wells Fargo. Indeed, what stands out is the complete collusion of the OCC and Fed in protecting Wells Fargo from any punitive penalties:

“The regulators repeatedly expressed their dissatisfaction with Wells Fargo’s progress towards remediating its regulatory issues for years, but have been slow and reluctant to impose additional penalties available to them under existing law.341 Beyond a list of monetary penalties assessed by the regulators,342 the Federal Reserve decided to cap the asset growth of the Company on the last day of Chair Janet Yellen’s time in office, and in January 2020, the OCC took action to prohibit a few former executives from working in the banking industry.343 However, as this report demonstrates, these actions come after many years of continued non-compliance by the Company and after the Committee announced and convened public hearings, and there remain stronger penalties available to prudential regulators.”

Recommendations

After amassing a mountain of evidence, revealing Wells Fargo to be a rampantly criminal organisation, Waters’ And Green conclude their report with an appeal to Congress to force federal regulators to take action against ‘recidivist megabanks’.

I’m not holding my breath about anything happening on that front considering the mind blowing scale of the recent Fed bail out of Wall Street sanctified by Congress and Trump.

To their credit the report issued by Waters’ and Green does make some positive recommendations which may be taken up Congress but would almost certainly be vetoed by Trump. Let’s not forget his Treasury Secretary is a former Goldman Sachs honcho better known as the ‘foreclosure king’, Steve Mnuchkin.

Considering the 17 million unemployed and massive increases in poverty taking place, Congress may be more favourable to the recommendations for all bank workers to be paid a living wage and protect workers right to unionise. Waters’ and Green propose a Bank Workers Bill of Rights giving them whistle-blower protections enabling them to, ‘speak out when they witness actions that harm consumers, ….’

Having said all of this, the report contains one sentence that should be widely publicised.

This sentence calls for Congress to ‘consider’ compelling federal regulators to take action to close down Wells Fargo. This would involve it having its banking licence revoked and be broken up with its components distributed to ‘smaller well-managed banks’.

Of course, Waters’ and Green should have gone much further and called for the criminal prosecution of the board of directors of the bank and converting Wells Fargo into a public infrastructure bank. Much like the Public Works Progress Administration of Roosevelt’s New Deal that built more, ‘than 650,000 miles (1,046,000 km) of roads; 125,000 public buildings; 75,000 bridges; 8,000 parks; and 800 airports’. Considering the dilapidated state of America’s infrastructure, with about one bridge a month collapsing, then this would be a sound idea.

The bought and sold corporate politicians who dominate Congress would never consider such action regarding it as ‘Communism’. They would never contemplate it unless mass action from the population forced them to do so. Much like the mass wave of sit down strikes in the 1930s prompted President Roosevelt to introduce various measures to protect, support and help ordinary workers.

The Wall Street Journal’s editorial board provides an unlikely yet accurate analysis of how the main focus of the Fed’s bail out actions are to save the wealth of the 1% who own Wall Street. It also explains why the Fed refuses to punish the criminal mega banks such as Wells Fargo. Instead it pays them fees for distributing public cash to main street:

“The Fed may feel all of this is essential to protect the financial system’s plumbing and reduce systemic risk until the virus crisis passes, but make no mistake the Fed is protecting Wall Street first. The goal seems to be to lift asset prices, as the Fed did after the financial panic, and hope that the wealth effect trickles down to the rest of the economy.”

The unprecedented economic crisis afflicting tens of millions of Americans reveals how paltry is the current political class that is totally beholden to the demands of Wall Street. It falls far short of the leadership provided by President Roosevelt in the 1930s. Roosevelt was no revolutionary and presided over violent attacks on workers by employers and the police.

However, he realised the dangers of letting the super wealthy become richer while the masses starved and suffered mass unemployment. At an election rally in 1936 President Roosevelt told a roaring crowd in New York that:

“The forces of ‘organized money’ are unanimous in their hate for me–and I welcome their hatred. I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match, [and] I should like to have it said of my second Administration that in it these forces have met their master.”

No prizes for guessing who won the election: Roosevelt by a landslide.