Another slap on the wrist for another shameful racket by a big bank. The problems are easily identified and could be corrected.

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Wells Fargo was often portrayed as a “good bank” amid the bankster rackets that nearly sent us into a second Great Depression. If it had trouble, that came from integrating the recklessly run Charlotte bank Wachovia.

But this charade ended with the $185 million fine against the San Francisco too-big-to-fail institution for opening 1.5 million accounts and 565,000 credit cards that may not have been authorized by customers. How, nearly eight years after the bank-induced Panic of 2008, could this have happened?

1. The big banks have worked relentlessly to water down the Dodd-Frank legislation, meant to control the risky behavior that caused the disaster. Many rules have been watered down and other elements of the legislation have never been translated into rules. The Volcker Rule against the dangerous proprietary trading of derivatives faced hysterical opposition. Dodd-Frank, the best compromise possible at the time, was 849 pages as passed by Congress (and ultimately more than 2,000) — a happy hunting ground for bank lobbyists. By contrast, the Depression-era Glass-Steagall Act, which kept banking safe for decades until its repeal in 1999, was 37 pages long.

2. In Congress, Republicans have made a fetish about opposing the Consumer Financial Protection Bureau. This was put together by Elizabeth Warren, but GOP antipathy to her was so strong she could never be its chief (how’d that work out for the anti-Warren forces?). The CFPB was established to specifically protect financial services customers against the predatory rackets that hurt millions. But it has faced consistent sandbagging by Congress and powerful banking interests, including Republicans refusing to approve President Obama’s qualified nominee as director.

3. We don’t have any Joe Kennedys. When the Securities and Exchange Commission was created in 1934 to police a Wall Street that had helped bring on the Great Depression, FDR named the famous financier and father of the future president as chairman. To his aghast brains trust, the cynical and cagey Roosevelt said “it takes a thief to catch a thief.” Indeed, Kennedy was so effective in cleaning up Wall Street that he later joked that he wouldn’t have made his fortune if he had come up against his SEC. With today’s revolving door between regulators and finance, big money compromising politics and captured regulators, such a figure wouldn’t be allowed to rise (e.g. Warren).

4. Pressure-cooker sales. Greed and short-term looting of an economic commonwealth it took more than a century to create have turned us into a nation of salespeople. “Always be selling.” Never mind that most people aren’t good at sales. At Wells Fargo, the morale crushing sales quotas were instrumental in this hustle, as detailed in a Los Angeles Times story. This is, of course, the opposite of the steady integrity traditionally associated with non-criminal banking.

5. No prison. The biggest lesson that the too-big-to-fail banks and many others in “financial services” took out of the panic and its aftermath was, We can get away with it. The rule of law was not brought to Wall Street.

There were no clawbacks of outrageous compensation even as millions of average Americans were ruined. The report on causes of the catastrophe and reform recommendations by the Angelides Commission were quietly ignored. The fines imposed were trivial compared with earnings, a cost of doing business. The too-big-to-exist institutions got bigger still, even more disconnected from the real economy yet still a threat to it. And no top banksters went to prison.

With such a pervasive climate of law-breaking and wickedness by the financial elite, only hard time would provide the “moment of clarity” — and stop the behavior. If a black teenager knocked over a convenience store for $50, he’d go to jail. Knock over the economy for $12.8 trillion (according to the Government Accountability Office), and you’re at the country club by 3 p.m.

Until these five issues are addressed, expect more bad behavior that hurts America.


Today’s Econ Haiku:

The best income growth

Will Seattle celebrate?

A fine whine will do