banking, cross-selling, Dr. William K. Black, incentive systems, KPFA, Letters and Politics, Messina, Pacifica Radio Network, Philip Maldari, Philip Maldari (SaveKPFA), Senator Bernie Sanders, transcript, UMKC, University of Missouri-Kansas City, Wells Fargo
LUMPENPROLETARIAT—On today’s edition of free speech radio’s Letters and Politics, substitute host Philip Maldari wisely turned to Dr. William K. Black, of the heterodox University of Missouri-Kansas City, to help us unpack some of the technical details of the most recent white collar crimes perpetrated by Wells Fargo bosses. 
And Professor Black makes learning about this, sometimes, complex stuff interesting. You can almost hear how baffled sub host Philip Maldari was during this interview. (Your author was, too, like most listeners, perhaps.)  Many questions are raised when we, laypersons, begin to explore the world of finance and banking. Sometimes, we must admit when we don’t understand something and ask further questions. Chances are, others need further explanation, too. This discussion helps us do so, to help inform our local communities of important information about the pros and cons of various banks and the services, which they sell.  Listen (and/or download) here. 
[Working draft transcript of actual radio broadcast by Messina for Lumpenproletariat and Letters and Politcs]
LETTERS AND POLITICS—[3 OCT 2016] “This is Pacifica Radio‘s Letters and Politics. Philip Maldari sitting in for Mitch Jeserich. On today’s programme, we’re going to talk with William Black, professor of economics and law at the University of Missouri, former president of the Fraud Prevention Institute about Wells Fargo Bank and the fraud it perpetrated on its customers. [theme music]
“But first the news.”
[News Headlines (read by Aileen Alfandary) omitted by scribe] (c. 6:12)
PHILIP MALDARI: “I’m Philip Maldari sitting in for Mitch Jeserich, who’s got a two-week vacation. Many thanks to Mitch for his good works. And he deserves a vacation.
“We’re gonna be talking about Wells Fargo today. Wells Fargo is one of the five biggest banks in the United States, possibly the world. I’ll ask my guest about that. And it has gained headlines in the past few weeks, as a result of the disclosure that it had perpetrated a fraud on hundreds of thousands of customers by signing them up for accounts, that they had no interest in and no idea that they were getting.
“To try to understand exactly what this fraud is all about and what the repercussions will be, we’re joined by William Black. William is professor of economics at the University of Missouri. He’s the former president of the Fraud Prevention Institute. William Black, welcome to Letters and Politics.” (c. 7:11)
DR. WILLIAM K. BLACK: “Thank you.”
PHILIP MALDARI: “Now, I sort of laid out that they had perpetrated this fraud over several years. The L.A. Times actually disclosed this story going back, all the way, to 2013. And, somehow, it was a sleeper. It only, really, became a huge controversy in the past few months. Would you explain exactly what they were up to?” (c. 7:35)
DR. WILLIAM K. BLACK: “[chuckles] Well, many things. But, so, it falls in two major categories. One, that you’ve discussed and a far larger one. The one, that you’ve discussed, is the ones that are actual felonies. So, these are creating two million accounts, about a million and a half, deposit-type accounts and a half million credit card accounts, where the customer had never signed on, had never agreed to create these accounts. So, these were done secretly.
“What was going on in both of the cases, I’m going to discuss, fraud and non-fraud, was that there were impossible-to-meet sales quotas to cross-sell multiple products. And these were extremely successful in producing record profits for Wells Fargo Bank, which, if you measure it by stock market capitalisation, is the largest bank in the world, by the way.” 
PHILIP MALDARI: “Really?”
DR. WILLIAM K. BLACK: “Um—”
PHILIP MALDARI: “So, let me just ask you again. Why would your stock go up if your cross-selling was successful at giving the appearance that you had many more accounts?” (c. 8:55)
DR. WILLIAM K. BLACK: “It wasn’t the appearance. It was the reality. So, I haven’t described the second part. The cross-selling, in addition to the two million frauds, produced tens of millions of successful sales, that should never have occurred. And, collectively, it produced something like 70—well, actually, more like 420 million, total, types of accounts, which Wells Fargo calls solutions. [chuckles]” (c. 9:28)
PHILIP MALDARI: “Now, wait a second, four hundred and some million accounts, that the customers were unaware of? Were the cus—”
DR. WILLIAM K. BLACK: “No, no, no, that they were aware of, but you see you’ve just talked about the fraud. But the far bigger scandal, and the one that emulates the huge scandal in the United Kingdom, is selling people product, that they shouldn’t buy because it’s very bad for them. And that’s where the big profits were. And that’s not measured at two million. That would be measured in the tens of millions. But no one has investigated that.
