Banks need more, not less, policing

Far be it from me to see metaphors where none exist, but Wells Fargo’s good name was literally blown away when Hurricane Harvey roared into the Texas city of Corpus Christi last week.

As the local paper reported: “An ‘O’ came to rest near a fountain on the corner of Lower Broadway and Peoples streets. Near there an ‘F’ sat, positioned by the downtown murals of children swimming underwater. An ‘L’ was propped against a blue dumpster.”

The big yellow letters blew off the top of the bank’s downtown building. They were subsequently retrieved and left in a heap near the front door.

That’s the image in my head as Congress returns to work Tuesday after its August recess (the Senate took three weeks off; the House took five). On the to-do list is Republicans’ ill-conceived Financial Choice Act, which the House passed in June and the Senate Banking Committee will take up in coming weeks.

Among other things, the act would all but cripple the Consumer Financial Protection Bureau, which has proved itself a reliable watchdog for consumers long preyed upon by greedy banks and lenders.

As if Republican lawmakers needed any more reminding of the foolishness of dismantling the bureau, Wells Fargo revealed last week that it may have opened as many as 3.5 million accounts without customers’ permission — way more than the 2.1 million it previously acknowledged.

“Wells Fargo is the poster child for why consumers need a strong Consumer Financial Protection Bureau,” said Emily Rusch, executive director of the California Public Interest Research Group. “Wall Street and its allies like to argue that there is too much oversight of the financial sector right now. Tell that to a Wells Fargo customer.”

Also last week, Wells was targeted by another consumer lawsuit, this one alleging that the bank cheated home-loan borrowers by charging them extra fees when their applications were delayed — even if it was Wells’ fault.

Meanwhile, the U.S.

Circuit Court of Appeals in Atlanta is weighing Wells’ demand that customers arbitrate disputes over allegedly unfair overdraft practices rather than have their day in court.

And California and New York are investigating the bank’s recent admission that it forced hundreds of thousands of auto loan borrowers to pay for insurance they didn’t need.

Jennifer Dunn, a Wells Fargo spokeswoman, told me the bank “is undertaking a thorough review across the company to ensure we are doing everything we can to build a better, stronger bank.”

Be that as it may, all these jaw-dropping developments while Congress was gone fishin’ contrast sharply with Republican lawmakers’ repeated declarations that long-suffering banks are hamstrung by too many rules.

Rep. Jeb Hensarling, the Texas Republican who chairs the House Financial Services Committee, in July described the federal government’s supervision of banks as “regulatory waterboarding.”

His Financial Choice Act aims to undo the DoddFrank Wall Street Reform and Consumer Protection Act, which was signed into law by President Obama in 2010. Dodd-Frank included a variety of measures aimed at lowering the risk of toobig-to-fail financial institutions endangering the economy or requiring taxpayerfunded bailouts.

Banks insist DoddFrank’s requirements are too costly and troublesome for them to comply with. The reality, as Wells Fargo so ably demonstrates, is that this is an industry with precious little understanding of ethical behavior.

The world’s biggest banks have paid $321 billion in fines for various misdeeds since the 2007-08 financial crisis, according to a recent report by Boston Consulting Group. U.S. banks accounted for most of the payouts.

And despite what Republicans say about banks being tortured by regulation, the reality is that the industry reported record profit last year of $171.3 billion, up 5% from a year earlier.

“We need more, not less, oversight of financial institutions,” said Sally Greenberg, executive director of the National Consumers League in Washington. “The deceptively named Financial Choice Act would give Wells Fargo and other banks license to return to the bad old days that got us the worst economic downturn since the Great Depression.”

The nearly 600-page bill would allow the president to fire the CFPB director at will, rather than the current requirement that the bureau chief be found guilty of “inefficiency, neglect of duty or malfeasance in office.”

It would strip the bureau of its authority to monitor the day-to-day activities of financial firms and prohibit it from cracking down on practices deemed unfair, deceptive or abusive. It would shut down the bureau’s database of consumer complaints, which contains more than 700,000 searchable listings.

In a win for predatory lenders, the bill would prevent federal authorities from exercising “any rulemaking, enforcement or other authority with respect to payday loans, vehicle title loans or other similar loans.”

And in its most cynical move, the Financial Choice Act would change the name of the Consumer Financial Protection Bureau to the Consumer Law Enforcement Agency, although it would be anything but.

CFPB Director Richard Cordray told me last week that the bureau has made “real change in the way financial institutions treat consumers.”

“Companies know they have to comply with the law because we are looking over their shoulder to make sure they treat consumers fairly,” he said.

“That’s evident through our work with our partners to put a stop to Wells Fargo’s illegal practice of secretly opening unauthorized accounts, which has generated significant public scrutiny and follow-on enforcement activity across all levels of government. It also put the entire industry on notice that this conduct will not be tolerated.”

Wells should have its Corpus Christi signage restored soon.

Republican lawmakers would be doing banks and consumers a favor if they focused on preventing future messes, not making them easier to occur.