Elizabeth Warren makes the case compellingly: our laws must change.
I’m confident that Mr. Stumpf has the benefit of several floors of Wall Street attorneys. I suspect that they have done an excellent job of protecting himself from the civil and criminal penalties that Senator Warren has so clearly articulated and correctly called for.
In order to end this kind of abuse, we must have tougher laws. That means that we must have a house and senate that passes them and we must have a president who signs and then aggressively enforces them.
This is a crucial election. Those of us who want to end these abuses MUST do all in our power to put Democrats in the house, the senate and the White House.
This clip is another inspiring example of why our senior senator is so effective right where she is.
Bravissimo, Senator Warren
johntmaysays
until we get tougher elected officials who are able to mount a campaign for their election that is not dependent on funding from the very institutions that are pulling this crap.
Nothing will change as long as Democrats need money from Wall Street to win elections.
After this is out of the news cycle, probably a week or so, Mr. Stumpf will go back to business as usual, get consoled by his friends for how poorly he was treated, and perhaps, get together with Ms. Tolstedt for dinner at Masa in NYC, have a few chuckles about how impotent the feds are….and then he’ll send the receipt for the check to his accountants who will no doubt use it as a business expense and lower his taxes.
fredrichlaricciasays
would that we could have 100 with her courage and integrity in the Senate !
Fred Rich LaRiccia
dasox1says
that 1.5 million unauthorized bank accounts, and 500,000 unauthorized credit card accounts are not a massive fraud. That speaks volumes about the problems on Wall Street. How can that be?
SomervilleTomsays
Wells Fargo, according to various sources, has about seventy million customers in thirty-five countries. Even at just one account per customer, that’s about 70M accounts. From the clip, the bank seems to have had about 5 accounts per customer — about 350M accounts.
Even if 1.5M were fraudulent, that’s a very small percentage of the total number of accounts. I can well imagine that, rightly or wrongly, Mr. Stumpf’s view is that almost all of the accounts were legitimate. Hence the fraud was not “massive” in his view.
It reminds me of some of the schemes that various people have used to embezzle funds from banks, often involving siphoning off round-off amounts in compound interest calculations and such. Each individual round-off is, by construction, less than a $0.01. The amounts are small enough that no particular customer is likely to notice them. When applied across a major bank, it’s easy for such a scheme to generate a few thousand dollars per day.
That’s a tiny amount of the total number of dollars transacted in a day, and barely noticeable on anybody’s balance sheet. It’s not a “massive” embezzlement when compared to the funds handled each day by a bank.
It’s still a VERY sweet cashflow for the individual receiving the cash.
Oh, and for what it’s worth, very few people — even including programmers — realize how much variation there is among banks in things like average daily balance and compound interest calculations. Even if two banks have exactly the same terms, as disclosed to the customer, they are likely to calculate different amounts for such things even when the external credits and debits are identical.
This is because there are no external standards on how such calculations are actually performed. These calculations are exquisitely sensitive to things like where, in a calculation chain, round offs are done (every finite computer MUST round off numbers), what numeric methods are used for the various calculations, and so on. Mathematicians are paid big bucks by banks (and insurance companies) to come up with approaches that meet the requirements of the law and accrue extra money to the bank.
dasox1says
the number of consumers impacted by the bank’s fraud. Maybe it should be judged by the amount of money (stock holder money) that it took to resolve the fraud—$180,000,000–with the government/regulators. Also, massive.
SomervilleTomsays
I just think we need to be careful about our vocabulary.
For example, suppose Wells Fargo is successfully penalized by, say, $200M. Do we call that “massive”? Suppose that $200M leveraged $2B worth of increased Wells Fargo profits, so that the penalty is viewed by future executives as well worth paying in exchange for higher profits — is the penalty still “massive”?
There is a major dispute unfolding right now about $14.5 B in taxes that the EU claims Apple owes. Some say that’s a massive amount of money. Others observe that it’s an insignificant amount for Apple to pay.