“That still hasn’t become a scandal the way it has in the United Kingdom. So, you say, correctly, that it’s taken three years to get to the point where the two million sales have become a scandal. We’ll have to wait and see whether a whole business system designed to sell people product, that was bad for them, that they should have never bought, whether that becomes a scandal.” (c. 10:32)
PHILIP MALDARI: “So, how, as a customer, would I experience the bad nature of these accounts? Would I be getting bills in the mail? What would be happening?”
DR. WILLIAM K. BLACK: “Again, it depends on, which accounts. For the two million accounts, yes, you would often be getting a bill in the mail. But, for many of these, the employee set up the notification, so that it would go to the employee, instead of you. And this means that people, in addition to having to pay fees, in a number of cases, would have had their credit score harmed because you wouldn’t have paid fees, that you didn’t even know existed.
“And, so, that is a particular bad thing about the two million [fraudulent accounts]. You would have known about the other accounts. You just wouldn’t have known that you were being scalped by someone, who was—the entire paramount business model. This is not a little thing. This cross-selling is the defining element of Wells Fargo. They do it more than twice as much as any other major bank in America. They are exceptionally successful and profitable because they push bad product on customers routinely.
“And here’s how it works. This is not a compensation system, in which the little guys get big bonuses for doing bad things [i.e., in which low-level workers are incentivised with bonus pay], the way it was back during the [Global Financial] Crisis for loan brokers and loan officers and such.  This is fear of losing your job.”
PHILIP MALDARI: ” [delays, or holds his thought] ”
DR. WILLIAM K. BLACK: “In a number of branches, it has come out that four times a day you would be called by your supervisor to explain whether you had met your sales quote for cross-selling in the last two hours of your operation. And, if you didn’t, you would ultimately be fired.
“Now, these are people, who are making, ballpark, $12 dollars an hour, roughly $35,000 dollars a year in entry. We know that people, who make $40,000 dollars a year, two-thirds of them, have savings of $400 dollars or less.
“So, you would, not only be fired, you would be unemployed. You’d be fired for cause. And it would be exceptionally difficult to go back into the banking industry and get a job.
“So, this was a system of terrorising the largest sales staff of bankers in America. They have, ballpark, 200,000 employees.”
PHILIP MALDARI: “And 5,300 of them were fired. Who were the people, that were fired?”
DR. WILLIAM K. BLACK: ” [unintelligible; Dr. Black started speaking just as Maldari asked the following question.]
PHILIP MALDARI: “Who were the people, that were fired?”
DR. WILLIAM K. BLACK: “Yeah. That’s an excellent question. Now, first, all of these numbers—the two million. This is not the full extent. This is they only look back a few years. And they found this two million. But this incentive system goes back at least 15 years.”
PHILIP MALDARI: “But—”
DR. WILLIAM K. BLACK: “And there hasn’t been a real investigation. It’s critical to understand. We haven’t—” (c. 13:56)
PHILIP MALDARI: “Wells Fargo has only admitted going back to ’07. Right? They haven’t agreed to go back 15 years.”
DR. WILLIAM K. BLACK: “Correct. And, on top of that, they didn’t actually go back. Worse. The regulators didn’t go back. What, instead [happened] is they, the Wells Fargo management was allowed to do the usual, useless thing, which is: You hire an accounting firm. And guess what the accounting firms always find. Yes, there were these terrible problems. But, of course, nobody in senior management is in the least bit responsible for all of this.
“And, so, the deal, which by the way, they paid less than $100-per-felony fine.”
PHILIP MALDARI: ” [delays, or holds his thought] ”
DR. WILLIAM K. BLACK: “How many folks would be willing to trade a hundred dollars to get out of a felony prosecution?”
PHILIP MALDARI: “I believe the fine was something like $185 million.  And, to most people, that sounds like real money. But, to Wells Fargo, that is just the cost of doing business?” (c. 15:01)
DR. WILLIAM K. BLACK: “Well, worse. As I say, it’s $100 per felony. Who wouldn’t pay [laughs] a hundred dollars to escape a felony prosecution. Right? No accountability, no admissions, no real investigation, and the fake investigation didn’t go very far back. And, again, they’ve ignored the larger part, which is the sale of product, typically, to people who can’t afford it, a very, very bad product, that they shouldn’t have. As I—”
PHILIP MALDARI: “Give me an example of a bad product. I mean I’ve got a checking account. And I have a credit card. So, I don’t really have any other accounts than that. So, what other accounts would there be?”
DR. WILLIAM K. BLACK: “Well, they would sign you up for an additional credit card when you were already maxed out on your first two. Is that a kindness? That’s a catastrophe for the person. They would sign you up for overdraft protection.  That may sound nice. But, if you don’t have enough money to pay, it’s simply another fee.
