There are a great number of stories about how Trump is “destroying” the Republican party.
Bullshit.
That Trump is most likely to lose the Presidency badly does not make the Republican party broken. There is some down-ballot effect, but:
- Republicans will certainly hold the House;
- Republicans will still control majority of State Governorships; and,
- They might lose the Senate but if they do it will be barely.
Does that sound like a broken party? No, it sounds like a largely ordinary election result: in fact, in 2008, the Republicans did far worse.
There will be blow-on effects from the Trump candidacy, but they will no more “destroy” the Republican Party than the Tea Party did.
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So, Trump said some very nasty things about women, which were caught on tape and released to the public.
There’s no question that Trump is a vile misogynist, and he has multiple outstanding sexual assault allegations against him.
It is also true, as Trump says, that Bill Clinton is a piece of work when it comes to women (no, spare me) and that Hillary has attacked those who accused him.
But what is more interesting to me is that a norm has been violated. Male politicians regularly molest women.
Please, don’t act surprised, everyone in the business knows this and so does anyyone outside it who wants to know. (Younger men get molested a lot too, the position of “page” is a dangerous job.)
But, as Marcy Wheeler has pointed out, this doesn’t usually get brought up. In the ’90s, Clinton got hit with it, and then it was mostly swept under the rug.
Now, someone has opened it up again.
This is what Trump has been, in his blustering way, warning about: Those who attack him on this issue will be attacked in turn. Especially Republicans, as he and his team view them as traitors–always worse than the “officially” avowed enemy.
Usually I despise having a “conversation,” but this is a conversation I welcome. Let’s get into it. Let’s talk about all those who are groping, molesting, assaulting, and out-and-out raping.
I do think it is worth pointing out that the Iraq war caused more rapes and assaults than anything Trump has ever done. Libya too. Oh, and “super-predator” legislation increasing the prison population would have caused a lot of rapes also.
It is worth looking at what people actually do. When someone is potentially in a position of power, it’s worth it to ask how many people they have, through their actions, hurt. This is a rounding error predicting the harm they might do. I know this is an intensely alienated way for most people to think, but being unable to think in those terms causes great suffering.
That said, one can certainly make the argument that Trump will be a worse President than Clinton (on some scale of awfulness). Remember, it isn’t necessary to pretend that Hillary is a good person for whom to vote, with the worst enemy being Iran, and the first priority being to overthrow Assad. One needs only to say either she’s the lesser evil or that fuck it, they’re both bad, and you’ll be voting in your own interest.
Finally, I note that, contrary to what you may have read, the Wikileaks releases from the DNC and Podesta are entirely accurate. In a normal election, they would be dominating the news-cycle. Clinton is a corporate shill and a warmonger who has caused immense suffering in her life.
These are not good people. Do not identify with either, nor with their courtiers. Those close to them have sold their souls for power, or its illusion. You would be selling something precious and receiving nothing close to that in return.
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…The chances are we’ve gone too far,
You took my time and you took my money,
Now I fear you’ve left me standing,
In a world that’s so demanding…
— New Order, “True Faith”
In this post, I discuss the options for the UK in its relationship to the EU after the Brexit vote, particularly in light of the fact that Theresa May’s government has decided that freedom of labour movement is to be sacrificed on the altar of the hostility towards immigration–which is held to have driven much of the support for Leave. It is also increasingly clear that the EU will take a harsh view of British attempts to separate trade access to the EU from the access of EU citizens to British work opportunities. I argue that, overall, this position is justified and mostly reflects an EU leadership representing the interests of their citizens in the face of a United Kingdom that, for whatever reason, believes that it can take what it believes to be the beneficial parts of its relationship with continential Europe and leave behind what it mostly (and wrongly) considers to be the costly parts. I make this argument despite a dislike of and disagreement with some of the governing attitudes in continental Europe: The historic demands of conservative, Eurosceptic UK politicians would have exacerbated what is bad about the EU and attenuated what is good about it.
The Taxonomy of Brexits
In practice, the European Union is actually a constellation (or maybe nebula) of treaty-defined entities. An EU member is a country that participates in a certain subset of them, but not necessarily all of them (there is of course a more formal definition, but I am talking about the institutional mechanics)–the UK is one of the exemplars of this choice. Conversely, there are countries that participate in some of the EU institutions, but are not members–the best exemplar of this is Norway, which participates in the single market, the unified visa area under Schengen, in the scientific bodies, and pays a significant charge in lieu of membership dues.
