Friday, 5 May 2017

Elizabeth Warren on Big Banks and Their (Cozy Bedmate) Regulators

 More on Regulatory capture, from the perspective of US Senator Elizabeth Warren and the Wells Fargo fiasco. As reported by the New York Times, although this article relates specifically to cases in the US the same issues are certainly prevalent in Canada and BC. The regulators are all connected and operate in a similar manner with FINRA being the international organization linking them.

 See an exert from the NY Times below,


Wells Fargo’s board and management are scheduled to meet shareholders at the company’s annual meeting Tuesday in Ponte Vedra Beach, Fla. With the phony account-opening scandal still making headlines, and the company’s stock underperforming its peers, it’s a good bet the bank’s brass will have some explaining to do.
How could such pernicious practices at the bank be allowed for so long? Why didn’t the board do more to stop the scheme or the incentive programs that encouraged it? And where, oh where, were the regulators?
Wells Fargo’s management has conceded making multiple mistakes over many years; it also says it has learned from them. In a meeting this week with reporters at The New York Times, Timothy J. Sloan, Wells Fargo’s chief executive, said the bank had made substantive changes to its structure and culture to ensure that dubious practices won’t take hold again.
But there’s a deeper explanation for why Wells Fargo’s corrosive sales practices came about and continued for years. And it has everything to do with the bank-friendly regulatory regime in Washington and the immense sway that institutions like Wells Fargo have there. This poisonous combination contributes to a sense among giant banking institutions that they answer to no one.

The capture of our regulatory and political system by big and powerful corporations is real. And it is a central and disturbing theme in the new book by Senator Elizabeth Warren, Democrat of Massachusetts.
“This Fight Is Our Fight” contains juicy but depressing anecdotes about how our most trusted institutions have let us down. It also shows why, years after the financial crisis, big banks are still large, in charge and, basically, unaccountable for their actions.
“In too many of these organizations, there are rewards for cheating and punishments for calling out the cheaters,” Ms. Warren said in an interview Wednesday. “As long as that’s the case, the biggest financial institutions will continue to put their customers and the economy at risk.”
Ms. Warren’s no-nonsense views are bracing. But they are also informed by a thorough understanding of how dysfunctional Washington now is. This failure has cost Main Street dearly, she said, but has benefited the powerful.
Wells Fargo got a lot of criticism from Ms. Warren, both in her book and in my interview — and on live television during the Senate Banking Committee hearing on the account-opening mess in September. She was among the harshest cross-examiners encountered by John G. Stumpf, who was Wells Fargo’s chief executive at the time. “You should resign,” she told him, “and you should be criminally investigated.” (Mr. Stumpf retired the next month.)
This week, Ms. Warren called for the ouster of the company’s directors and a criminal inquiry into the bank.
“Yes, the board should be removed, but that’s not enough,” she told me. “There still needs to be a criminal investigation. The expertise is in the regulatory agencies, but the power to prosecute lies mostly with the Justice Department, and if they don’t have either the energy or the talent — or the backbone — to go after the big banks, then there will never be any real accountability.”
Banks are not the only targets in Ms. Warren’s book. Others include Wal-Mart, for its treatment of employees; for-profit education companies, for the way they pile debt on unsuspecting students; the Chamber of Commerce, for battling Main Street; and prestigious think tanks, for their undisclosed conflicts of interest.
My favorite moments in the book involve the phenomenon of regulatory capture: the pernicious condition in which institutions that are supposed to police the nation’s financial behemoths actually come to view them as clients or pals.

One telling moment took place in 2005, when Ms. Warren, then a Harvard law professor, was invited to address the staff at the Office of the Comptroller of the Currency, a top regulator charged with monitoring the activities of big banks.
She was thrilled by the invitation, she recalled in the book. After years of tracking various problems consumers experienced with their banks — predatory lending, sky-high interest rates and dubious fees — Ms. Warren felt that, finally, she’d be able to persuade the regulators to crack down.
Her host for the meeting was Julie L. Williams, then the acting comptroller of the currency. In a conference room filled with economists and bank supervisors, Ms. Warren presented her findings: Banks were tricking and cheating their consumers.
 After the meeting ended and Ms. Williams was escorting her guest to the elevator, she told Ms. Warren that she had made a “compelling case,” Ms. Warren writes. When she pushed Ms. Williams to have her agency do something about the dubious practices, the regulator balked.
“No, we just can’t do that,” Ms. Williams said, according to the book. “The banks wouldn’t like it.”
Ms. Warren was not invited back...
 See the source below for the full article.
Elizebeth Warren on Regulatory Capture in the Banking And Securities Sectors
Related Coverage

 Canadian Securities Commissions like the BCSC are certainly no better, as always more to come..

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