Tweets Reveal the Wall Street Accountability Gap

September 20th 2016

Kyle Jaeger

Wells Fargo executives made a lot of money off a years-long fraud scheme that involved creating fake accounts for customers and raking in money from fees.

But in terms of accountability — aside from paying $185 million in state and federal fines — the bank placed the burden on the company's low-level employees — about 5,300 of whom it fired as a consequence of their involvement.

Wells Fargo

That accountability gap fueled a fiery tirade against Wells Fargo chairman and CEO John Stumpf by Sen. Elizabeth Warren, D-Mass., and other members of the Senate Banking Committee on Tuesday.

"If one of your tellers took a handful of $20 bills out of the cash drawer, they'd probably be looking at criminal charges for theft," Warren said. "They could end up in prison. But you squeezed your employees to the breaking point so they would cheat customers, and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket. "

Stumpf, for his part, pushed back on Warren's characterization of Wells Fargo activity as a scam but admitted that he hadn't used any of his own money to pay back customers affected by the company's activities. He also acknowledged that no high-level Wells Fargo executives were terminated.

Warren and Sen. Bernie Sanders, D-Vt., condemned Wells Fargo on Twitter as another example of how Wall Street executives evade repercussions while Main Street Americans are punished for low-level crimes.

How did we get here?

Frustration over Wall Street's lack of accountability reached a climax in the aftermath of the 2008 financial crisis, when it was revealed that risky mortgage lending and borrowing on the part of bankers and investors had created market volatility that ultimately ended in an economic crash. Sanders made the issue a cornerstone of his presidential campaign, and Warren has routinely criticized the government for not doing enough to penalize bad actors in the finance industry.

While federal investigators identified the problem, pinned blame on certain financial institutions, and helped shape measures meant to prevent a repeat of the 2008 crisis, Wall Street executives, by and large, avoided jail time. Instead, they were able get away with paying out large settlements — much to the dismay of financial reform advocates. As The Atlantic's William Cohan wrote, "extracting large settlements paid with shareholders’ money is not the same as bringing alleged wrongdoers to justice."

Here's what happened at Wells Fargo.

Wells Fargo

From 2011 to 2016, Wells Fargo employees reportedly opened more than 2 million deposit and credit-card accounts for customers without their knowledge, according to the Consumer Financial Protection Bureau. CFPB Director Richard Cordray said the employees did so in order to to "hit sales targets and receive bonuses."

In response, the banking giant agreed to pay out $185 million in fines and fired about 5,300 employees involved in the scheme. But while the company's CEO repeatedly said that he was accountable, he admitted on Tuesday that no executives were fired for their lack of oversight, and he personally would not be taking a financial hit as a result of the investigation.

Therein lies to frustration that Warren and Sanders expressed on Twitter.

As the senators note, it's reasonable to assume that if an employee at Wells Fargo was found guilty of petty theft or a marijuana-related offense, they would lose their jobs and possibly face criminal penalties. Federal banking regulations enacted in 2011 "forbid the employment of anyone convicted of a crime involving dishonesty, breach of trust, or money laundering," including "expunged crimes and certain minor offenses," USA Today reported.

A lawsuit filed by seven former Wells Fargo employees last year highlighted the disparity. Around the same time that the company reached a $175 million settlement with the U.S. Department of Justice over its role in the financial crisis, seven Black employees were terminated "after background checks found years-old convictions for crimes such as marijuana possession, illegally receiving welfare benefits, and misdemeanor theft," The Des Moines Register reported. The former employees alleged that Wells Fargo violated the 1964 Civil Rights Act by disproportionately enforcing background check policies for Black employees. (The company denies this claim.)

That's the accountability gap that Warren and Sanders are railing against.

Example after example goes to show that getting caught with some marijuana, or even having a petty theft charge on your criminal record, can cost employees their livelihood and haunt them for their lives. But if you're a Wall Street executive, giving up a small fraction of your millions seems to be punishment enough.

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