We are now months after the Brexit referendum returned a clear Leave result (52-48 is not a small margin, and immediate do-overs after buyer’s remorse is a democratically terrible idea), and the United Kingdom faces a choice in how to implement the referendum. The taxonomy of choices resolves to two major taxa of future possibilities: “hard” or “soft” Brexit. Under a “hard” Brexit, the UK effectively reverts unilaterally to a mostly exterior relationship with the countries of the European Union without (much) special status or access to EU-related institutions. The UK becomes like a nearby Canada, in other words. There’s no question that the border will remain open for Brits to visit the EU, but they will likely do so under the same visa waiver terms under which Canadians and Australians live, which generally excludes labour competition with EU citizens and permanent residents, outside of designated priority professions. Goods and services will have to be negotiated by treaty separately, but they will have to be agreed-upon by the entire EU, meaning that everything, absolutely everything, would be on the table, and more favorable terms than the current access to the single market would not be on offer.
Under “soft” Brexit, the UK becomes, in practice, mostly like Norway. That is, it would retain access to the single market, have to pay dues, and remain a participant in many of the institutions–but will emerge from the direct, if often only superficial, supervision of the European Commission. Much less, in terms of the UK’s real capabilities, would change, but some aspects of internal policy and regulation become officially independent of EU authority, and much influence in EU institutions would, of course, be lost.
The division between these two types of Brexits turns out to revolve around one issue: The separability of the Four Freedoms of the European Single Market. These are: freedom of movement of (1) goods; (2) labour; (3) capital, and; (4) services. These freedoms, presently well-entrenched in the EU treaty framework, are supposed to guide convergence towards a fully-implemented, single market (meaning: It’s not fully implemented). If, as a Leave supporter, your problem with the EU lies elsewhere, for instance, in its economic regulatory framework, then you would still be willing to accept the Four Freedoms, and soft Brexit is an option that other EU partners would accept in overall good faith, especially since the departure of Britain from the rest of the EU’s convergence framework would enable other agenda items, that the UK has deliberately hindered, to go forward with minimal overall disruption.
Economic Freedom as Compromise
If, however, your problem with the EU is with the implementation of the Four Freedoms, then, Houston, you have a real problem as a Brexiteer. Because every country in the EU has some significant sectors vulnerable or sensitive to one or more of the Four Freedoms. The Four Freedoms establishes a relatively simple guiding framework for compromise among these issues. I hope that it is not too difficult to see that allowing countries to withdraw in spirit and practice from one or more of these freedoms, while retaining full privileges on the rest, is a recipe for disaster for the entire Single Market project, because some countries would become “free riders” to the detriment of the other countries, which would in turn cause the disadvantaged countries to withdraw from other freedoms, in a downward spiral that would dismantle European economic unity.
The Four Freedoms and the regulatory framework that accompanies them makes the Single Market a far superior trading arrangement to treaties like NAFTA, and, yes, TTIP. The common regulatory framework, needless to say, impedes (however, does not prevent) the degree of race-to-the-bottom behaviour that you see in NAFTA-like deals, by creating a regulatory and arbitration system that is, yes, considerably more accountable to the public than the infamous investor-state dispute settlement (ISDS) that is a common practice in bilateral treaties. European, particularly British critics, decry the European Commission and its institutions as being very distant from popular sovereignty, and the criticism is true, to some extent; but that the road to accountability is long does not mean that there is no road at all, in contrast to international arbitration tribunals, which are sensitive to very little.
But more importantly, the free movement of labour is essential if you decide you want to have free trade at all. It is increasingly clear that trade deals like NAFTA, alleged to lift poor countries out of poverty by exporting low-skilled economic activity to these countries, actually have deleterious effects on developing countries. Mexico has experienced a great labour dislocation from exposure to competition from sectors that were domestically important but more productive and heavily subsidized in the US. Free movement of labour at least slightly ameliorates this by permitting workers in sectors negatively affected by this dislocation to find work in countries that directly benefited from it (overall). Because NAFTA does not lift border controls on the free movement of labour, Mexican workers who go where the work has gone (to the US) cannot send back remittances that reflect the higher US value of their labour, because they live under a wage-suppressive environment of immigration control. Needless to say, US workers do not benefit from the immigration controls as much as they are told.