“And they have many other products. They have, you know, well over 15 products, that they try to sell you in these kinds of things.” (c. 16:22)
[SNIP] (c. 56:37)
PHILIP MALDARI: “One last caller, Phil in San Carlos. Phil, you’re on the air.”
MESSINA: “Yes, I am. How are you guys doing today? [confirming I was on the air, and attempting to incorporate a little back and forth, instead of just, like, ‘saying your piece’ or whatever and being treated like an insect by the radio thought police]”
PHILIP MALDARI: “We’re doing fine.”
MESSINA: “Beautiful. [proceeding to express myself, after having confirmed I was on the air] I missed the last 20 minutes or so of the interview. So, I apologise if you guys, uh, got off topic on an important topic [already and my contribution here is redundant]. But I just want to bring attention to the fact that Professor Bill Black is one of the foremost experts on fraud and criminology. So, it’s excellent that you guys have this conversation.
“But, as a graduate of UMKC‘s Department of Economics, I hope that you will bring him on again to discuss modern monetary theory, modern money theory—”
DR. WILLIAM K. BLACK: ” [laughs] ”
MESSINA: “—and the job guarantee programme and, also, the fact that Dr. Kelton, Professor Black’s colleague, was the chief economist, alongside Professor Black, of Bernie Sanders. And, for some reason, Bernie Sanders didn’t tell the American people about the job guarantee programme—”
PHILIP MALDARI: “Okay.”
MESSINA: “—about monetary sovereignty. I know this is off topic—”
PHILIP MALDARI: “Sure.”
MESSINA: “—but I think your audience finds it just as compelling as your preceding conversation.”
PHILIP MALDARI: “Okay, Phil. We, we’ve got the message. William, do you wanna comment on that?”
DR. WILLIAM K. BLACK: “Yeah. So, he’s absolutely right. This is absolutely critical to the lives of all of your listeners. And it would be a great future topic. And I did—this is not a plant—but I did live in San Carlos for 20 years. [laughs]”
PHILIP MALDARI: “Well, let me just ask you—one, one question’s just gotta go to Bank of America. [Maldari dodged the issue…] 
[SNIP] (c. 59:59)
Learn more at LETTERS AND POLITICS.
[This transcript will be expanded as time constraints, and/or demand or resources, allow.]
 For background on the current Wells Fargo fraud scandal, see:
- “Wells Fargo CEO to Return $41 Million in Compensation Amid Scandal”, Democracy Now!, 28 SEP 2016.
- “Sen. Warren Calls for Wells Fargo CEO to Resign & Face Investigation Amid Growing Scandal”, Democracy Now!, 23 SEP 2016.
- “Elizabeth Warren to Wells Fargo CEO: You Should Be Criminally Investigate”, Democracy Now!, 21 SEP 2016.
- “Wells Fargo Fined $185 Million for Creating Phony Accounts and Credit Cards”, Democracy Now!, 9 SEP 2016.
 Your author was, like substitute host Philip Maldari (a SaveKPFA partisan). And Maldari is one of the sharpest intellectuals at KPFA, although I disagree with his SaveKPFA politics. Maldari is usually very sharp on most issues, but this current Wells Fargo fraud requires a little deeper digging, perhaps a series of broadcasts.
The complexity of white collar crime can be daunting, but the more we know about the ins and outs of banks and the pros and cons of the services, which they peddle, the better off families and communities will be, and the more likely they will be to demand better regulation of bankers and financial institutions, while still making sure that individuals and working class families have access to banking and financial resources, which can help them improve their lives.
 Speaking of not understanding something, your author has long wondered why our good friends at KPFA, do not understand the monetary system, or the modern money system (MMT). Bonnie Faulkner featured MMT and the job guarantee programme on Guns and Butter back in 2012. But it seems the important information doesn’t cross-pollinate, or cross-inform, the other public affairs broadcasters at KPFA. So, although Guns and Butter knows about MMT and the benefits to the American working class, other shows like Letters and Politics and UpFront and Philip Maldari’s Sunday Show. You would think the revolutionary policy proposals from heterodox economists like Dr. William K. Black and Dr. Stephanie Kelton would have been championed by KPFA. But, instead, we’ve had a virtual whiteout of this crucial understanding of our monetary system.
So, at the very end of this broadcast, your author managed to get on the air to bring up questions around modern money theory, the job guarantee programme, and Bernie Sanders’ occulted chief economists.
Why did Bernie Sanders not allow his experts in law and economics, Dr. William K. Black and Dr. Stephanie Kelton, to tell the American people about key policy proposals, which they have long championed, such as the job guarantee program, which could end involuntary unemployment, as we know it, reduce poverty, crime, and other social ills?
