News Is Wells Fargo "a criminal enterprise"?

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The discussion centers on the ongoing fallout from the Wells Fargo scandal, where the bank faced significant backlash for creating millions of unauthorized accounts. Participants express surprise at the lack of immediate consequences, such as an FBI investigation or a mass exodus of customers, especially those affected by the fraud. Concerns are raised about the bank's resilience, with some arguing that its size and perceived "too big to fail" status protect it from severe repercussions. The conversation also touches on the ineffectiveness of leadership, particularly CEO John Stumpf, who is criticized for failing to prevent the scandal despite significant compensation. Overall, there is a strong sentiment that Wells Fargo's actions reflect broader issues within the banking industry.
  • #31
mheslep said:
Not from this fraud. ENRON bungled large securities bets, like Lehman. When the market collapsed, the firms literally became worthless. Wells Fargo is not in that position. Even if all management and the board was found guilty of fraud and went to jail, the assets of the company are still large.
The ENRON fraud included fraud by their accounting firm, Arthur Andersen, which lost its license to do accounting and had to shut down. I could see such a thing happening to Wells Fargo.
Do you mean those responsible are fired or even criminally held responsible, or do you literally want the bank to disappear. 265 thousand employees.
If the bank disappeared, the employees (most of them) would not lose their jobs, they'd just have their offices/branches acquired and converted to whatever bank bought Wells Fargo.
 
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  • #32
mheslep said:
Do you mean those responsible are fired or even criminally held responsible, or do you literally want the bank to disappear. 265 thousand employees.
Yes you are right just those involved.
 
  • #33
mheslep said:
US has 7000 banks. They are not all Wells Fargo.

But they are all criminal enterprises. Fractional reserve banking is a ponzi scheme. If you or I did it, we would go to prison. Banks get away with it, because the banksters rigged the system with bought politicians in the 17th and 18th centuries.
 
  • #34
Kevin McHugh said:
But they are all criminal enterprises. Fractional reserve banking is a ponzi scheme. If you or I did it, we would go to prison. Banks get away with it, because the banksters rigged the system with bought politicians in the 17th and 18th centuries.
1. Ponzi scheme or not*, it is at face value wrong to call something that is legal illegal.
2. I own a house, for which I pay a mortgage. Ponzi scheme? I have never once possessed enough money to cover the value of my house.
3. *Not; fractional reserve banking bears little resemblance to a Ponzi scheme that I can see.
 
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  • #35
russ_watters said:
1. Ponzi scheme or not*, it is at face value wrong to call something that is legal illegal.
2. I own a house, for which I pay a mortgage. Ponzi scheme? I have never once possessed enough money to cover the value of my house.
3. *Not; fractional reserve banking bears little resemblance to a Ponzi scheme that I can see.
That's what I was thinking. I think I would have had to live at home with my parents until I was 35 to save up that much money.
And with six siblings, their 3 spouses, and their 6 kids, all in the same situation, in a 3 bedroom house? :oldsurprised:

Thank god, for fractional reserve banking... :bow:

ps. I have decided that I have no idea how to read the annual reports of financial institutions.
My credit union: 8 pages, of which two have numbers. [ref]
Wells Fargo: 273 pages, of which most have numbers. [ref]

Ain't nobody got time for that much maths...

hmmmm... My niece worked as an accountant for Arthur Andersen. Maybe I should call her up, and make her pay... :devil:
 
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  • #36
OmCheeto said:
...
My niece worked as an accountant for Arthur Andersen. Maybe I should call her up, and make her pay... :devil:
She says; "Sounds interesting...I'll take a look later today after work."

Yay!
 
  • #37
Kevin McHugh said:
But they are all criminal enterprises. Fractional reserve banking is a ponzi scheme.
Problems or abuses in the banking system become less likely to resolved if they are mislabled. US banking with some given capital requirements are legal, as Russ states. Also, they're not a ponzi scheme, which refers to a scheme where new investors pay returns to the old. A US bank does not have to work that way. A bank can work in simplest form with one investor or depositor.
 
  • #38
  • #39
mheslep said:
Problems or abuses in the banking system become less likely to resolved if they are mislabled. US banking with some given capital requirements are legal, as Russ states. Also, they're not a ponzi scheme, which refers to a scheme where new investors pay returns to the old. A US bank does not have to work that way. A bank can work in simplest form with one investor or depositor.

Really? On Monday I deposit $10 in a bank in which I'm the only depositor. On Tuesday the bank loans out $9, because they can (legally). On Wednesday, I go to take out $5 from my account. Guess what? They're bankrupt, they can't provide the cash.
 
  • #40
Kevin, this is not relevant to Wells-Fargo. Furthermore, a) in practice this rarely happens and is insured against, and b) if it were not for fractional reserve banking, loans would be extremely expensive and difficult to get.
 
  • #41
Vanadium 50 said:
Kevin, this is not relevant to Wells-Fargo. Furthermore, a) in practice this rarely happens and is insured against, and b) if it were not for fractional reserve banking, loans would be extremely expensive and difficult to get.

Really? So there have never been runs on big banks? In December 1931, New York's Bank of the United States collapsed. The bank had more than $200 million in deposits at the time, making it the largest single bank failure in American history.
 