What UK Eurosceptics are demanding, when they demand immigration controls for EU labour while retaining access to freedom of goods, capital, and services, is that UK business be able to profit from access to new markets in Bulgaria and Romania, countries that cannot yet compete in productivity with the UK, and yet fail to offer Bulgarian and Romanian workers the ability to improve their lot and their skills in higher-wage, higher-productivity environments with UK domestic labour protection, such as exist. It should not be hard to see why this is toxic.
European Unity and Freedom of Movement
The choice that Theresa May seems to be making is for a hard Brexit, particularly as signaled by some public pronouncements suggesting that existing EU-citizen workers in the UK would not be fully protected and grandfathered into the post-Brexit arrangement–that is, they are being designated as bargaining chips. The only condition under which it makes sense to use their status as a bargaining chip is to make an attempt for the UK to have privileged access to the EU without accepting any reciprocal obligations. (Whether it is actually possible to use them as bargaining chips this way is another matter.)
For the choice to be something in the middle between a hard and a soft Brexit, the EU would have to allow cherry-picking among the four freedoms, and therefore its own demise as a political project. I have described some of the reasons for this above. The EU is not going to passively accept its own demise at the hands of right-wing British Eurosceptics, some of whom have made no secret of their desire not only for Britain to leave the EU, but for the EU project itself to fail.
The mistake of British Eurosceptics, at least those who care about maintaining a privileged economic relationship with the European Union, is to fail to understand many continental politicians and bureaucrats, and significant portions of the continental public really “mean it” when it comes to European convergence. While the spectre of WW2 hangs in the air, somewhat faded due to the inevitable passing of those who survived it, continental Europe has still had regular reminders that it, the originator of colonialism, is in the modern world now itself susceptible to divide-and-conquer politics steered by greater, exterior powers. Critics of the EU say that the democratic legitimacy of its institutions is undermined by the non-existence of a European “demos,” but policy-makers are well aware of that. That is the whole point of the convergence process. The EU, in fact, has programmes to encourage social relationships between citizens of member states, precisely out of a desire to ensure that a European demos emerges in a future generation, and, yes, the United States of Europe can thereby be finally constructed.
Freedom of labour movement is a element of the unification of peoples explicitly envisaged by the construction of the European Union. In addition to its role in helping the Single Market to be mutually beneficial, the workplace is a key element of social integration and the building of trust between peoples at an individual level. Among younger British people, the policy has already shown signs of working–one of the complaints of younger Brits about Brexit is precisely that they were the generation that had both the most developed European identity and the highest intention of taking advantage of freedom of labour movement, of educational movement, and other related European freedoms.
National and Personal Factors
I would be remiss if I stayed only at the “high” institutional levels when discussing the dilemma into which the EU must now force the UK. There is certainly a personal dimension that cannot be ignored. British Eurosceptic politicians and media, both UKIP and Tory, have attacked what most continental Europhiles, both official and otherwise, see as the emotional core of the EU project, and did so consistently and constantly, so much so that EU immigration is seen as a prime driver of the Leave vote. Indeed, so much so that Theresa May feels compelled to choose it over Single Market access. Anyone who believes that such a consistent attack on a core belief and life work of many European politicians and bureaucrats would have no effect on how the negotiation proceeds is fooling themselves. Greece’s and Syriza’s offense during the 2015 negotiations was to attempt to step off script and make it politically impossible for German politicians to sell the band-aid to their own public; this is nowhere near as offensive as a direct political attack on free labour movement. If the UK gets off this with less visible damage than Greece, it is only because the UK is, for various reasons, economically much stronger than Greece–and not a member of the Eurozone.
Furthermore, it evidently became a bad habit in UK politics to blame domestic policy failures on the EU. The UK was never a member of the Eurozone, and there is nothing about the EU that prevents the UK from running a more social-democratic economy than it has. It was always within the power of the UK to handle its own housing crisis, its economic inequality issues, its infrastructure issues, and so on. What flaws the EU has (and it definitely has flaws!) cannot be blamed for very many of the problems now viewed as causing the political alienation that has led to the Brexit vote. Now, yes, it is a common sport across the EU for national politicians to blame Brussels officials for preventing them from doing things, and this is often true: The Commission has known democratic legitimacy issues, even if it is better legitimized than ISDS arbitration tribunals. Eurocrats are used to serving as the “distant scapegoat” function. The problem is that UK politicians did not, apparently, know when to pull back, or they knew it and chose to go over the cliff anyway, because an internal Tory party battle was more important than keeping the European project together. EU negotiators are human; they are not going to simply accept that they were the cruel masters from whom the British people needed freeing.
