The recent news that Wells Fargo has uncovered at least another 1.4 million fake accounts left many commentators on the verge of stroking out. One of those commentators was Housing Wire's Not-so-Gentle Ben Lane, who seethed with the heat of a blue-white super nova.
ARE YOU F$*KING KIDDING ME????
Ummmm...No. At least, I'm not kidding you, Ben. He also used the terms "gross" and "disgusting" to describe Wells Fargo's conduct, terms my 15 year-old niece uses to describe broccoli, because, I guess, "reprehensible" was deemed beyond the educational level of Housing Wire's typical reader. Inasmuch as this blogger is a regular reader of Housing Wire, Ben's got a valid point.
Thus far, I can follow the line of logic. Then, however, Ben asserts that the scandal "proves" that the CFPB must continue to exist.
Situations like Wells Fargo show why the CFPB must exist.
It’s absolutely, critically important to have a government agency that can protect consumers from financial institutions that lie to them, steal from them, and prey on them.
[...]
Financial services companies are still screwing up, whether it’s on purpose or not. And it all happened on the CFPB’s watch. So make the bureau stronger, not weaker. Allow it to truly function how it was designed to function. Let the bureau really protect people.
The CFPB needs to be there to hold those companies responsible, and to work to prevent things like Wells Fargo from happening at all.
He then takes off on an extended, and somewhat defensive, rant, against the Republican Party, whose Congressional members are attempting to enact legislation that, according to Lane, would put the CFPB out of existence, but which those who've actually read the proposed legislation, would instead provide customary and sound constitutional checks on an a federal governmental agency which has few, if any, such checks currently in place. Ben also claims that the Wells Fargo scandal proves the need to "strengthen," not "weaken" the CFPB.
I use the term "defensive" because Ben anticipates those who disagree with him regarding the necessity of the CFPB will label him [shudder] "liberal."
Now, I’m sure people reading this will happily slap labels on me like “liberal,” “Democrat,” or “progressive” for suggesting that the CFPB needs to continue to exist and get stronger.
Heaven forbid someone disagree with one piece of the Republican Party line, lest they be branded as a “bleeding heart liberal” or whatever.
So be it.
This is more important than labels or political parties. It’s about common sense and doing what’s right.
Well, if the shoe fits...
Personally, I don't care what Lane's politics might be. I just think he's wrong. The CFPB already has more power, and is more free from restraint, than most, if not all, other federal financial regulatory bodies. As I and other critics never tire of pointing out, there's a reason that the founders built into our political system checks and balances on the exercise of governmental power, as well as enacted the Bill of Rights. Read Federalist Paper No. 9, authored by Alexander Hamilton, not exactly a shrinking violet when asserting the need for a strong central government. Human beings are flawed creatures, including those, or, perhaps, especially those, who exercise substantial governmental power over others, whether or not you think they are performing "God's work." The often inefficient workings of our federal government protect individual liberty, which many of us value more highly than living in a world where the federal government attempts to micromanage the activities of its citizens on a level designed to "ensure" that bad things never happen to nice people. Ben wants to give the CFPB even more power than it already has, apparently not believing Lord Acton's maxim that "power corrupts, and absolute power corrupts absolutely." Well, I do believe in the truth of that maxim, and on that basis alone I'd oppose any effort to give the CFPB "more power."
In addition, why should we accept the proposition that a strong federal agency like the CFPB, given even more power that it was given by Dodd-Frank, will prevent future bad behavior by human beings? Wells Fargo isn't an artificial entity run by robots. It's a legal fiction, but one created, and run, by human beings, some, or many, of whom were guilty of "bad behavior" in connection with the opening of fraudulent accounts (whether your "personally evolved system of moral values" categorizes "bad" as a matter of immorality, unethical behavior, illegality, or any combination of the foregoing). I'll repeat myself, from a blog post last September on culpability for the Wells Fargo moral meltdown:
At the bottom level, however, no matter what the pressures or incentives, the fact that so many sources who contributed to the linked article and others I have read on the subject, were former Wells Fargo employees who left in disgust at the pressure to do the wrong thing, indicates that this fraud could not have been perpetrated for so long and so extensively without a character issue, from the ground floor to the roof. Every day I toiled in Big Law, the pressure was there, effectively if not expressly communicated, to "make your hours." Padding hours and churning the file pressures were always present, but it takes a failure of personal virtue to allow them to succeed. Executives who placed that pressure on subordinates, and those in authority who looked the other way, bear a greater culpability. However, no one at Wells Fargo who participated in these activities is off the hook.
