The Chippewa Herald: After the Wells Fargo scandal, there is a better way
Recent revelations that Wells Fargo fired thousands of employees for opening more than 2 million unauthorized checking and credit card accounts is infuriating for two reasons.
First, it is hard to imagine a community banker or credit union in Wisconsin allowing even one of their employees to engage in this kind of fraudulent behavior without quick and decisive action. Yet it took the firing of more than 5,300 employees over four years for Wells Fargo to come clean. Second, in the wake of the Great Recession and the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the agencies meant to protect consumers appear to have been asleep at the wheel.
Fortunately, there is a better way to hold Wall Street accountable, protect consumers and grow our economy: it’s called the Financial CHOICE Act.
Following the global financial crisis, which caused millions of job losses and sucked tens of billions of dollars from workers’ retirement savings, President Obama used his supermajorities in Congress to remake our financial system. However, instead of addressing the root causes of the crisis, he took the advice of his then-chief of staff Rahm Emmanuel to “never let a good crisis go to waste.” He enacted everything on his progressive wish list under the guise of crisis management.
The product, known as Dodd-Frank, is more than 2,300 pages and is expected to cost our economy $895 billion. Even though small community lenders had nothing to do with the crisis, Dodd-Frank thrust a tidal wave of new rules and regulations on them, forcing them to either shrink their balance sheets, consolidate with big banks like Wells Fargo, or go out of business. The outcome is Dodd-Frank doubled down on “too big to fail” bailouts so that if banks, like Wells Fargo, get into trouble, taxpayers could be left holding the bag. Worst of all, it has stalled meaningful economic growth.
Dodd-Frank also propped up the Consumer Financial Protection Bureau, a new agency meant to “protect” customers from the very kind of fraud committed by Wells Fargo. The CFPB was given unique and unprecedented powers for a government agency. It’s nearly impossible for its all-powerful director to be fired and it receives all of its funds without Congressional appropriations or oversight. This stands in stark contrast to most other financial regulators, which are governed by a bipartisan commission that must seek funding from Congress.
This lack of accountability helps to explain the abusive behavior by the agency. The CFPB blacklists companies through an unverified public complaint database; it collects consumer’s private information without consent; and it has made it more difficult for Americans to get a mortgage or access to credit.
After the CFPB issued a $180 million fine for Wells Fargo’s fraudulent behavior, Democrats argued that this validated the good work of the CFPB in holding Wall Street accountable and protecting consumers. There is just one problem: As chairman of the Financial Services Subcommittee on Oversight and Investigations, I have seen no evidence that the CFPB even knew about issues at Wells Fargo until 2013, after the Los Angeles Times exposed what was happening at the bank and the L.A. city attorney filed a lawsuit. Even though the CFPB had agents at the bank, it did nothing until 2015 and that was only because Wells Fargo self-reported.
Ultimately, it was the bank that committed fraud and customer theft, which its CEO was forced to admit publicly to me during a recent hearing. Wells Fargo should be held accountable, which is why I have launched a full investigation. While there is still much that we do not know, we know that more than 8,900 Wisconsin accounts may have been opened without authorization and across the country, and more than 115,000 incurred fees, which may have impacted an individual’s credit scores. While the bank failed to live up to its own ethical standards, regulators appear to have done nothing to prevent or stop this egregious behavior from happening.
Last month, my committee passed the Financial CHOICE Act to address Dodd-Frank’s failures. Our bill will end taxpayer bailouts, impose the toughest penalties ever on Wall Street for fraud and theft and incentivize well-managed financial institutions to hold more capital by offering them relief from unnecessary regulatory burdens. Our bill also converts the Consumer Financial Protection Bureau into a bipartisan commission and makes it more accountable to the American people.
Nearly a decade after the Great Recession, we shouldn’t be fighting the same fights we did eight years ago. Dodd-Frank was supposed to make our financial system safer. However, as evidenced by the fact that consumers could still be on the hook if a bank, like Wells Fargo, fails and that it can get away with consumer theft right under the nose of our regulators, the law is an utter failure. The Financial CHOICE Act offers a better way to grow our economy, promote financial independence for families, and a safer, more accountable, financial sector.
U.S. Rep. Sean Duffy (R-Wausau) has represented the 7th Congressional District since 2011. He serves on the House Financial Services Committee as chairman of the Subcommittee on Oversight & Investigations.