 Terrestrial radio transmission, 94.1 FM (KPFA, Berkeley, CA) with online simulcast and digital archiving: Letters and Politics, this one-hour broadcast hosted by substitute host Philip Maldari, Monday, 3 OCT 2016, 10:00 PDT.
 To become the largest bank in the world (or one of the largest), Wells Fargo has had to diversify its investments, for example, as with profiting from prisons, profiting from imprisoning.
 For more on compensation system incentives toward fraud, see:
- “Lender’s Lies about Liar’s Loans and ‘Rigorous Underwriting'” by William K. Black, New Economic Perspectives, 2 FEB 2016.
- “Hundreds of Wall Street Execs Went to Prison During the Last Fraud-Fueled Bank Crisis” [an interview with William K. Black] by Joshua Holland, Bill Moyers, 17 SEP 2013.
- “‘Pervasive’ Fraud by Our ‘Most Reputable’ Banks” by William K. Black, Huffington Post, 28 FEB 2013 (updated 30 APR 2013).
- Prepared Testimony of William K. Black, Associate Professor of Economics and Law, University of Missouri-Kansas City, Before a Hearing of the Senate Committee on the Judiciary Entitled “Examining Lending Discrimination Practices and Foreclosure Abuses”, 7 MAR 2012.
- “Lenders Put the Lies in Liar’s Loans and Bear the Principal Moral Culpability” by William K. Black, New Economic Perspectives, 2 OCT 2011.
- “Lenders Put the Lies in Liar’s Loans, Part 2” by William K. Black, Huffington Post, 10 NOV 2010 (updated 25 MAY 2011).
- “Lenders Put the Lies in Liar’s Loans” by Wiliam K. Black, Huffington Post, 8 NOV 2010 (updated 25 MAY 2011).
 Anecdotal point of information: Your author was actually a long-time Wells Fargo customer and, being a working class family man trying to make ends meet, living paycheck to paycheck, constantly had to battle with Wells Fargo about overdraft protection charges. One attempts to keep track of one’s transactions. But weekend transactions were posted to one’s account inconsistently, among other inconsistencies, which made it difficult to plan one’s daily cost of living expenditures. At one point, attempts to opt out of overdraft protection was made impossible. It was clear Wells Fargo was playing games with its customers, who they could see struggled to get by from paycheck to paycheck. So, they set up many traps, which gouge Wells Fargo customers. For example, on at least one occasion, thinking all transactions had posted and a certain balance was available, separate weekend purchases of a bottle of water, some gas, and food, resulted in three separate $35 overdraft charges. Ultimately, your author had to quit Wells Fargo.
For an excellent documentary film on these types of abusive practices, and their toll on working class families, see: Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders (2006) directed by James Scurlock. Maxed Out is a must-see film, which features, among other experts, a then-little-known Elizabeth Warren.
 Essentially, Philip Maldari, as a SaveKPFA partisan, as a Wellstone Democratic Renewal Club type of Democrat, he avoids certain issues, to the left of the Democratic Party.
Since Dr. Black did agree with your author, Messina, and did admit that the job guarantee programme is critical to the lives of free speech radio listeners, why, do we suppose, Philip Maldari didn’t ask Dr. Black anything about it? Why would Maldari not express even the slightest hint of curiosity in this very important, but under-reported, information? Is it obfuscation? Is it intellectual laziness?
(My audio was cut off at the point when Maldari takes over. But I was still on the line, until the end of the broadcast. Usually, the producer or the host may get on the line to thank people for calling in or to ask further about anything a caller may have commented on. The last time I called in to KPFA, Deana(sp?) Martinez got to me after the UpFront broadcast, and took a message from me to delivery to Car Brooks about MMT, the job guarantee programme, Dr. Kelton, and the Bernie Sanders campaign. But not this time. This time they just hung up.
(It seems they didn’t want to know about MMT or the job guarantee programme or any of the heterodox policy proposals from the University of Missouri-Kansas City or other heterodox institutions. They just want to confine intellectuals to strict parameters, which do not upset the two-party system, or the impulse to corral progressives toward the Democratic Party and away from political alternatives. I have respect for Philip Maldari as a longtime contributor to KPFA. I have learned a lot from his broadcasts, like others on KPFA. But I must question his, and his faction’s, resistance to certain controversial topics, issues, and interview subjects. KPFA seriously needs to support heterodox economists, such as Dr. William K. Black, Dr. Stephanie Kelton, Dr. L.R. Wray, Dr. Michael Hudson, and others from heterodox institutions like the University of Missouri-Kansas City. It is in keeping with the Pacifica Mission Statement.)
[3 OCT 2016]
[Last modified 10:35 PDT 4 OCT 2016]