No matter how much power you give the CFPB, why would we accept the proposition that the devious, the weak, the avaricious, and the just plain "bad" among the regulated will not concoct other fraudulent schemes in the future, that the incompetent, the lazy, or the equally "bad" among the internal and external watchdogs assigned to detect and squelch such behavior will not fail in their assigned tasks, and that bad things will not, once again, happen to the "innocent" among us? What specific powers that the CFPB does not currently possess should be granted it to accomplish this feat, the likes of which the world has never seen before?
[Sound Of Crickets Chirping]
No, I did not see the specific powers listed in the Housing Wire article, either.
I agree with Ben and other critics that there would be some deterrence value if actual bank employees responsible for bad behavior were punished by something more than firing. Punishing shareholders by levying heavy fines on Wells Fargo has theoretical deterrence value (shareholders can, in theory, demand that directors punish responsible officers and employees, and shareholders might remove "bad" directors and/or elect new directors who will punish wrongdoers), but for large, publicly-owned companies like Wells Fargo, that seldom seems to be the result. The bank regulatory agencies do have the power to hit directors, officers, and the institution itself with various types of sanctions. The US Department of Justice and state criminal authorities can seek to make offenders "do the perp walk." Cynics rightly note that individual officers and directors of big banks like Wells Fargo rarely seem to suffer these punishments. Except for imposing criminal penalties, the CFPB has substantial power in this regard under existing law. Is the proposal to give "more power" to the CFPB include the right to make them a "Super G-Man" (sorry, I had a politically incorrect brain freeze: I meant to state "Super-G-Self-Identified-Gender")? The right to suspend habeus corpus? The ability to confine offenders to gulags for "re-education"? The right, perhaps, to issue "execution warrants," whereby "special agents" of the CFPB could track down and shoot through the base of the skull any officer or director of a bank who takes advantage of a person over the age of reason?
A partial answer, perhaps, is not granting more power to regulate and/or punish, but the effective exercise by the responsible agencies of the US government of the power they already possess. That,certainly, occurred following the collapse of many savings and loans in the late 1980s, where officers, directors, and owners were sued by the trainload, and a number of them served time in jail. In the wake of the collapse of many community banks in the years following the Great Recession of 2008, I personally know of many officers and directors of failed banks who were slapped with lawsuits by the FDIC or regulatory sanctions by their primary federal regulator, and I've read about many more. Of course, those penalties didn't prevent the next great scandal, anymore than previous punishments of those involved in previous scandals prevented the next scandals that no one anticipated.
A radical idea might be for consumers who currently bank with a large bank that engages in "bad behavior" to take their banking relationships to a community bank or (perish the thought!) credit union. If the conduct of a "big bank" is so egregious that it drives usually responsible adults to fits of carpet-F-bombing, why does the bank still have customers who aren't family members, lunatics, denizens of organized crime families, or members of Congress? A much more effective deterrent than creating a (Dodd-)Frankenstein monster of a federal "ensurer of justice" might be the marketplace. I am not advocating a run on any bank, but I am suggesting that if the public wants a safe banking environment, then at the very least, its members should not do business with those it considers "Evildoers."
Preventing such scandals in the future is a pipe dream as long as human nature is what it is. That doesn't mean we don't try, but it also means that we should be realistic and wise about the measures we put in place to try to prevent them. In my opinion, giving the CFPB "more power" in order to "prevent" such scandals is neither realistic nor wise. Ben's opinion of what's "common sense and doing what's right" obviously leads him to a different conclusion. We'll agree to disagree, without, I trust, labeling the other as anything so heinous as either "liberal" or "conservative."