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.


Legend 3 years 49 weeks ago

Not to mention that Wells Fargo has thousands of employees that are expected to work lots of hours over 40 hours a week and receive no additional compensation. He takes home millions and they do not get anything as salaried employees.

Uncle Ralph's picture
Uncle Ralph 3 years 49 weeks ago

Greed is like gravity. I provides a point of reference and a sense of direction, but you need stops and controls for it to work against so that it works for you and not against you. In the case of gravity, it will keep your book on the table, but if you don't want your book on the floor, you need the table. If you don't want your wine on the floor, you need a glass to keep gravity from making a flat puddle out of it and a table to keep the glass off the floor where you can reach it.

Greed, and its slightly less warty cousin, Desire, provide impetus and a reason to do rather than not do, but you need some limits, restraints and guidelines to keep them from running completely amok and smashing everyone else's needs and plans on the pavement in the service of one or a few sociopaths.

It's called civilization. Look it up.

Willie W's picture
Willie W 3 years 49 weeks ago

Just another check mark on a long list of things to come. Can't wait for Hillary to get elected so she can put an end to this crap...... Or not.$$$

cccccttttt 3 years 49 weeks ago

Tom hits the ball out of the park with this blog topic!

It underlies all manor of corporate abuse to the public.

It also remains to be seen which services should be private

enterprise and which should be run as public coops.

But its clear that money is too vital to the national interest to be

left to private bankers.


TomDorr's picture
TomDorr 3 years 49 weeks ago

Stumph is a liar. My wife and I had an estate account at Wells Fargo, and anytime we wanted to draw money from the count we were offered all different types of "products" and "accounts" by the tellers. It was impossible for a simple transaction to take less than 40 minutes. I was almost tempted to get a gun and a mask to quickly gain access to my wife's and my money.

It's obvious employees were coerced into this type of behavior, as every teller we did this with had the same spiel, and all seemed uncomfortable, maybe even embarrassed, doing so. We withdrew all our money, finally.

We now have all our money in a credit union and two banks that are locally owned and not aggressive.

Hephaestus's picture
Hephaestus 3 years 49 weeks ago

Banking should not be privately owned

And especially, fractional reserve banking needs to be illegal

DFMM's picture
DFMM 3 years 49 weeks ago

Wells Fargo's Stumpf

Stumpf rhymes with Drumpf. Coincidence???

Dan, San Diego

Legend 3 years 49 weeks ago

Now he is retiring with a golden parachute of at least 186 million. This will also include other benefits such as medical insurance etc. Too bad that you cannot take it with you when you die.

ronsears 3 years 49 weeks ago

Greed Kills. Spreadsheet morality is a blueprint for hell on earth. A focus on short term profits over all long term investment destroys companies and countries. Anyone who claims any related self-serving personal and business strategies are "smart" doesn't understand that evolution must select for intelligence that benefits all of mankind, or we will all be gone. Greed kills.

dianhow 3 years 49 weeks ago

STOP using Greedy arrogant Wall St banks Use smaller local banks / or credit unions ! GOP anti middle class, pro corp, war loving, education cutting policies have drained our country & its resources. US once had safeguards to protect the people They are all GONE. Since Reaganomics, trickle down, deregulation, lower wages, busted unions, anti US Free trade deals, 2 long failed Bush Cheney wars, global crash/ huge corp cuts, loopholes, subsides, then came Citizens United. That gave billionaires all the power . I'm 73.. we worked , we saved, counted on SS , savings, pension to make it in our old age. I've lost so much, my husband, health, pension was cut 75 % .. barely making it, medical bills. Medigap insurance is very high, Most health insurance co's do not want folks who take insulin ! I was a care taker 2012 -2015 . Lifetime savings almost gone..then what do I & people like me do ?

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