Wells Fargo Failure Shows Dodd-Frank’s Failure
Dec. 14, 2016 (EIRNS)—Wells Fargo Bank’s third failure to produce a credible "living will" by which it could fail without a large bailout, shows as well, the failure of the Dodd-Frank Act to end too-big-to-fail Wall Street banking.
Wells Fargo on Dec. 13 had its "living will" rejected by both the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) for the third time. The regulators finally accepted the living wills of four other banks which had failed twice—JPMorgan Chase, Bank of America, Bank of New York Mellon, and State Street Bank. This process, of trying to claim a design by which these Wall Street banks could fail without a mountainous taxpayer bailout, has been going on for four years under the Dodd-Frank Act.
So then, what are the consequences under Dodd-Frank for Wells Fargo, which has been found three times to be unresolvable without a bailout? Wells Fargo gets another shot at repairing its accounting problems, by March 2017, according to the Federal Reserve. If it fails to do so a fourth time, by March 31, the total assets in its broker-dealer and non-bank units will be capped.
Imagine the firm rigor, the cruel regulatory grip of such a measure: speculative securities/derivatives assets of this commercial bank, over a trillion dollars now, would be capped!
Wells Fargo would then have two more years to convince the agencies it is "on the right track." And only then, in case of a fifth failure, over a total period of six years, could the regulators "step in and force it to break off pieces of its business," as Bloomberg reported today.
Under a restored Glass-Steagall Act, Wells Fargo would be being broken up now; it has been found committing precisely the crimes committed by National City Bank in the 1920s—looting depositors with purported "securities"—whose exposure in 1933 led to the original passage of Glass-Steagall.