I just think we need be very careful about how we use words like “massive” when describing these matters. There is a marked tendency for such characterizations to come back and bite us in unintended ways.
dasox1says
2 million customer accounts that aren’t authorized by the customers themselves isn’t massive? Two million. Agreeing to pay a 9 figure fine isn’t massive? Almost $200,000,000. Be careful about my vocabulary? Come back to bite us in unintended ways? You’re arguing that it’s not massive because Wells Fargo is soooooo big. So if a small bank did this it would be massive, but it’s not massive because Wells Fargo is soooo big? I wonder where “too big to fail” came from. Now apparently we’ve got “too big for massive fraud.”
I’ve got too much respect for you from all your great posts that I’ve enjoyed for so long but… I don’t get where you’re coming from.
SomervilleTomsays
I agree with you that it’s massive.
The concern I have is that the size of a financial penalty needed to change corporate behavior may be several times larger than an amount we describe as “massive”. Exxon-Mobil and BP proudly trumpet the “enormous” sums they’ve spent on environment protection (often compulsory), yet those weren’t nearly enough to dissuade them from making disastrous decisions.
In the case of Wells Fargo, I can imagine a protracted dispute, where the bank ultimately agrees to pay a “massive” penalty (like $200 M). It will be described as a great victory for consumers.
Such an award is not likely to be large enough to change their behavior. The effect might be primarily cosmetic.
I think that if we want this behavior to stop, we need to find punishments that are “existential” — penalties that threaten the continued existence of the enterprise.
That’s what happened to Arthur Anderson after Enron.
lodgersays
Banks sort daily transactions from large to small. Start the day with a balance of nine dollars. Let’s say you have 5 transactions in that day, four checks clear at one dollar each, and one check clears for ten dollars. The $10 check is listed first and the four $1 checks follow. That way the bank can charge you overdraft fees on five transactions. If the listing was reversed, you wouldn’t have gone negative until the last check (the $10 check) hit, only one overdraft fee. As you say, it all depends upon how the bank software is written.
johntmaysays
He pulls a fast one with the “1%” remark. It’s a statistical mirage. By itself, 1% can be made to look small while in many case, 1% is a big number. If 1% of today’s commercial airline flights crashed, that would be over 2,500 disasters.
Senator Warren has been delivering similar lashings for years. Do you observe any consequence? It’s certainly appealing, and of course I support Warren, but there will be no practical consequence. That’s a problem.
TheBestDefensesays
I think most of us observed the consequences of Warren’s work when she led the effort to create the Consumer Financial Protection Bureau. I think you probably saw that but maybe forgot her impact.
You are too smart to fail to understand the difference between the legislative and the executive branches of government. Next time, please make sure you ascribe this failure of government to the exec (Obama) and not leave it hanging that there was a failure on the part of Warren.
BTW, I think there will be blowback, if not prosecution in this case.
JimCsays
Warren, Obama … everybody.
johntmaysays
Warren does not have enough allies in the senate. The house it controlled by Republicans. The new president will not want to be bothered with old news. $185 million was paid. The dog & pony show made it to You Tube……we’re done here. Nothing more to see, move on.
centralmassdadsays
But you have to build the political pressure to change that, and the only way to do that is to do exactly what Sen. Warren is doing, persistently.
johntmaysays
….and who else?
SomervilleTomsays
The “who else” will be the Democratic members of the house and senate who will benefit from voters turning out.
That’s why, if we care about making these changes, it is imperative to maximize our turnout.