Therein lies a major, unavoidable issue. There are parties, particularly in countries like France and the Netherlands, that would likewise wish to scapegoat Brussels for whatever goes wrong and sell an EU breakup as a panacea. Former (?) colonialist countries like France have populations that share the imperial nostalgia issues that right-wing British Eurosceptics do. It would be actually irresponsible if EU negotiators simply attempted to go for the narrow-sense, economically most mutually beneficial deal with the UK possible. It must be seen that the EU was not the author of British woes, but at worst neutral. This is quite a different situation from Greece and the Eurozone, where, in material terms, the structure of the Eurozone acted as a real straitjacket on Greek well-being and Greek fiscal democracy.
Brexit, Boiled Hard
If there’s anything underhanded about the EU position on these matters, the blame goes principally to the people who set up the EU treaties well before this point. The article 50 exit procedure is deliberately designed to disadvantage the exiter by turning the tables: Exit is turned into exclusion, and exclusion happens automatically after the (too-short) deadline. No negotiation is possible until the country in question puts on the article 50 dunce cap and sits in the corner of shame. The architects of European convergence have always been especially careful to ensure that convergence is a one-way procedure wherein departure is so costly as to be better to be avoided at all. This was done, to put it in Ianwelshian terms, because they thought it was the right thing. Otherwise, European convergence would not be externally credible, and its lack of external credibility would be a further invitation for foreign powers to play wedge games.
One may argue that a hard Brexit also damages Europe as it disrupts the flows that currently exist, and this is always costly. European leaders have made it crystal clear that the project is more important to them than the short-term cash flows. Just as the British say that they can find substitute buyers and sellers, so can the rest-of-EU–with, in some ways, greater efficiency, because manufacturing still significantly exists on the continent. And everyone, even German industry, knows that the destabilization caused by separation of the four freedoms of the Single Market would, in the medium term, be more costly than putting up tariffs against the UK, to be negotiated down in a later and less UK-favorable process than full UK membership.
In this instance, I do explicitly take a strongly EU-sympathetic position on this. The aftermath of the Leave campaign has shown that anti-immigrant hysteria, nationalist nativism, and colonial/imperial nostalgia had a major impact on the shape of this, not a major desire for either libertarian economics or left-wing fiscal expansion. These are real dangers and ought not to be rewarded by political victories. Even under a hard Brexit, it still remains fully within the power of UK politicians to ensure that ordinary people are at least exposed to only minimal immediate suffering, and if they are not willing to use their means to protect their people, we know, once-and-for-all, that the woes and alienation of the people of the UK were never because of Europe.
The Course of Empire by Thomas Cole
It is a cliche, but true, that American elections, especially Presidential elections, are lesser-evil contests.
Both candidates are bad. Both candidates will reign over continued decline. Both candidates will kill a lot of people whose deaths will not make America or the world safer or more prosperous.
Every US Presidential election of my life, with the possible exception of 1968 and 1972, when I was four years old, has been between two candidates who, objectively, could be expected to do things which would cause American decline. (And in both 1968 and 1972, the bad candidate won.)
Somewhat coincidentally, 1968 is the earliest year from which you can date American decline; 1968 is when white working class wages peak. It’s not until 1980 that one can say, “Ok, America has chosen decline,” however, because how to fix the problems of the late 60s and the 70s is the question of that time.
Since 1972, every election has been between people who would have been (or will be) bad Presidents. Every single one.
You cannot be led by bad leaders for 44 years and expect anything but bad results.
Various attempts have been made to end the “nothing but bad candidates problem.” All of them have failed.
Each failure is another rail pounded into the railway to Hell America is building.
You must fix this problem, of nothing but bad leaders, or you can go nowhere good. And even if you elect the “lesser evil,” you are just going to Hell a little slower.
Fix your politics, or wind up in Hell.
It is that simple, and I am not saying “Hell” idly.
