Money And Change

Wells Fargo Or The Fed: Who's The Bigger Fraud?
 
ZeroHedge.com    Sep 26, 2016 9:25 PM

Submitted by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

The Wells Fargo bank account scandal took center stage in the news last week and in all likelihood will continue to make headlines for many weeks to come. What Wells Fargo employees did in opening bank accounts without customers' authorization was obviously wrong, but in true Washington fashion the scandal is being used to deflect attention away from larger, more enduring, and more important scandals.

What Wells Fargo employees who opened these accounts engaged in was nothing more than fraud and theft, and they should be punished accordingly. But how much larger is the fraud perpetrated by the Federal Reserve System and why does the Fed continue to go unpunished? For over 100 years the Federal Reserve System has been devaluing the dollar, siphoning money from the wallets of savers into the pockets of debtors. Where is the outrage? Where are the hearings? Why isn’t Congress up in arms about the Fed’s malfeasance?

It reminds me of the story of the pirate confronting Alexander the Great. When accused by Alexander of piracy, he replies “Because I do it with a small boat, I am called a pirate and a thief. You, with a great navy, molest the world and are called an emperor.”

Over two thousand years later, not much has changed. Wells Fargo will face more scrutiny and perhaps more punishment. There will undoubtedly be more calls for stricter regulation, notwithstanding the fact that regulators failed to detect this fraud, just as they have failed to detect every fraud and financial crisis in history. And who will suffer? Why, the average account-holder of course.

Any penalties assessed against Wells Fargo will be made up by increasing fees on account-holders. Clawbacks of bonuses, if they occur, will likely face resistance from the beneficiaries of those bonuses, leading to protracted and costly lawsuits. Even if the Wells Fargo CEO and top executives of Wells Fargo step down, the culture at Wells Fargo is unlikely to change anytime soon. As one of the largest banks in the world, Wells Fargo knows that it is not only too big to fail, but also too big to prosecute. At the end of the day, no matter how much public posturing there is, Wells Fargo and the regulators will remain best buddies. And those regulators who failed to catch this fraud will be rewarded with more power and larger budgets, courtesy of the US taxpayer.
Through all of this, the Federal Reserve will continue its policy of low interest rates and easy money. Retirees who hoped to be able to live off the interest on their investments will find themselves squeezed by continued low interest rates. Those living on fixed incomes will see their monthly checks buying less and less as the prices of food staples continue to rise. The fat cats on Wall Street will continue to have access to cheap and easy money while those on Main Street will face a constantly declining quality of life.

It is well past time for the Federal Reserve to face the same music as Wells Fargo and the bad actors on Wall Street. It is, after all, the Federal Reserve's creation of money out of thin air that enables all of this fraudulent behavior in the first place, so why should the Fed remain untouchable? Let's hope that someday Congress wakes up, hauls the Federal Reserve in for questioning, and puts as much pressure on the Fed as it does on private sector fraudsters.

Wells Fargo Slammed With $2.6 Billion Lawsuit By Terminated Workers
ZeroHedge.com     Sep 24, 2016 4:49 PM
 
In the first legal action brought by fired employees of America's largest mortgage lender and Warren Buffett's favorite bank - about whose criminal activity he was vowed not to say a word until after the election to avoid bringing attention to Hillary's hypocrisy of slamming Wells' illegal tactics even as she accepts support and money from Wells' biggest shareholder - two former Wells Fargo employees filed a class action in California seeking $2.6 billion from managers who fueled the creation of fake accounts on behalf of workers who tried to meet aggressive sales quotas without engaging in fraud, and were then demoted, forced to resign or fired.
The lawsuit (Polonsky v. Wells Fargo Bank & Co., BC634475, California Superior Court, Los Angeles County )  filed on Thursday, alleged that "Wells Fargo fired or demoted employees who failed to meet unrealistic quotas while at the same time providing promotions to employees who met these quotas by opening fraudulent accounts."
The lawsuit on behalf of people who worked for Wells Fargo in California over the past 10 years, including current employees, focuses on those who followed the rules and were penalized for not meeting sales quotas. It accuses Wells Fargo of wrongful termination, unlawful business practices and failure to pay wages, overtime, and penalties under California law.
It also offers details of how low-level bankers were allegedly pushed to create at least 10 new accounts a day in a sales initiative that has blown up into a scandal and prompted U.S. lawmakers to call for Chief Executive Officer John Stumpf’s resignation. Bankers were “coached” to secretly open fee-generating accounts and often resorted to using false customer contact information like [email protected] on accounts so they couldn’t be traced back, according to the complaint.
 