In order to build the political pressure to change these laws, we need the grassroots revolution that Bernie Sanders talked so much about during the primary campaign. Our task is to get those who agree with us that these laws must change to turn out and vote for Democratic house and senate candidates who will accomplish just that.
jconwaysays
I don’t see too many coattails, not like 2008 or 2012 anyway. It’s four more years of gridlock or a true threat to constitutional governance. An easy chicks, albeit an unpleasant one.
johntmaysays
And Senator Sanders did more than talk about a grassroots revolution, he was part of it. Our nominee would be advised to join in, get on the bandwagon instead of running to get in front of it and announcing that they are its leader. We would welcome her. I’ll save a seat. I think she’s close, but needs a push.
SomervilleTomsays
I meant no criticism of Mr. Sanders.
I said, from the very beginning, that the grassroots revolution he emphasized was a requirement whether or not he won the primary. That remains true. My point here is to suggest that we keep our focus on the grassroots, rather than the nominee.
Each every one of those of us who want these laws to change must get out and vote for the down-ballot candidates. That’s especially true in NH. That includes you, me, and millennials.
Our ability to change the behavior of Ms. Clinton is very limited. The person whose behavior is easiest to change is ourselves. Each of us is far more likely to be able to influence people around us that we know, talk to, and meet.
The most effective way to change the behavior of Ms. Clinton is to demonstrate a growing army of grassroots supporters eager to change the balance of the house and the senate.
Christophersays
…has endorsed several candidates who she believes will back her up in these efforts.
dasox1says
But, I don’t think that the talk is cheap. She’s doing exactly what she should be doing; raising the profile of the fraud that’s occurring. The fact that many in Congress don’t seem to want to hold large corporations accountable for fraud, can’t be blamed on Sen. Warren. Arguably the creation of the CFPB at least played some role in exposing the extent of the fraud, and brining about a resolution.
scott12masssays
The internet has provided the common man a tool that has been largely untapped when it comes to consumerism. I use a local credit union (maybe 7 branches) and get very good service. If these abuses by Wells Fargo went viral on social media, people closed their accounts and went “local” with their money it would be a far more devastating punishment to Stumpf than his corporation paying a fine for him. (not sure how it works but #dumpwellsfargo)
fredrichlaricciasays
and join your local credit union and/or your community bank.
I joined Metro Credit Union as a state government employee 10 years ago and now that I’m retired I continue to get great service from them and my local community bank.
I agree with scott12mass. Hit these greedy bastards where it hurts most…in their wallets !
Elizabeth Warren makes the case compellingly: our laws must change.
I’m confident that Mr. Stumpf has the benefit of several floors of Wall Street attorneys. I suspect that they have done an excellent job of protecting himself from the civil and criminal penalties that Senator Warren has so clearly articulated and correctly called for.
In order to end this kind of abuse, we must have tougher laws. That means that we must have a house and senate that passes them and we must have a president who signs and then aggressively enforces them.
This is a crucial election. Those of us who want to end these abuses MUST do all in our power to put Democrats in the house, the senate and the White House.
This clip is another inspiring example of why our senior senator is so effective right where she is.
Bravissimo, Senator Warren
until we get tougher elected officials who are able to mount a campaign for their election that is not dependent on funding from the very institutions that are pulling this crap.
Nothing will change as long as Democrats need money from Wall Street to win elections.
After this is out of the news cycle, probably a week or so, Mr. Stumpf will go back to business as usual, get consoled by his friends for how poorly he was treated, and perhaps, get together with Ms. Tolstedt for dinner at Masa in NYC, have a few chuckles about how impotent the feds are….and then he’ll send the receipt for the check to his accountants who will no doubt use it as a business expense and lower his taxes.
would that we could have 100 with her courage and integrity in the Senate !
Fred Rich LaRiccia
that 1.5 million unauthorized bank accounts, and 500,000 unauthorized credit card accounts are not a massive fraud. That speaks volumes about the problems on Wall Street. How can that be?
Wells Fargo, according to various sources, has about seventy million customers in thirty-five countries. Even at just one account per customer, that’s about 70M accounts. From the clip, the bank seems to have had about 5 accounts per customer — about 350M accounts.