(The saddest thing is that as flawed as he was, I’d take Nixon in a heartbeat over any President from Reagan on. Yes, including Clinton and Obama. It isn’t even close.)
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I used to get paid to watch these things. I don’t any more. So…I’m going to go read a nice novel in a coffee shop. Please feel free to talk about the debate in comments. I will, actually, be curious to hear what people have to say, just not willing to sit through so much sewage to get my own “take.”
Enjoy.
![Image by [rom]](http://web.archive.org./web/20161016083313im_/http://www.ianwelsh.net/wp-content/uploads/2009/03/japanese-fan-by-rom-199x300.jpg)
Image by [rom]
Keep the rich poor.
Punish negative externalities, encourage positive externalities.
Tax economic rents punishingly.
Do not allow pipeline companies (app stores, telecom companies, railways, etc…) to extract monopoly profits.
Enforce the doctrine of first sale (if you buy it, it’s yours) and do not allow items to be turned into services.
Do not allow elites to opt out of the experience of ordinary citizens.
Allow no unregulated monopolies or oligopolies (and by regulated, I mean 5 percent + inflation profit, no more, no less and strict limits on executive compensation).
Keep so-called “intellectual property” to an absolute minimum.
Make it worth doing social work and do not allow the private sector to pillage the social sector (for example, parenting).
Never use widespread targeted incentives.
Do not allow the rich to grow rich any faster than the bottom or middle of society.
Do not allow fraudulent profits to drive out real profits.
Allow easy bankruptcy.
Do not allow usury.
Do not allow resource extraction profits to drive out profits in other sectors of the economy.
Keep the real rate of return low, except on genuinely risky entrepreneurial activities.
Do not reward people for winning lotteries (economic competitions someone was going to win, like Facebook winning the social site competition).
Do not allow the financial sector to be the tail that wags the dog.
Allow no financial instruments which are more complicated than the underlying asset or project.
Do not allow anyone to take future profits in the present.
Make sure that people cannot cash out of the system without taking a huge loss.
Ensure that no one can give themselves a payday by destroying real value (i.e., much private equity).
Do not allow the old to make deathbets.
Enforce accountability on decision-makers, especially corporate decision-makers.
Do not allow private money to buy elections (taxpayers should pay for their own elections and not expect donations to do so).
Do not allow lawmakers or public executives to ever make more money (adjusted for minimum wage increase, median wage increase, and CPI) than they did while in office.
Give lawmakers generous pensions that kick in after only a few years of service, so that they are not worried about their next job.
Pay lawmakers generously, but link pay to minimum wage, CPI, and median wages.
Recognize health externalities caused by urban and exurban planning, pollution, and additives.
Reduce barriers to entry in new industries, including outlawing non-compete agreements and restrictive patents.
Reward creatives not primarily by patent or copyright, but by levy and distribution. Corporations are not creatives.
Do not allow trade to be used to externalize negatives like pollution.
Restrict capital flows significantly.
Treat credit as a utility and regulate all credit grantors as utilities.
Credit rates should be based on the utility of the end use of credit.
All universal or near-universal insurance should be run by the government, as the government is always the insurer of last resort.
Do not have large standing armies.
Do not obsess over inflation targets. Moderate inflation, to as much as 10 percent, is not harmful and is less harmful than very low inflation.
Do not use monetary policy for fiscal policy or vice-versa.
Do not lock up a large part of your population.
Do not make reintegration of criminals who have served their time effectively impossible.
Make sure your population eats healthily. There is no such thing as cheap food. Cheap food is paid for by death, disease, and health care costs.
Do not allow educational advantage to be bought by high housing prices or by money in general.
Do not impoverish your cities by allowing politicians to use city money to buy rural and suburban votes.
Do not allow city folks’ mores to run the country, nor country mores to run the cities.
Do not allow unproductive suburbs which do not allow light businesses or have covenants.
Do not borrow significant amounts of money in anything but your own currency.
Do not allow people to make large amounts of unearned money (i.e., as when housing inflation is much faster than general inflation).
Do not allow the costs of your society to outrun real gains spread over the population (i.e., housing prices to rise faster than wages).
Make sure that the consumer economy has an alternative.
Understand what the government does well and what the public sector does well.
Use competition between the private and public sectors.
Do not allow your elites to enter into direct competition with foreigners running resource economies.
Do not allow your economy to be owned or run by foreigners.