 
Former employees Alexander Polonsky and Brian Zaghi, who brought the lawsuit, allege Wells Fargo managers pressed workers to meet quotas of 10 accounts per day, required progress reports several times daily and reprimanded workers who fell short. Polonsky and Zaghi filed applications matching customer requests and were counseled, demoted and later terminated, the lawsuit said.
Furthermore, the lawsuit alleges that while while executives at the top benefited from the activity, they blamed thousands of $12-per-hour employees who tried to meet the quotas and were often required to work off the clock to do so. Understandably, they are now angry and want nearly $3 billion in damages.
"Employees with a conscience who tried to meet quotas without engaging in fraud were the biggest victims, losing wages, benefits and suffering anxiety, humiliation and embarrassment", the lawsuit said.
Wells Fargo was aware many accounts were illegally opened, unwanted, carried a zero balance, or were simply a result of unethical business practices, the lawsuit said.
“Wells Fargo knew that their unreasonable quotas were driving these unethical behaviors that were used to fraudulently increase their stock price and benefit the CEO at the expense of the low-level employees,” the bankers alleged in state court. “Although this policy was known to top executives of defendants, plaintiffs, as bankers, were blamed for harm to clients and retaliated against."
Cited by Bloomberg, Jonathan Delshad, the plaintiffs’ attorney, said in the complaint that bank managers often handed employees blank account forms with an unknown signature at the bottom and the bankers were expected to fill out the forms, adding as many accounts as they needed to meet their quotas.
“It could have been a customer’s signature, it could have been their manager’s -- they had no way of knowing," Delshad said in an interview. “One of those customers was an exchange student making $300 a week who had four accounts, including two with negative balances." Delshad said his clients are no longer Wells Fargo employees and that one is now a real estate agent. A LinkedIn profile for Zaghi shows him working for Marcus & Millchap in commercial real estate in the Los Angeles area.

