Last week the press announced that Wells Fargo had let go of 5,300 employees following the discovery of a massive fraud. Turns out that WF's bankers were creating fake accounts for customers and then charging fees on these fake accounts. this is a multi year fraud that has been going on for some time. This morning the CEO of WF was testifying before congress, turns out he could not remember anything, nada, probably not entirely sure of his name.
For the CEO of WF there are two choices: (a) I knew of the whole thing and I will resign and go to jail for defrauding clients orrrr (b) I remember nothing, I will maybe keep my job, I will keep my bonuses and will not go to jail. Guess what road the CEO chose; really this cannot be a surprise to anyone.
The system is such that you can be a liar (or economical with the truth) or not remember your name and it will a go away, probably. Now if I am Warren Buffet (he owns a big chunk of WF) I will make sure that the CEO, the COO, the CFO, the compliance officer, the board and the ombudsman/women all get fired. I do it quietly, say: "we are sorry I didn't know" fine of a few billion and move along an try to rebuild the franchise.
Now, all this is run of the mill stuff it will end with some lowly vice president going to jail -- because he got a $200,000 bonus two years ago, but the CEO and his friends will walk away retire and find new, well paying jobs. When I worked in the financial industry, I never though there was that much fraud. In fact, now I am having a hard time finding a market that was not rigged sometimes in the past decade (you would think that opening new accounts would be difficult...). Turns out that my entire industry is one big massive scam! Who knew -- well the crazy lefties, they knew -- although they also think that the moon landing was faked and that George Bush stole the election (damn they go that one correct too...maybe the moon landing was, never mind).
Anyway, this is where I sit, the world I have worked for my entire career is full of crooks -- sure there are many good guys (and gals) but there are a lot of crooks and people who are more than happy to look elsewhere. The truth is that the whole system is corrupt; the regulators jump back and forth between regulator and regulatee -- getting nice fat bonus to make up for the small(er) salaries. They have little incentive to go after the big fishes, cause the big fish will give them their pay offs! All this is legal, the mortgage market, the CDO/CLO, gold, interest rates swaps structured products, metals everything has been touched by malfeasance over the past decade.
The truth is even worse, because the banks are bigger today than they were a decade ago, sure there is less leverage (in America) and less stupid trades, but the market is unhealthy because so many now are too big to fail, they get an sure thing backstop from their national government. While the American government has been pushing (successfully) for more capital, in Europe the pushback and the lack of movement has been unbelievable. Several Italian banks are in trouble today because they were able to shovel the shit ahead -- hopping that an eventual recovery would float all boats (ask the Japanese how that turned out), well the recovery never occurred in Europe and now some are in dire straight (Monte the Pashi de Siena) -- ok all the Italian banks, some are in some trouble (DB) and some seem to be ok but we are not sure (the entire French banking industry).
In the end, we have another scandal, 5,300 lost their job at WF, its certain that the rot went higher, but no one has interest in the corporate office to take a hit and lose their jobs (they will eventually if Warren has his way -- but they will walk away with multi-million separation bonus). Just watch what emerges in the next few weeks.
How very depressing!