Even if 1.5M were fraudulent, that’s a very small percentage of the total number of accounts. I can well imagine that, rightly or wrongly, Mr. Stumpf’s view is that almost all of the accounts were legitimate. Hence the fraud was not “massive” in his view.
It reminds me of some of the schemes that various people have used to embezzle funds from banks, often involving siphoning off round-off amounts in compound interest calculations and such. Each individual round-off is, by construction, less than a $0.01. The amounts are small enough that no particular customer is likely to notice them. When applied across a major bank, it’s easy for such a scheme to generate a few thousand dollars per day.
That’s a tiny amount of the total number of dollars transacted in a day, and barely noticeable on anybody’s balance sheet. It’s not a “massive” embezzlement when compared to the funds handled each day by a bank.
It’s still a VERY sweet cashflow for the individual receiving the cash.
Oh, and for what it’s worth, very few people — even including programmers — realize how much variation there is among banks in things like average daily balance and compound interest calculations. Even if two banks have exactly the same terms, as disclosed to the customer, they are likely to calculate different amounts for such things even when the external credits and debits are identical.
This is because there are no external standards on how such calculations are actually performed. These calculations are exquisitely sensitive to things like where, in a calculation chain, round offs are done (every finite computer MUST round off numbers), what numeric methods are used for the various calculations, and so on. Mathematicians are paid big bucks by banks (and insurance companies) to come up with approaches that meet the requirements of the law and accrue extra money to the bank.
the number of consumers impacted by the bank’s fraud. Maybe it should be judged by the amount of money (stock holder money) that it took to resolve the fraud—$180,000,000–with the government/regulators. Also, massive.
I just think we need to be careful about our vocabulary.
For example, suppose Wells Fargo is successfully penalized by, say, $200M. Do we call that “massive”? Suppose that $200M leveraged $2B worth of increased Wells Fargo profits, so that the penalty is viewed by future executives as well worth paying in exchange for higher profits — is the penalty still “massive”?
There is a major dispute unfolding right now about $14.5 B in taxes that the EU claims Apple owes. Some say that’s a massive amount of money. Others observe that it’s an insignificant amount for Apple to pay.
I just think we need be very careful about how we use words like “massive” when describing these matters. There is a marked tendency for such characterizations to come back and bite us in unintended ways.
2 million customer accounts that aren’t authorized by the customers themselves isn’t massive? Two million. Agreeing to pay a 9 figure fine isn’t massive? Almost $200,000,000. Be careful about my vocabulary? Come back to bite us in unintended ways? You’re arguing that it’s not massive because Wells Fargo is soooooo big. So if a small bank did this it would be massive, but it’s not massive because Wells Fargo is soooo big? I wonder where “too big to fail” came from. Now apparently we’ve got “too big for massive fraud.”
I’ve got too much respect for you from all your great posts that I’ve enjoyed for so long but… I don’t get where you’re coming from.
I agree with you that it’s massive.
The concern I have is that the size of a financial penalty needed to change corporate behavior may be several times larger than an amount we describe as “massive”. Exxon-Mobil and BP proudly trumpet the “enormous” sums they’ve spent on environment protection (often compulsory), yet those weren’t nearly enough to dissuade them from making disastrous decisions.
In the case of Wells Fargo, I can imagine a protracted dispute, where the bank ultimately agrees to pay a “massive” penalty (like $200 M). It will be described as a great victory for consumers.
Such an award is not likely to be large enough to change their behavior. The effect might be primarily cosmetic.
I think that if we want this behavior to stop, we need to find punishments that are “existential” — penalties that threaten the continued existence of the enterprise.
That’s what happened to Arthur Anderson after Enron.
Banks sort daily transactions from large to small. Start the day with a balance of nine dollars. Let’s say you have 5 transactions in that day, four checks clear at one dollar each, and one check clears for ten dollars. The $10 check is listed first and the four $1 checks follow. That way the bank can charge you overdraft fees on five transactions. If the listing was reversed, you wouldn’t have gone negative until the last check (the $10 check) hit, only one overdraft fee. As you say, it all depends upon how the bank software is written.
