Last week, we learned from an important joint enforcement action by the CFPB, OCC and Los Angeles City Attorney that Wells Fargo had opened accounts for 2 million customers without their consent. Bank employees had been pressured to do so by aggressive sales quotas that could not be met through actual sales. This week, we are appalled by the further news that the executive who oversaw the unit responsible for this fraud was not fired, and in fact is retiring with nearly $125 million in compensation.
Regulators have a tool in front of them to make it harder for bank executives to get away with giant pay packages in cases of lawbreaking and abuse. Section 956 of Dodd-Frank and Section 39 of the Federal Deposit Insurance Act give the watchdogs a mandate to stop banks from rewarding executives for practices designed to produce short-term gains with long-term risks. The regulatory agencies should exercise their existing authority to compel banks to use pay-clawback mechanisms, and they should make sure the final rule implementing Section 956 requires banks to take back pay from executives who oversee lawbreaking. In addition, the CFPB and OCC should refer their findings to the Department of Justice for a full investigation.
In the meantime, it is important that the penalties resulting from the illegal activity at Wells fall on the executives responsible for putting an abusive system in place and allowing it to continue. Wells Fargo and its CEO John Stumpf should claw back the $125 million going to the company’s head of consumer banking, Carrie Tolstedt, who supervised the employees directly engaged in these illegal acts. The company should also recover the bonuses received by Stumpf himself during the time period covered by the abuses. This money should be used to pay the penalties and refunds.cfp
In a speech on the Senate floor on February 3rd, Senator Elizabeth Warren described America’s criminal justice system as “rigged” in favor of big corporations and the wealthy and powerful. The Senator also condemned attempts in the House to pass H.R. 766, a bill that makes it harder to the Department of Justice to investigate and prosecute financial crimes.
The House is set to vote on H.R. 766 on February 4. Americans for Financial Reform opposes the bill, and has written to Congress voicing that opposition. [UPDATE: H.R. 766 passed the House 250–169].
Here is the complete transcript of Senator Warren’s speech:
Mr. President, across the street at the Supreme Court, four simple words are engraved on the face of the building: Equal Justice Under Law. That’s supposed to be the basic premise of our legal system: that our laws are just, and that everyone – no matter how rich or how powerful or how well-connected – will be held equally accountable if they break those laws.
But that’s not the America we live in. It’s not equal justice when a kid gets thrown in jail for stealing a car, while a CEO gets a huge raise when his company steals billions. It’s not equal justice when someone hooked on opioids gets locked up for buying pills on the street, but bank executives get off scot-free for laundering nearly a billion dollars of drug cartel money.
We have one set of laws on the books, but there are really two legal systems. One legal system is for big corporations, for the wealthy and the powerful. In this legal system, government officials fret about unintended consequences if they’re too tough. In this legal system, instead of demanding actual punishment for breaking the law, the government regularly accepts token fines and phony promises to do better next time. In this legal system, even after huge companies plead guilty to felonies, law enforcement officials are so timid that they don’t even bring charges against individuals who work there. That’s one system.
The second legal system is for everyone else. In this second system, whoever breaks the law can be held accountable. Government enforcement isn’t timid here – it’s aggressive, consequences be damned. Just ask the families of Sandra Bland, Freddie Gray, and Michael Brown about how aggressive they are. In this legal system, the government locks up people up for decades, ruining lives over minor drug crimes, because that’s what the law demands.
Yes, there are two legal systems – one for the rich and powerful and one for everyone else. Continue reading