Do great things, not because of the return, but because they are great.
Seek the health and happiness of your citizenry, not maximum income.
(First published Sept 7, 2011. This is old, but the only relatively comprehensive list I’ve written, so back to the top. My thought has evolved on a few issues, but it’s still a very good list. – Ian)
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So, Bush Jr., of Iraq and torture fame, will vote for Clinton. The Clinton team is pleased. Michelle Obama has a publicity photo with her embracing him.
1st Lady Michelle Obama hugs Pres. George W.Bush at opening of @NMAAHC I was there for 1 of museums chief sponsors @BankofAmerica pic.twitter.com/XWw41G5nHO
— kennerly (@kennerly) September 24, 2016
Meanwhile, they are screaming at third-party voters, claiming they caused the Iraq War by not voting for Al Gore?
Bush is a war criminal. Nazis were hung at Nuremburg for the exact same crime he committed. Clinton voted for that war, though she tries to claim she didn’t think she was voting for it. Even if she wasn’t, Libya was another war crime of the same sort. What did Clinton say about Gaddafi? “We came, we saw, he died.”
Yup. He was sodomized with a bayonet, then killed.
Let us be clear: While Trump is a member of the establishment, he is not a member of the political establishment. Bush and Clinton and Obama are closing ranks against an upstart who threatens to change their world, to change how things are done.
You can’t make much of an argument from principle against Trump if you’re kissing up to George W. Bush.
I never believed Obama would have voted against Iraq if he’d been in the Senate, and I sure know he has no strong feelings about Bush. (No, no, his wife did not do a photo-op with Bush that Obama didn’t want done.)
This is a complete farce.
Make your lesser evil arguments. There is no candidate here with even a marginal case for being good.
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61.8 percent of the vote, after a massive voter purge.
Labour Purge Numbers by Eoin
Labour Purge #s by Eoin
This is a fairly remarkable set of numbers. Even if we take them to be on the high side, a concerted effort appears to have been made to deny people votes, and almost always, from the anecdotes of those purged, they were Corbyn supporters. What is amazing is that even with so many people denied a vote, Corbyn crushed Smith.
The National Executive Committee (NEC) is the body which has the power to execute the purges.
I will suggest, strongly, that with a new roster on the NEC, Corbyn’s allies should re-instate virtually all the purged members, and that they should then purge those who were behind the purges.
There have been calls from neo-liberal Labourite leaders, like Kinnock, for ex-members of Labour’s Shadow Cabinet who participated in the abortive coup to ask to be reinstated and for Corbyn to let them back. Beyond a small number, I do hope Corbyn does not. These are not honest actors who can be trusted to stay loyal to Corbyn, and having lost two elections in a row, even despite the massive purge, they have little mandate.
We will now see if there is a split–many Tories and Labour MPs feel there should be a neo-liberal party dedicated to remaining in the EU.
This is a good day and a good result. Let us see what an actual left-wing Labour party is able to do going forward. For the first time in years, one of the two major parties in a Westminister democracy is actually left-wing, not “center-left” Blairist and neo-liberal.
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American dollar toilet paper roll
Some years ago I worked for a mid-sized financial multinational. Towards the end of my tenure, my employer merged with another company, and the senior executives in my department were replaced with Americans. (It was the smallest department in the division, and they felt they should give the Americans something.)
There had been some… dubious… practices before, stuff that skirted the line, mostly related to moving near future earnings into the current month, quarter, or year end. Because I was involved in both operations and compliance, I had made my concerns known, but what was being done was legal–if marginally so.
When the new senior managers took over, they started to require certain “numbers” of lower management. These numbers were hard to reach, but we tried. One day, the dictum came down to reach a number which simply could not be met. Fortunately, it wasn’t a number involving money.
Junior and middle management told the senior executives that the number was impossible; could not be done. The seniors insisted, the lower management resisted. The seniors said, “Do it, or else.”
They got their numbers. 100 percent on a specific metric. The reports all said so.
Problem was, getting 100 percent on that metric was legitimately impossible. The reports were now being changed. Straight up lies were being reported to the executives. And that was only the beginning; having forced lower management to lie about one thing, there was no reason for them not to lie about other things.
To be clear, they did it to save their jobs. “Get these results or lose your jobs” will get you the results you ask for–especially if you dangle bonuses on the other side: “If you do, we’ll reward you.”
