Is Wells Fargo "a criminal enterprise"?

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In summary: What makes me think they will survive just fine is that their stock has not crashed.I think the biggest issue is that they are a big bank and it's hard to shut them down.In summary, the conversation discusses Wells Fargo's recent scandals and the government's response. The summary states that Wells Fargo is caught doing something unthinkable, and that if it were not for their stock not crashing, they would be seized by the government. The summary also states that the biggest issue is that they are a big bank and it's hard to shut them down.
  • #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!
 
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  • #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
And now Morgan Stanley is under scrutiny by Massachusetts' top securities regulator.
https://www.yahoo.com/finance/news/...les-contests-regulator-144231631--sector.html

"This complaint lays bare the culture at Morgan Stanley that bred the high pressure effort to cross sell banking products to its brokerage customers without regard for the fiduciary duty owed to the investor," Galvin said in a statement.
 
  • #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.
 
  • #61
I do have to stand corrected on statement I made. Since 2011 the FDIC has changed the assessment rates to reflect the relative risk of the institution. Now the minimums are about $3-4 per $100. And the problem remains the same, they are both underfunded.
 
  • #62
Vanadium 50 said:
This is rapidly turning into "Banks are evil. This act is evil. Therefore banks committed this act."

V50, you are an intelligent person. When you examine the facts pertaining to the banking system, you can only draw one conclusion. The banks can engage in risky behavior with no consequence. If the FDIC is incapable of making good its liabilities, history has proven that the government (i.e. the people) will make good the difference. The banks have been continuously bailed out by the taxpayers since the inception of the FDIC.

The first time a government supported a bank in a time of failure was in 1696. There was run on the Bank of England which led to insolvency. The Parliament responded by making a law which suspended the "payment of specie". This means that depositors could not redeem their payments in gold (the standard of currency of the day). The precedent was set, and to this day there is an unholy alliance between govermnents and central banks that defies logic. Just because something is legal, does not make it right.

In the words of the Mayer Amschel Rothschild ( the original bankster), "Give me control over the issuance of a nation's currency, and I care not who makes its laws."
 
  • #63
Kevin, I am afraid your argument is too slippery for me and you keep moving the goalposts. The fact that a bank commits some bad acts does not prove it commits other bad acts, just like the fact that a person is a thief does not allow you to hang him for murder. Fractional reserve banking, "too big to fail" and risky S&L loans in the 1980's have nothing to do with this particular Wells Fargo scandal.
 
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  • #64
Vanadium 50 said:
Kevin, I am afraid your argument is too slippery for me and you keep moving the goalposts. The fact that a bank commits some bad acts does not prove it commits other bad acts, just like the fact that a person is a thief does not allow you to hang him for murder. Fractional reserve banking, "too big to fail" and risky S&L loans in the 1980's have nothing to do with this particular Wells Fargo scandal.

Yes, of course you are right, FR banking has nothing to do with this scandal. Cheers. :cool:
 
  • #65
I used to have a bank account with Wells Fargo 8 months ago. I was incredulous when they took $12 dollars out of my account for no reason. The story: I had transferred some money from savings to checking to buy an item (I can't remember exactly what it was, probably a game to play with some friends) I knew the exact cost of. When I bought the item (online purchase) for the exact amount Wells Fargo gave me an overcharging fee. When I tried to get my my money back because I clearly had not over charged but paid the exact amount the Wells Fargo rep would only give me six dollars back. I was thoroughly upset and resorted to keeping my money away from Wells Fargo. The worst part is that I was powerless to do anything about it. They took the money I had entrusted them with. I can't imagine I am the only one this has happened to.
 
  • #66
The WF CEO was sacked couple days ago.
 
  • #67
But replaced by his right-hand man. Meet the new boss.
 
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  • #68
The bank stands to lose $99 billion in deposits, $4 billion in revenue and a customer base that could dwindle by up to 30 percent, a study released Monday by cg42 showed. Ultimately, about 14 percent of customers are actually projected to switch banks, an at-risk level that a cg42 principal still said is "dramatically higher" than what would be expected from any of Wells Fargo's competitors.
http://finance.yahoo.com/news/wells-fargo-fallout-study-says-145943938.html
 
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