Back in 2012, I posted: “The end of private banking: Why the federal government should own all banks.”

(The issue also is addressed in Step #9 of “The Ten Steps to Prosperity” [below]).

You might refer back to that post to get the full flavor of the argument, but the essence was:  Crime requires opportunity, reward, and risk assessment.

  1. The banks’ absolute control over dollars, provides ample opportunity for criminality.
  2. The vast amount of dollars controlled, provides ample reward for criminality.
  3. The risk of apprehension and punishment of banksters is low. Though determined regulation wouldn’t entirely prevent banking criminality, the banking industry’s wealth and current finance laws and the resultant bribery of politicians, discourages even minimal regulation.

The “Great Recession,” beginning early in 2008 (or late 2007, depending on definitions), which was caused by bank criminality, provides ample proof of #1-#3, above.

Crime involves the interaction of opportunity, reward and risk. Given plenty of opportunity, ample reward, and low risk, crime is inevitable.

Wells Fargo Fined $185 Million for Opening Phony Customer Accounts, Charging Fees Without Consent; Executives Go Scot Free

Wells Fargo employees opened roughly 1.5 million bank accounts and applied for 565,000 credit cards that may not have been authorized by customers, the regulators said in a news conference.

This was an astonishingly brazen, large-scale effort, clearly a systematic, institutionalized campaign.

It is virtually impossible for senior executives not to have known what was going on.

The big reason that Wells has managed to cultivate the myth that it is better managed than other large banks is that it is largely a traditional bank, as in it is not seriously involved in free-wheeling, high-risk, hard to manage investment banking activities.

But traditional banks, and above all retail banking operations, are extremely routinized. Customer-facing staff have virtually no discretion. 

In other words, there is no way to defend the lack of punishment of executives in a fraud of this scale that extended over five years.

Either they were in on it, or somehow lower level employees cooked this up and were able to hide it from the top brass. The latter would represent a massive control failure.

Under Sarbanes Oxley, the CEO and CFO are required to certify the adequacy of financial and operational controls. There is no way the Wells Fargo’s can have it both ways. Either they were in on the ripoff or they were not even remotely on top of what was happening.

But, in keeping with the half-hearted enforcement culture that has become normal in the US, the executives were allowed to get away with crooked conduct that unquestionably was their responsibility, whether by omission or commission.

Wells Fargo’s criminality involved all three problems: Opportunity, reward, and risk.

  1. The quantity of money private banks control which provides the opportunity for stealing and for political bribery.
  2. The profit motive,  which provides the reward for criminality
  3. And weak law enforcement, which eliminates the risk of apprehension and punishment.

And everything devolves to the profit motive:

Los Angeles City Attorney Mike Feuer sued Wells Fargo last year and accused the bank of high-pressure quotas for workers that encouraged them to skirt the rules.

“When I worked at Wells Fargo, I faced the threat of being fired if I didn’t meet their unreasonable sales quotas every day, and it’s high time that Wells Fargo pays for preying on consumers’ financial livelihoods,” Khalid Taha, a former employee, said in a statement..

If Wells Fargo were not privately owned, but instead were a federal government agency, there would be no profit motive to create “unreasonable sales quotas.”

Nor would there be a profit motive to galvanize political bribery.

Nor would there be a profit motive to create weak laws, and non-enforcement, and non-punishment of bank executive criminals.

Whatever your feelings about the mythical “superiority” of private industry over government agencies, and whatever your feelings about the federal government supposedly being “too big,” no public purpose is served by allowing privately owned banks. 

If the banking industry continues to be privately owned, criminal bankers will continue to invent ways to bribe politicians, cheat the public, and cause recessions.

If nothing changes, nothing will change. 

You know it; I know it: the Wells Fargo executives know it.

Rodger Malcolm Mitchell
Monetary Sovereignty

Ten Steps to Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
This article addresses the questions:
*Does the economy benefit when the rich afford better health care than the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE AN ANNUAL ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONEFive reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefiting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-tranferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and corporate taxes would be an good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.