Wells Fargo has admitted to illegally opening thousands of accounts without clients’ approval or even knowledge.
In response, the CEO has not taken his $41 million bonus and he will not take his salary until the mess is sorted. He went to Capitol Hill to get yelled at by “shocked” congressmen and senators. The CEO of the division was relieved of her duties and will not get a bonus or severance.
And, that’s about it. No criminal charges for anyone. Again.
The second largest bank in the U.S., which controls about 12 percent of all the money in the banking system, walked away from this act of corporate conspiracy with nary a scratch.
It fired more than 5,000 people but there’s no telling how many of those people were actually fired for being complicit in this scheme or simply cut to hand out bigger bonuses. Apparently the sales people were told to sell and sell hard. And their jobs were dependent on opening new accounts for clients.
In a slack economy when banks like Wells Fargo were sitting on their cash instead of lending to small business and individuals, it was hard to see how the bigwigs thought they were going to expand their business. This is a perfect example of how out of touch with reality these banksters really are about the needs of the real economy.
To the banks this is an abstraction, simple numbers that they want to make bigger. When you’re inventing derivatives to trade and using algorithms to literally manufacture money, working with people is an inefficiency they can’t tolerate; as we’ve seen.
Fortunately state governments are actually stepping in and doing something about this. California is divesting its pension fund from Wells Fargo and Illinois is no longer using the bank to work on state issued bonds, which is a multi-billion business.
Strangely silent in all this are the politicians in Washington, D.C. They did their bread and circuses committee meetings where CEO John Stumpf had to sit there and get yelled at by a bunch of do-nothing pawns that were most in his pocket anyway. Endure it, allow the catharsis of the television highlights and then get back to business as usual.
But all the while this is going on, there is another “Too Big to Fail” bank in Europe that is reaching its own “Lehman Brothers Moment.” It’s the German giant, Deutsche Bank.
Its practices have been found lacking on both sides of the Atlantic and the bank has racked up some massive fines.
But the real troubling part of Deutsche Bank is its derivatives exposure. Right now, the bank is holding $42 trillion in derivatives. To put that into perspective, the GDP of the entire European Union is $14 trillion.
This is a massive risk.
But just as its American counterpart, Deutsche Bank is not worried. It knows no matter what befalls the bank, the government of Germany and the Europe will come to its aid, just like they do in the U.S.
I’m not sure what we really learned from the financial crash eight years ago. Or perhaps it’s not what we learned but what we did about what we learned.
But it’s an election year. And it’s time to get rid of the people that are happy with the status quo. It’s time to rebuild the American economy so that it reflects the commerce and values that drive today’s markets, not those of the early 20th Century.
And with your money, vote too. Divest from these teetering giants. They are not safe for investors. Buy precious metals for now and stick with companies that are making money by buying and selling goods, not manipulating derivatives and making money out of nothing. I’m talking about utilities, consumer staples companies and select tech.
This is the best way to protect yourself and your assets.
— GS Early