With the 2008 financial debacle now a distant memory, many of us are back to being comfortable with our banks. Those oddly comforting, familiar names: Bank of America, J.P. Morgan Chase, Wells Fargo.
Friendly local branch offices, cheerful faces of familiar tellers, some good hot coffee. Maybe a nice plate of cookies. We feel so much better now that the financial markets are on a more even keel, and we’ve dealt with the fallout of the Great Recession and all the terrible panic, confusion, and despair—more even than in this year’s Republican presidential race.
After all, we’ve now got the piece of 2010 legislation called Dodd-Frank, put in place to safeguard us against the kinds of speculation, fraud, and recklessness that created the 2008 mess. That’s going to protect us, right?
Not so much.
Here are some uncomfortable realities that need underlining. First, now six years after the fact, only a little more than half of the hundreds of provisions of Dodd-Frank have been implemented, principally because the biggest banks have been spending roughly a million dollars a day for the finest in lavish lobbying and lawyering to water them down or prevent their implementation altogether.
And if you’re not quite demoralized enough by that news, a bit more than a week ago we got a specific progress report about how things are coming along — or rather, not coming along — with regard to implementing a major part of Dodd-Frank.
In case you missed it, both the Federal Reserve and the Federal Deposit Insurance Corp. informed us that “Too Big to Fail” is still very much a thing. Both institutions agreed that five of our largest banks have not, as Dodd-Frank requires, provided viable “living wills,” i.e., realistic plans by which they could be liquidated in an orderly way without taking the whole economy down with them in the event of another financial crisis. Which is to say they remain, literally, too big for the government not to bail them out if they fail.
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Among these Godzillas in Savile Row business suits are—guess who?— J.P. Morgan Chase, Bank of America, and our Napa County government’s banking partner of choice, Wells Fargo. Turns out that Wells, the bank described by more than a few county officials as “not as bad” as its fellow fraudulent mega-banks, has had an especially busy time of it recently, serving up an impressive double shot of villainy.
Aside from their unacceptable “living will,” Wells is also currently basking in the notoriety of losing a massive mortgage fraud case—requiring a $1.2 billion settlement with the federal government—in which they acknowledged scamming the FHA housing program through what the U.S. Attorney for the Southern District of New York describes as “…years of reckless underwriting while relying on government insurance to deal with the damage.” Lest you think this is minor stuff, the Department of Justice notes that it is the largest recovery for loan origination violations in FHA history.
Oh, and to add some more mouse droppings to the frosting, back in 2012, Wells officials lied about the scam, causing more taxpayer expenditures in legal fees before they finally owned up to it. But wait, I hear you cry. We certainly hope no actual executives or managers received harsh treatment for these crimes. Please: put your fears to rest. No Wells personnel were convicted of anything. What a relief.
The takeaway from all this is that you, the taxpayer, today are every bit as much on the hook for whatever disastrous, creative sleaziness Wall Street cooks up as you were in 2008. Not much has changed. Yet our politicians still manage to evince great puzzlement at the current spectacle of so much voter anger and cynicism. Why, oh why are people so upset?
Senator? You might try opening your eyes.
Paul Moser lives in Napa.