We Don’t Need No Stinkin’ Regulation

Yep, financial regulation is bad for business… if by that you mean not letting banks do whatever they want. Want another subprime mortgage crisis that triggered the recent Great Recession? The one where Wall Streeters forced credit ratings agencies to give high ratings to bundles of garbage subprime mortgages on overpriced houses for folks who couldn’t afford those loans in the first place… and then sold those bad bundles to other financial institutions who sold that crap to the public? They borrowed to the hilt – Lehman and Bear Stearns went out of business with debt totaling more than 30 times equity – pushed questionable financial facts off their books on to controlled companies to hide the truth. Crash!!!!

Or maybe you would prefer to let them conspire to set interest rates – possible in Europe where many U.S. financial institutions operate? “The European Commission, the region’s antitrust regulators, hit eight big financial firms with $2.3 billion in fines for their alleged roles in the global Libor-rigging scandal. The settlement is based on antitrust laws and accuse the banks of participating in cartels… Among the banks fined are two U.S. banks; JPMorgan will pay $107 million and Citigroup will cough up $95 million.

“The range of fines was determined by a few factors including how long each bank participated in what the Commission calls ‘illegal cartels.’… JPM’s fine, for instance, is based on a month’s participating in the cartels in Yen Libor rates, according to the regulator.” Forbes.com, 12/4/2013 Or maybe you prefer the banks that foreclosed on homes, throwing the residents onto the street, by filing false documents saying that they had complied with legally-required foreclosure procedures when they had not?

Or maybe you would rather rest your hopes on a rather wide-spread banking practice – one that was recently exposed within Wells Fargo – where management sets either mandatory sales quotas for designated types of consumer accounts, credit cards, loans and services or “de facto” mandatory (meaning you know the rules, but management carefully avoided putting it in writing) quotas. This Wells Fargo mandate got thousands of Wells Fargo account managers to open such accounts/services without their clients’ knowledge to meet the quota, and thousands more were fired because they could not or would not:

“Wells Fargo fired more than 5,000 bank employees for opening the sham accounts, and there’s now a class action lawsuit in California on behalf of workers who claim the bank fired or demoted them, for not bending the rules to hit those aggressive sales targets. But this is a catch-22 that employees at other banks say they’ve also experienced… [Wells Fargo CEO] John Stumpf was contrite [in late September], as lawmakers quizzed him on Wells Fargo’s hyperaggressive sales tactics.

“‘I accept full responsibility for all unethical sales practices in our retail banking business,’ Stumpf said… But he didn’t go far enough for Democratic Senator Elizabeth Warren, who called on the CEO to resign. ‘Evidently your definition of ‘accountable’ is to push the blame to your low-level employees who don’t have the money for a fancy P.R. firm to defend themselves. It’s gutless leadership,’ Warren told him.

“Oscar Garza was a personal banker for a Chase Bank outside Dallas. He said aggressive sales tactics aren’t just a problem at Wells Fargo…‘Deceptive sales trade practices is across the industry. It’s systematic. It is not specific to any branch,’ Garza said.  

“Garza said he made under $12 an hour and that the only way to make extra cash was to meet certain sales goals set by managers -- even if that meant signing up customers for financial tools they didn’t want… ‘Were they sales goals or were they quotas? Did they have to be met?’ Villafranca asked… ‘They were quotas. They had to be met and there were consequences for not meeting those quotas,’ Garza said.’ CBS.com, September 28^th. While Stumpf forfeited approximately $41 million in compensation benefits, it seemed a lot of too little too late to most professional observers. California and Chicago have announced short term suspensions of doing business with Wells Fargo. Enough? Er… you tell me.

Still, the financial industry still maintains that self-regulation is more than enough and that federal laws and regulations are unnecessarily encumbering their ability to operate their businesses. Yup, I guess they are, but since they are still doing as much nasty stuff as ever, I suspect there is a stronger argument for more regulation. And until we see some of the most senior managers from these financial biggies in orange jumpsuits or stripes, does anyone really think this is an industry that is likely to change for the better?

In North Carolina, where the legislature amended state laws to lift all kinds of environmental regulations on local companies, they found that they could not vitiate federal Clean Water Act’s requirements… so locals simply ignored those laws and hived to state requirements alone. The resulting dumping of millions of gallons of toxic coal ash into the Dan River by Duke Energy (America’s largest private electric utility) seriously compromised adjoining lands, crops and the water purity for vast tracts of North Carolina. The feds, unlike the wink-wink state officials (including the governor with longstanding ties to Duke Energy), were not amused. Criminal charges followed, and Duke Energy lawyers negotiated a plea deal.

The chemicals used in fracking – using hydraulic power to force oil and gas to a point where it can be extracted – do not have to be disclosed based on a heavily-lobbied loophole in environmental regulations, and the massive increase in earthquakes in areas of heavy fracking has the local petroleum companies in full denial mode. We have companies in in Colorado, North Dakota and Pennsylvania denying that their fracking had anything to do with the methane finding its way to consumers’ faucets (see the photo above)… and then there’s the absurdity in the drinking water scandal that has rocked Flint Michigan.

But if those health impairing/slow killers aren’t enough for you, perhaps you might prefer where worker safety appears to be an unnecessary tax on corporate profits. “Former Massey Energy Chief Executive Don Blankenship was found guilty in federal court … of conspiring to violate safety standards at the Upper Big Branch mine, the site of a 2010 blast that killed 29 people.” Reuters.com, 12/3/15. Yup, those awful anti-pollution and worker safety laws impose a terrible burden on corporate America. We need to get those laws off the books and close all those federal oversight agencies. Screw the American people… we all have to make sacrifices! So a few people have to die… so what?!

I’ve talked about taxes in numerous other blogs, so I’ll just remind you of one little tiny fact. The federal corporate income tax is over 35%. Wow! That’s high. Listen to Donald. Well, not exactly. For American corporations with annual revenues of $10 million or more, apply a few loopholes, and the average tax paid 12.6% with some of the largest paying absolutely nothing. That the GOP is proposing a new tax code that will generate over 96% of the tax cuts to the highest brackets should come as no surprise, while adding trillions to our accumulated national deficit.

Yet we have a political candidate, from the GOP, who can say with a straight face that all these financial and environmental regulations are stifling growth, jobs and American business and need to be eliminated… and that our tax code needs to be adjusted so the richest can have more money to hire people, a trickle-down strategy that never seems to work. Republican Governor Sam Brownback used that strategy in Kansas. The most recent result from that once solvent state government: no real new jobs and a near-bankrupt state with a rather clear inability to continue to fund public education even at vastly reduced levels. Yup, deregulation and cutting taxes for the rich… when you look at the evidence (I’ve only presented the tip of the iceberg above)… good for whom? Not for 95% of us.

I’m Peter Dekom, and a fact-averse voter seems to be particularly susceptible to being conned by a candidate with a very long track record of breaching contracts, not paying vendors, declaring corporate bankruptcy resulting in lots of little guys getting screwed, taking harsh advantage in the subprime scandal, not paying taxes, hyping a non-university as effective and gifted with a general glib ability to con without the slightest regret.