He pulls a fast one with the “1%” remark. It’s a statistical mirage. By itself, 1% can be made to look small while in many case, 1% is a big number. If 1% of today’s commercial airline flights crashed, that would be over 2,500 disasters.
Senator Warren has been delivering similar lashings for years. Do you observe any consequence? It’s certainly appealing, and of course I support Warren, but there will be no practical consequence. That’s a problem.
I think most of us observed the consequences of Warren’s work when she led the effort to create the Consumer Financial Protection Bureau. I think you probably saw that but maybe forgot her impact.
You are too smart to fail to understand the difference between the legislative and the executive branches of government. Next time, please make sure you ascribe this failure of government to the exec (Obama) and not leave it hanging that there was a failure on the part of Warren.
BTW, I think there will be blowback, if not prosecution in this case.
Warren, Obama … everybody.
Warren does not have enough allies in the senate. The house it controlled by Republicans. The new president will not want to be bothered with old news. $185 million was paid. The dog & pony show made it to You Tube……we’re done here. Nothing more to see, move on.
But you have to build the political pressure to change that, and the only way to do that is to do exactly what Sen. Warren is doing, persistently.
….and who else?
The “who else” will be the Democratic members of the house and senate who will benefit from voters turning out.
That’s why, if we care about making these changes, it is imperative to maximize our turnout.
In order to build the political pressure to change these laws, we need the grassroots revolution that Bernie Sanders talked so much about during the primary campaign. Our task is to get those who agree with us that these laws must change to turn out and vote for Democratic house and senate candidates who will accomplish just that.
I don’t see too many coattails, not like 2008 or 2012 anyway. It’s four more years of gridlock or a true threat to constitutional governance. An easy chicks, albeit an unpleasant one.
And Senator Sanders did more than talk about a grassroots revolution, he was part of it. Our nominee would be advised to join in, get on the bandwagon instead of running to get in front of it and announcing that they are its leader. We would welcome her. I’ll save a seat. I think she’s close, but needs a push.
I meant no criticism of Mr. Sanders.
I said, from the very beginning, that the grassroots revolution he emphasized was a requirement whether or not he won the primary. That remains true. My point here is to suggest that we keep our focus on the grassroots, rather than the nominee.
Each every one of those of us who want these laws to change must get out and vote for the down-ballot candidates. That’s especially true in NH. That includes you, me, and millennials.
Our ability to change the behavior of Ms. Clinton is very limited. The person whose behavior is easiest to change is ourselves. Each of us is far more likely to be able to influence people around us that we know, talk to, and meet.
The most effective way to change the behavior of Ms. Clinton is to demonstrate a growing army of grassroots supporters eager to change the balance of the house and the senate.
…has endorsed several candidates who she believes will back her up in these efforts.
But, I don’t think that the talk is cheap. She’s doing exactly what she should be doing; raising the profile of the fraud that’s occurring. The fact that many in Congress don’t seem to want to hold large corporations accountable for fraud, can’t be blamed on Sen. Warren. Arguably the creation of the CFPB at least played some role in exposing the extent of the fraud, and brining about a resolution.
The internet has provided the common man a tool that has been largely untapped when it comes to consumerism. I use a local credit union (maybe 7 branches) and get very good service. If these abuses by Wells Fargo went viral on social media, people closed their accounts and went “local” with their money it would be a far more devastating punishment to Stumpf than his corporation paying a fine for him. (not sure how it works but #dumpwellsfargo)
and join your local credit union and/or your community bank.
I joined Metro Credit Union as a state government employee 10 years ago and now that I’m retired I continue to get great service from them and my local community bank.
I agree with scott12mass. Hit these greedy bastards where it hurts most…in their wallets !
Fred Rich LaRiccia