St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills.”
Wells Fargo will pay a $1 Billion penalty for its outright thievery in creating fake accounts and related scams. Isn’t that great news?
Uh, wait a min. Is that really good?
Read this article and the associated comments:
Where the $1 Billion From the Wells Fargo Settlement Goes
Tobie Stanger ,Consumer Reports•April 20, 2018
Wells Fargo bank will pay $1 billion in civil penalties and compensate hundreds of thousands of victims of its abusive lending practices, according to settlements announced Friday by the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency .
The $1 billion penalty will be split evenly between the CFPB’s civil penalty fund and the Treasury Department. But how much the victims themselves get hasn’t been determined.
In a departure from how the CFPB worked under its former director, Richard Cordray, the consent order issued by the bureau doesn’t say how much Wells Fargo has to give back to consumers allegedly harmed by the bank’s activities.
The billion dollars will go to two agencies of the federal government, the CFPB’s civil penalty fund and the Treasury Department.
But the federal government is Monetarily Sovereign. It has the unlimited ability to create its sovereign currency, the U.S. dollar.
It has no need for, nor use of, that billion dollars, which simply will disappear from the economy. In short, the U.S. economy will be penalized $1 billion.
Just as a tax cut stimulates economic growth by adding dollars to the economy, this transfer of $1 billion will depress economic growth by taking dollars out of the economy.
Wells Fargo has to submit a compensation plan to both regulators within 30 days. Consumers will then be notified by the bank about how much money they will receive. Under the settlement, Wells Fargo neither admits nor denies wrongdoing
That’s the penalty? The criminals are allowed to pay a fine without having to admit they are criminals? No jail time for the top executives of Well Fargo? No loss of salary? Nothing?
Would a bank robber be treated with the same kindness?
Some observers were critical of the arrangement.
“This case is silent on how much restitution is being provided to the customers,” says Christopher Peterson, a law professor at the University of Utah and former senior counsel for enforcement policy and strategy at the CFPB under Cordray. “It says Wells Fargo can give money back to customers as they choose and CFPB can object after the fact. And my suspicion is, there won’t be objections.”
Defrauded consumers stand to receive only a pittance, and this administration’s CFPD has not indicated that it even cares. The rich Wells Fargo executives are laughing. The rich Trump executives are laughing.
The poor cheated people are left crying.
In the years in which Cordray led the CFPB, about $12 billion was returned directly to consumers by companies found to have defrauded them.
The CFPD had two, far better actions available to them:
- Criminally charge the top brass at Wells Fargo, not only as proper punishment, but as a deterrent to other banks.
- Rather than levying a fine, the money for which goes to the federal government, Wells Fargo and its executives should have been required to make every victim whole, and additionally paid them for time and suffering. This would not have penalized the economy.
According to the consent orders, Wells Fargo charged thousands of auto-loan borrowers for auto insurance they didn’t need.
The bank also unfairly failed to follow the mortgage-interest-rate-lock process that it explained to prospective customers. Many home-loan borrowers were improperly told that they had to pay fees to extend interest-rate locks on their pending mortgages.
The bank’s auto finance practices over recent years led to an estimated 800,000 consumers pushed into auto insurance they did not need, according to the Center for Responsible Lending, a not-for-profit organization based in Washington, D.C.
An estimated 274,000 customers ended up in delinquency, and an estimated 25,000 cars were wrongfully repossessed as a result, the organization asserts.
Wells Fargo identified both issues independently and began providing restitution in late August 2017, according to Wells Fargo spokesperson Kate Pulley.
To date, the bank has issued 235,000 checks totaling $11.7 million. The company has estimated that it will pay a total $182 million to customers, Pulley says.
If Wells Fargo’s figures are to be trusted, the average defrauded customer received $49.79. Some received less, some more. But does $49.79 compensate for buying insurance you don’t need, having your credit rating destroyed, and losing your car to repossession?
Would you accept $49.79 for that financial and emotional disaster?
Wells Fargo said an estimated $98 million in unnecessary rate-lock fees was paid by 110,000 customers, though it estimates the actual amount to be refunded could be lower.
It began issuing refunds to consumers late last year.
Wells Fargo won’t even return the amount it stole, let alone any dollars in punishment. In short, Wells Fargo will make a profit on its crime.
It’s like a robber who steals $1,000 and when caught, is required to return $200, and no jail time. That is how the Trump administration punishes high-level criminality.
Consumer groups hailed Friday’s announcement, the first enforcement action completed since November, when President Donald Trump appointed Mick Mulvaney the CFPB’s interim director.
Mulvaney, a longtime critic of the bureau he now heads, has announced that under his leadership the CFPB will follow through on enforcement investigations already in progress but will initiate no new ones.
As bad as the Obama administration was, in punishing criminal bankers, the Trump administration is far worse. Mulvaney has given bankers an open invitation: “Steal as much as you can, and at worst you will be given a soft tap on the wrist.”
Pamela Banks, senior policy counsel for Consumers Union, warned: “You can’t stop lawbreakers if you aren’t looking for them. The CFPB’s future ability to uncover and stop financial rip-offs is being seriously compromised by Mulvaney’s push to ease investigations of the financial industry.”
Consumers beware. The Trump administration cares nothing for you. It encourages theft.
The $500 million the CFPB will collect from the settlement will go into its civil penalty fund. The fund provides direct compensation to consumers harmed by companies that go bankrupt or don’t have enough money to make these customers whole. Money that is left over goes toward consumer education.
Just like the Social Security “trust fund,” and the Medicare “trust fund,” there is no “CFPB civil penalty fund.” It is an accounting fiction.
Because the U.S. federal government never can run short of U.S. dollars, and in fact, creates dollars at will, it neither needs nor has any sort of trust funds.
Ben Bernanke, former Chair of the Federal Reserve: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
In summary, the $1 billion fine is a disgrace:
- It takes $1 billion from the economy
- It does nothing to compensate the millions of Wells Fargo’s victims
- It does nothing to punish the top executives of Wells Fargo, who perpetrated the crime.
- It does nothing to dissuade future criminality.
It is Donald Trump’s invitation to bankers: “The more you cheat, the more money you will make.”
(No surprise from the man who created the scam known as Trump University. He too, got away with a fine.)
Rodger Malcolm Mitchell
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell
The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-lesses.
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.
Implementation of The Ten Steps To Prosperity can narrow the Gaps:
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.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can 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 A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) 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 EVERYONE Five 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 benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
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.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce 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 business taxes would be a 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.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
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.