  • #42
Kevin McHugh said:
Really? On Monday I deposit $10 in a bank in which I'm the only depositor. On Tuesday the bank loans out $9, because they can (legally). On Wednesday, I go to take out $5 from my account. Guess what? They're bankrupt, they can't provide the cash.
That's called a run. It is not a ponzi scheme. Once you get past the notion of fraud, you can investigate what factors might best make a banking system able to avoid a bank run, and to see the consequences of requiring 100% capital reserves.
 
  • #43
Kevin McHugh said:
Really? So there have never been runs on big banks? In December 1931, New York's Bank of the United States collapsed.

The Federal Deposit Insurance Corporation is an independent federal agency created in 1933 to promote public confidence and stability in the nation's banking system.
https://www.fdic.gov/consumers/banking/facts/
 
  • #44
Kevin McHugh said:
In December 1931

And in 13th Century Venice too!

  • There have been no deposit losses in the US since 1933.
  • This is still not a ponzi scheme.
  • You haven't addressed the severe credit crunch that 100% reserves would cause.
  • This has nothing to do with Wells Fargo.
 
  • #45
Perhaps ponzi scheme is not the correct term to describe fractional reserve reserve banking. Quasi- ponzi might be more descriptive, as it does require many depositors (investors) to keep the scheme afloat; the assumption being not every depositor will demand their money at the same time The FDIC is under funded based on its total liabilities. Typically they keep $1.20 for every $100 deposited in banks (it has gone as low as $0.70 per $100). The failure of two large banks simultaneously would wipe out the entire fund. By law, the FDIC must hold monies collected from bank assessments in the form of US Treasuries.
 
  • #47
Vanadium 50 said:
And in 13th Century Venice too!

  • There have been no deposit losses in the US since 1933.
  • This is still not a ponzi scheme.
  • You haven't addressed the severe credit crunch that 100% reserves would cause.
  • This has nothing to do with Wells Fargo.

Here is a list of bank failures since the FDIC. Since thr\e FDIC only has so much $$ on hand, any differences came from taxpayers.

https://en.wikipedia.org/wiki/List_of_largest_U.S._bank_failuresSee my previous post.

Where did I say the reserve requirement should be 100? So why should I address it?

Wells Fargo is a bank isn't it?
 
  • #48
According to the FDIC, there have been almost 4000 bank failures since the 1934.

https://www5.fdic.gov/hsob/hsobRpt.asp
 
  • #49
If the FDIC is so functional, why did the government spend $700B taxpayer dollars bailing out the banks?
 
  • #50
What does the FDIC say is its function is, and what's it's record in that regard.
 
  • #51
This is rapidly turning into "Banks are evil. This act is evil. Therefore banks committed this act."
 
  • #52
The FDIC has three options when bailing out a failed bank:

1. Simple payoff: the depositors get a direct payout for their deposits (small banks only).

2. Sell off: Another bank acquires the liabilities and assets of the failed bank.

3. Bail out: The failed bank is not closed, and all depositors (insured or not) are fully protected (Only a select few large banks). This is paraphrased from Irving Sprague, former Director of the FDIC.
 
  • #53
Vanadium 50 said:
This is rapidly turning into "Banks are evil. This act is evil. Therefore banks committed this act."

Not it's not. We're discussing the original post if Wells Fargo a criminal enterprise.My assertion is yes. If you care to continue the debate, please refute any of my statements.
 
  • #54
https://www.fdic.gov/bank/analytical/banking/2000dec/brv13n2_2.pdf

Here is an analysis of the S&L crisis in the 1980's. S&Ls are insured by the FSLIC, a cousin to the FDIC for commercial banks. The FSLIC became insolvent in 1986. The resolution of over 1000 S&L failures cost the taxpayers an estimated $128B. The same will happen to the FDIC in the event of another big bank failure.
 
  • #55
Before asserting the conditions of the S&L failures were the same as now, what changes were made in the wake of the S&L failures.
 
  • #56
mheslep said:
Before asserting the conditions of the S&L failures were the same as now, what changes were made in the wake of the S&L failures.

Are you asking me because you don't know, or are you testing my knowledge of S&L regulation? There was a whole bunch of legislation after the 2008 collapse too. Neither FIRREA nor Dodd Frank address the moral hazard of reserve requirements.
 
  • #57
I apologize for my link to the FDIC. I ran a report on bank failures, and copied the IP address. It takes you to the main page. You can go to bank failures and run a query yourself from the home page.
 
  • #58
KM, you just implied the situation between the S&L collapse and now are the same. I'm asking you to back that assertion with some evidence.
 
  • #59
No I didn't. I asserted that currently the FDIC is in the same situation as the FSLIC was at the time of its insolvency. And that situation is the FDIC does not have enough funds to cover the failure of two or more large banks.
 
  • #60
Kevin McHugh said:
No I didn't. I asserted that currently the FDIC is in the same situation as the FSLIC was at the time of its insolvency. ...
No, its not. Relative to the FDIC, the FSLIC had very little hands on control of S&Ls such as capital controls (3%), minimum number of investors (one for S&Ls at the time), time that insolvent firms were allowed to stay open (years).

https://www.fdic.gov/bank/historical/history/167_188.pdf

Thousands of banks have failed since the FDIC was created, and more will fail. The FDIC insures deposits, not all the assets of the bank.

https://www.fdic.gov/bank/individual/failed/banklist.html

I think there are many indications of problems with US banking, but that does not include that the FDIC is in the same position as the FSLIC was decades ago.
 

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