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.
