by Simon Black
Is it Friday again? Must be time for another banking scandal!
Seriously– these banking scandals are happening with such regularity and predictability it would be almost comical. . . were it not for the millions of people who have had their lives turned upside down.
The latest transgression involves, once again, our old friends at Wells Fargo.
Bear in mind that the ink isn’t even dry yet on the $1 billion check that Wells Fargo wrote last week as a penalty to settle its previous scandal, where they defrauded 570,000 clients in a car insurance scam.
By the bank’s own estimates, as many as 20,000 of those clients may have had their vehicles repossessed as a result of their inability to pay for the car insurance that Wells Fargo illegally stuck them with.
And speaking of vehicle repossession, in November of last year Wells Fargo came under fire for illegally repossessing vehicles that were owned by members of the military.
In October, Wells Fargo took heat from federal regulators after it was found that the bank had deliberately recommended investment products that were “highly likely to lose value. . .”
Early that month, the bank admitted that it had ‘erroneously’ charged late fees to more than 100,000 borrowers, even though the delays were the bank’s fault.
In 2016, a number of employees at various Wells Fargo branches in California were found to have sold sensitive customer information, including Social Security Numbers, to a ring of identity thieves.
And of course, in late 2016 and all throughout 2017, Wells Fargo’s notorious ‘fake account’ scandal was found to have affected millions of customers.
There’s a word for all of this: fraud.
And if you or I had committed any of these acts by even the slightest, we’d be wearing DayGlo Orange jumpsuits in a federal penitentiary.
But a grand total of ZERO executives from Wells Fargo have been sent to prison or faced any charges whatsoever.
In fact, the executive who was found to be the most culpable in the fake account scandal scored a whopping $67 million severance package when she left the company in late 2016.
And the new CEO (who took over after the fake account scandal in 2016) has been rewarded with a 35% pay increase even though both the stock price and the bank’s profits have languished.
Scandal #867,241 just hit the news yesterday afternoon: Wells Fargo is now being investigated by the United States Department of Labor.
This time the bank is accused of deliberately pushing customers into more expensive, higher-fee retirement accounts– accounts that are bad for the customers, but more lucrative for the bank.
It just never stops with these people.
And it’s not just Wells Fargo.
Nearly EVERY major bank in the world, from JP Morgan to Barclays, Citigroup, UBS, Bank of America, etc. has been found at some point or another over the last several years of grossly violating the public’s trust.
Yet we consumers still willingly let these criminals hold our money.
Month after month we deposit our paychecks and hold our savings in an institution that rarely misses an opportunity to prove that they cannot be trusted.
They’ve been caught manipulating asset prices, colluding to fix interest rates and exchange rates, and engaging in irresponsible lending practices that put our savings at risk for their sole benefit.
They treat customers with such contempt, scrutinizing even the most innocuous transactions as if WE are the criminals.
And when they screw it all up, gambling away our hard-earned savings on some idiotic investment fad, they go to the taxpayer with hat-in-hand claiming that they’re too important to go out of business… and then shower themselves with record bonuses.
Our reward for putting up with all of this abuse? Well, according to BankRate.com, interest rates at the biggest retail banks (Wells, Bank of America, Chase, etc.) average just 0.01%.
This banking system so pathetic.
Yet we’ve all been institutionalized, practically since birth, to believe that we HAVE to use it… that there’s no alternative.
And that used to be true several decades ago.
But in 2018, there are countless alternatives.
Literally every single function of a bank can be performed better, faster, cheaper OUTSIDE of the banking system.
Rather than holding your savings in a bank, you can literally earn more than 150x as much interest with extremely short-term Treasury Bills. Or if you want, you can even hold physical cash.
For loans, there are dozens of websites where you can crowdfund a home loan or small business loan.
And for retirement accounts– the latest Wells Fargo transgression– you DEFINITELY don’t need a bank.
Retirement accounts are one of the biggest areas where banks and major financial institutions routinely bilk their customers out of useless and unnecessary fees.
Even if they’re not charging you a fee outright, they’re diverting your retirement savings into some fund that they control and taking a percentage or two away from what you should be earning.
And over a period of several decades (we’re talking about retirement after all), a single percent difference in your average investment return because of bank fees can add up to hundreds of thousands of dollars.
So it’s a pretty big deal.
The reality is there are SO many ways to properly structure your retirement in better, more robust, less expensive ways.
For example– if you qualify, a solo 401(k) is an extraordinary retirement structure that’s cheap to administer and incredibly flexible.
With a solo 401(k), you can contribute tens of thousand of dollars each year to your retirement, as well as invest in a variety of assets that are not available to traditional plans (like real estate and private equity).
And you can even borrow money directly from your retirement plan under certain circumstances.
Self-directed IRAs are also great structures with similar benefits, though they have slightly higher costs and less flexibility.
Bottom line, there are plenty of options on the table to distance yourself from this abuse.