Last Thursday, the Consumer Financial Protection Bureau (CFPB) announced that Wells Fargo was paying $185 million in fines and penalties for allowing its employees to open “more than two million deposit and credit card accounts” that were not authorized by its customers. The employees were attempting to “hit sales targets and receive bonuses.” In one of the most audacious forms of bank fraud, according to the CFPB, employees actually “transferred funds from consumers’ authorized accounts to temporarily fund the new, unauthorized accounts.” This resulted in untold numbers of customers being charged for insufficient funds in their legitimate accounts or paying overdraft fees.
If anyone ever doubted Senator Bernie Sanders when he repeatedly said during campaign stops that fraud has become a business model on Wall Street, that debate is over. According to the CFPB, this conduct at Wells Fargo went on for five years. Yesterday, Fortune’s Stephen Gandel reported that the woman who headed up this division at Wells Fargo, Carrie Tolstedt, will be “walking away with $124.6 million in stock, options, and restricted Wells Fargo shares.” Fraud is not only a business model but a road to riches for the overlords on Wall Street. Just ask John Paulson, Sandy Weill, Robert Rubin, John Reed, and Jamie Dimon.
Fake accounts are just the latest alchemy on Wall Street. Let’s not forget that Bernard Madoff was generating fake statements to thousands of clients showing that $65 billion in fake money was in their accounts as the industry’s top watchdog, the Securities and Exchange Commission (SEC), ignored the repeated warnings from whistleblower Harry Markopolos for years. But Ponzi schemers are not the only source of fake money on Wall Street. Just consider how the Federal Reserve secretly funneled $13 trillion in cumulative, below-market-rate loans to some of the most hubristic banks on Wall Street and on foreign shores during the 2007 to 2010 financial crisis. How did the Fed create that money without any appropriation from Congress? It simply pressed a button.