An Unorthodox Solution To The World's Economic Problems
ZeroHedge.com      Sep 20, 2016 3:30 AM
Submitted by Frank Hollenbeck via Mises.ca,
We currently face a monumental dilemma. How do we extract ourselves from all this excessive debt without crashing the world economy? There is a solution which is totally counterintuitive: print even more money. In other words, to get out of the deep, deep hole we are in, dig even deeper.
It is called the Chicago plan. With a stroke of a pen, money would be substituted for debt, without the negative consequences of printing money. Banking would be restructured so that it never again leads to boom and bust cycles, and most debt, public and private, could be cancelled.  It’s basically a “one time” get out of jail card for the world economy.
The plan, and there are different versions, was first developed in the 1920s and 193os by the leading economists of the time. A version of this plan was actually put on Roosevelt’s desk, and was presented to Congress for implementation in 1934.
Back then, economists realized that it was the rapid expansion and contraction of credit, not driven by fundamentals of the real economy, which created most booms and busts. This is because banks can make a loan and then finance it out of thin air, through the fractional reserve banking system- something no other business can do. Of course, central banks adding unnecessary liquidity aggravated the problem and made the boom and bust cycles worse.
An essential feature of all the different Chicago plans is that it would require banks to hold 100% reserves against deposits.
Currently, banks in the U.S. normally are required to hold between 0 and 10 percent reserves against deposits. According to the Chicago plan, banks would be required to exchange their assets for enough money to bring their reserves up to 100%. It is basically an asset swap, with the government exchanging cash for almost all the banks private and public debt. This new money in the banking system just sits there since banks have a new 100% reserve requirement, so there are no inflationary consequences of all this new printing.  An IMF paper on the Chicago plan estimates that government could cancel the entire government debt held by banks and over $15 trillion of private debt!
Irvin Fisher, a Yale economist whom Milton Friedman called America’s greatest economist, said that the plan would greatly reduce the severity of business cycles, probably eliminating booms and busts. Bank runs would be impossible, making deposit insurance unnecessary, and it would greatly reduce the amount of public and private debt.
The IMF paper using state of the art economic modeling concluded that Dr. Fisher was right, and that the plan would be even more beneficial. Real GDP growth would initially surge by 10% resulting from the elimination of many distortions.
Many Austrians would normally cringe at such a plan since it implies massive government intervention and the strengthening, although temporarily, of government influence on the economy. This, however, can be viewed as one of the few legitimate roles for governments: enforcing property rights. Fractional reserve banking is fraud (see here and here) since it generates multiple claims to the same real resources or goods and services. The Chicago plan would simply be taking ill-gotten gains away from the counterfeiters.
The plan, if structured correctly, would achieve most of what Austrian economists have been proposing for many years, and would finally set the world economy on a stable path.
First, it is important to put a wall between the deposit function and the loan function. Historically, the incentive to engage in the FRB Ponzi scheme, committing fraud, is simply too great. These functions should not coexist in the same entity. We should have deposit banks and investment trusts, which should be 100% equity financed. These investment trusts or loan banks would then be like any other business and would not need any more regulation than that of the makers of potato chips.
A very interesting feature of the crypto-currency  bitcoin is the “bitcoin wallet.” To a large degree, this would eliminate the need for deposit banks. We could have a worldwide crypto-currency, call it the Dypre (first letters of major currencies), or multiple cryto-currencies linked to gold.  Banks would then finally act as true financial intermediaries instead of the fraudsters they are today. Some of the assets in the asset swap could be bank ATMs, to be converted to cryto-currency distribution points and then sold off to the private sector.
Governments should not be allowed to finance banks – a feature of the IMF plan. Investing in a loan bank or, more accurately, a 100% equity financed investment trust, should be like investing in the stock market. You know you could lose everything. However, money in a deposit bank is there, for sure, to pay your rent and electricity bills.
Second, central banks should be abolished. Every dollar that the central bank prints is a tax on cash balances: a tax which no one has voted for. Deflation should be the norm, as during much of the 19th century. A real gold standard should be seriously considered, since governments simply cannot be trusted. There is simply too much temptation to print money to fund spending, or to use the printing press to reach unattainable macroeconomic goals. This will finally stop governments from fiddling with the economy’s most important price: the interest rate.
Finally, private debt instruments should cease to exist if they are fraudulent in nature. This is a very important since past attempts to separate deposit banking from loan banking failed because banks were able to create near money-a demand deposit in a different dress (e.g., a money market mutual fund).
Many free market economist fear that such a plan would simply allow government and the private sector to ramp up borrowing all over again. The difference this time is that governments and households would have to compete with the demand for plants and equipment (investment) for a limited amount of funds coming from slow-moving savings. Higher interest rates would quickly create pressures for less borrowing.
The ideal solution would be to link a balance budget to the plan. Governments would then depend solely on direct taxation to fund spending. The government would have to explain to the taxpayer why he must forgo his flat screen television at Christmas to pay for soldiers in Afghanistan or planes over Lybia. The average citizen would finally realize there is no free lunch, and that government services require real sacrifices.
 
The Chicago plan failed in the 30s because the banking cartel killed it. Today the situation is different. People blame banks for the current monumental mess we are in. If academic economists can get together behind some version of this plan, as they did in the 30s, it is possible, with public support, to bring the banking cartel, obviously screaming and kicking, to the alter of 100% reserve banking.
Inaction is not an option. Today, we are between a rock and a hard place with no good choices. We are left with the increasing likelihood of severe depressions and hyperinflations eventually leading to dictatorships. If history is a guide, Napoleon and Hitler, both responsible for millions of deaths, rode to power on a wave of discontent that followed periods of excessive monetary printing. For Napoleon it was the hyperinflation of 1790-1797, and for Hitler the hyperinflation of 1921-1923. In that situation, no one really wins.
Europe is a runaway train with a certain crash in its future. European governments would be wise to discuss a rapid implementation of this plan for their economies, before extremism takes hold again, and Europe repeats its catastrophic past.
It is essential that we start a banking revolution before it is too late. The Chicago plan would restructure the banking system leaving a world for our children that is stable without the booms and busts that have created so much hardship for so many.