Our Giant Experiment with “Greed is Good” Has Failed
Another day, another example of the disastrous effect Reaganomics has had on our country's business culture.
Ever since his bank was fined $185 million for illegally opening millions of accounts in its customers' names to help boost profits, Wells Fargo CEO John Stumpf has insisted that he only discovered what was going on in 2013.
That's what he said when testifying before Congress, and it's what he's said in all public remarks on the scandal.
There's only one problem: John Stumpf appears to be lying.
The New York Times is reporting today that Wells Fargo employees began complaining to their superiors about the illegal practices they were seeing as far back as 2005, 8 years before John Stumpf said he heard about them.
What's even more damning is that many of these complaints were apparently addressed to John G. Stumpf himself.
As the Times reports this week: "For years... identical complaints from Wells Fargo workers flowed in to the bank's internal ethics hotline, its human resources department, and individual managers and supervisors. In at least two cases in 2011, employees wrote letters directly to Mr. Stumpf... to describe the illegal activities they had witnessed."
And what happened to these brave Wells Fargo employees after they blew the whistle on what they were seeing? They were punished. Some were outright fired, others were accused to ethics violations themselves, and still others were fired and then rehired again for lower pay.
Meanwhile, the culture of greed at the company continued to fester.
According to one Wells Fargo employee who testified this week before the California legislature, the pressure to boost sales was so great that he and his co-workers were actually denied bathroom breaks if they didn't meet expectations.
You really couldn't ask for a better example of how much damage Reaganomics has done to the business culture in this country.
There's nothing wrong with wanting to make money, but when President Reagan and his free-market extremists came to town in the 1980s, something changed in America's corporate culture.
Businesses were no longer just encouraged to make money -- they were encouraged to make as much money by any means possible, and no matter what the cost.
This new way of thinking was captured brilliantly in Oliver Stone's film Wall Street when Michael Douglas' character Gordon Gekko tells an audience of stockholders that "greed is good."
This point of view was shared by President Reagan, which is why he and the Republican Party did everything they could to reward greed in our economy.
It's why Reagan functionally stopped enforcing the Sherman Act so that big companies could merge with other big companies to create giant monopolies, kicking off the M&A or Merger Mania.
It's why he dropped the top marginal tax rate for the super-rich from 70 percent down to 28 percent over the course of his administration.
It's also why he changed the tax code so that CEOs were purely incentivized by greed to increase share prices and dividends.
Tax and accounting rules were both changed in the 1980s to turn CEOS into more shareholder than employee. This was done by converting huge chunks of their compensation from payroll into stocks and stock options.
The idea here was to connect CEO pay with the company's performance and therefore encourage efficiency in business practices and create a lot of money for everyone involved.
What it actually did, though, was give corporate executives an incentive to cut as many corners as possible to make as much money as possible, everything and everyone else be damned.
There is a direct line from this to what we're seeing right now with Wells Fargo.
John Stumpf and the other Wells Fargo higher-ups didn't apparently ignore complaints from employees about the illegal goings on at their company because they were lazy and didn't want to deal with the problem.
They ignored them because, thanks to Reagan, doing so was in their best interest as shareholders.
So if we really want to stop other banks from doing what Wells Fargo did, we need to take two major steps.
First, we need do start prosecuting and jailing executives like John Stumpf. These problems start at the top, and the only way to discourage them in the future is punishing the people at the top for making them possible.
But that's not the only thing we need to do.
We also need to repudiate Reaganomics and the tax structure and business rules that allow it flourish. Start enforcing the Sherman Act and break up the giant corporate monopolies. Raise the top tax rate. And eliminate the corporate deduction for compensating executives with stock and stock options. If they want stock in their own companies, they can buy it just like you and me.
Only then we will stop greed from dominating our economy and distorting our business culture.