So I have no trouble understanding how Wells Fargo got 1.5 million bank accounts and 565,000 credit cards that customers didn’t want. No trouble at all. “If you fail to meet the numbers we’ll get rid of you. If you meet them, we’ll reward you.”
Of course, for this to happen with actual financials, not just operations, the compliance staff and most of management had to be onside. Any decent audit or internal controls will pick that up, any competent junior operations management will figure it out. It can be done by small groups, not by 5,300 employees.
This is confirmed by how the senior executive in charge was treated.
Carrie Tolstedt, the divisional senior vice president for community banking, was the person responsible for Wells’s 6,000 branches where the infractions took place. When she retired, quietly, in July, the bank knew that her operation had been under scrutiny for sales tactics for more than a year. Ms. Tolstedt spent 27 years at Wells Fargo, and was no doubt steeped in the bank’s culture. In the last three years, she was paid a total of $27 million. She remains employed at the bank until the end of the year. When she leaves, she will probably be able to take with her nearly $125 million in stock and options.
The NYTimes and most commenters are obtuse about this. Completely obtuse.
By Wall Street standards, the Wells Fargo fiasco is minor in terms of dollar amounts. According to the Consumer Financial Protection Bureau, the employees opened something like 1.5 million unauthorized deposit accounts in the name of unsuspecting customers and made 565,000 unauthorized credit card applications, generating $2.6 million in fees and enabling the employees to qualify for bonuses. Wells agreed to pay $185 million to settle
This wasn’t about revenue. It was about being able to say, “We opened so many new accounts and credit cards” to Wall Street. Much of executive compensation is based on stock options and stock prices go up when you “beat expectations” and report good news. New accounts and credit cards aren’t expected to generate a lot of money immediately, but they are leading indicators of future earnings. By beating expectations on these numbers, Wells Fargo would have a higher stock price than if they didn’t, and everyone who was paid in stock options in the company (a.k.a. every executive, likely) would receive more money for those options.
Carrie Tolstedt is being treated well because she did what she was supposed to. The 185 million dollar settlement is worth more than the accounts were to Wells Fargo, BUT the executives running Wells Fargo got a lot of personal money out of it and were not punished. Some of them, those Tolstedt reported to, may well have “earned” promotions from it as well, based on meeting or exceeding sales goals.
Everyone who makes decisions at Wells Fargo, in other words, benefited from the scam. The only people punished were junior employees who, while complicit, I guarantee were doing what management wanted them to do, and who would have been fired before this if they hadn’t been willing to play along.
Financial fraud of this sort always follows this pattern: Executives get rich doing it, the company takes a hit–but not the executives–and the executives have no reason not to go on to their next fraud or even go back to what they were doing (sub-prime loans are a thing again, and we’ll find out many of them were based on fraud, again.)
The only way this sort of thing will stop is if we start charging senior management, the CEO, and their board members with crimes. Use RICO statutes to say it was organized crime (it was), and take their money. Assign them public defenders. Even if they don’t go to jail, they will lose a decade of their life defending the case, and it will serve as a genuine deterrent to other financial fraudsters. (If they do go to jail, it should be to nasty maximum security penitentiaries.)
Fines for the company are NOT a disincentive. In this case, the fine is more than the company made, while in other cases it has been much less, but it doesn’t matter: The executives got their money and they make the decisions. The company is a fictional person, not a real person; it does not make decisions.
This sort of thing will continue until we get serious about stopping it. People will probably only get serious when a financial and economic crisis occurs which is so severe that most everyone in power is swept out of power and not before. Criminal charges did not occur over the last financial crisis because no one in power, most especially Obama and his Justice department, did not want to insist upon them.
Bill Clinton had a hundred million not long after retiring as President. He pushed through massive financial deregulation. A few years after being President, Obama will be worth even more than Clinton. Financial executives may bitch about Frank-Dodd, but they know Obama saved them from long terms in prison and did not get in the way, and indeed abetted, trillions of dollars being funneled to save their companies and keep the game, and the frauds, going.
Those who “win” the capitalist game always immediately try to buy out the system, meaning buy the politicians and regulators, so that they can never truly lose their position of power and wealth.
And that, in the end, is what the Wells Fargo “scandal” (a good name, because scandals usually have no real consequences for anyone who matters) is about.
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