DOJ Investigating Possible Abuses In Wells Fargo’s Wealth-Management Unit

Some weeks, it seems like barely a day goes by without learning about some new nefarious activity perpetrated by Wells Fargo, or their repercussions.

Case in point, yesterday, Reuters reported that the Office of the Comptroller of the Currency was preparing to sanction the bank for charging customers for auto insurance they didn’t really need. The bank has blamed a third party for wrongly layering the insurance policies on its auto borrowers.

Wells Fargo’s auto insurance woes stem from a policy drivers must carry when they borrow money to buy a new car. It pays out to the bank when a car is stolen or destroyed.

Wells Fargo required drivers to carry their own policies, but had a right to “force-place” a policy on borrowers who let insurance lapse. Insurers working for Wells Fargo pushed policies onto 570,000 customers who already had coverage and then delivered profits for the bank.

Wells is investigating auto insurance abuses back to 2005 and estimates it will need to refund $145 million to borrowers, and adjust account balances by another $37 million, according to securities filings. That is up from its initial cost estimate of $80 million.

Then on Friday, the Wall Street Journal reported that the Department of Justice is investigating possible abuses in the bank’s wealth-management business. The abuses reportedly took place in the Phoenix area, which was also an epicenter of the bank’s cross-selling scandal. After whistleblowers reportedly informed the US government that there might be something amiss in Phoenix, regulators instructed Wells to launch an internal probe. As part of the probe, investigators are interviewing employees from the bank’s Phoenix Wealth Management office. However, the exact nature of the suspected wrongdoing is unclear.

The Justice Department and Securities and Exchange Commission are now probing the bank’s wealth-management business, these people said. Agents from the Federal Bureau of Investigation have been interviewing some wealth- management employees in the Phoenix area as recently as this week, some of these people said.

Wells Fargo declined to comment. Officials at the Justice Department and SEC also declined to comment.

Several U.S. Attorney’s offices, as well as a bevy of federal and state regulators, have been investigating Wells Fargo since fall 2016 when the bank disclosed widespread sales-practices problems. Those included bank employees opening as many as 3.5 million accounts without customers’ knowledge or authorization. Wells Fargo has said it is cooperating with the investigations.

Arizona was one epicenter of Wells Fargo’s retail-banking sales practices problems. Some employees in that region created fake email addresses using customers’ phone numbers to open banking accounts or opened two accounts for each customer, a practice known as a “double pack.” Some top executives from that region have since been terminated by the bank.

At some point, the DOJ launched its own investigation, separate from the internal probe.

Despite firing executives, including former CEO John Stumpf, and offering to reimburse customers, lawmakers like Senator Elizabeth Warren have criticized the bank and demanded that more changes must be made.

Wells

During a recent hearing, Warren questioned the bank’s decision to send out “opt-in” letters to people affected by its abuses, and accused the bank of not doing enough to make sure customers are fairly compensated.

* * *

Even though Warren has labeled him “incompetent” and suggested that he should step aside as WFC’s CEO, the Wells Fargo’s board of directors awarded CEO Tim Sloan a 36% raise. Sloan’s total compensation climbed to $17.4 million, compared with almost $13 million in 2016, thanks to increased stock awards, per CNNMoney.

The board cited the bank’s “solid financial performance,” including low credit losses, strong capital and a slight increase in annual profits to $22.2 billion. The board also noted Sloan’s “continued leadership” on the “top priority of rebuilding trust and building a better bank.” The board believes that paying executives in stock is preferable to cash because it aligns the executive’s incentives with the long-term goals of the company.

Last month, the Federal Reserve announced what at first seemed like a shocking crackdown by imposing sanctions that would prevent the bank from growing its assets beyond their end-2017 levels. Though analysts were quick to point out that the sanctions lacked teeth.

For now the price is falling…

Of course, the big question is What Will Warren Buffett Do (WWWBD)?

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Public Sector Unions Brace for Janus Ruling: New at Reason

California’s public-sector unions are so accustomed to getting their way in the state Capitol that it’s almost entertaining watching them respond to a coming U.S. Supreme Court decision that is likely to slash their political and economic power.

In the Janus v. American Federation of State, County and Municipal Employees case, the court is deciding whether public employees in non-right-to-work states such as California may opt out of paying dues even for collective-bargaining purposes. Since 1977, workers have been allowed to withhold dues for a union’s direct political activities, but not for anything related to negotiating their contracts. The case could spell the end to mandatory unionization in the public sector.

Anticipating a ruling that could go against them, unions are pushing a variety of bills designed to mute that decision. But there’s surprisingly little they can actually accomplish, writes Steven Greenhut.

View this article.

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Paulson Fires Heads Of Equity And Credit Trading As Slump Deepens

Having watched over his AUM plunge 70% in two years, to just $9 billion, John Paulson has axed several key employees, according to NYPost.

After reaching a peak of $38 billion in AUM in 2011, of which roughly 50% was contributed by outside clients, Paulson now runs about $9 billion, 80% of which is his own money. And it appears this slump has finally forced him to make across the board cuts in staff, including several very senior personnel (who have been with the fund for more than 10 years).

Among the senior level hedgies being shown the door were:

  • Keith Hannan, head of trading;

  • Brad Rosenberg, head credit trader; and

  • partners Victor Flores and Allen Puwalski.

Of course, as we noted  previously, just last summer Paulson was also forced to shutdown a $500 million long-short equity fund focused on healthcare after a series of bad bets resulted in massive losses. 

All of this obviously bodes ill for Paulson’s fund, unless that is he is making room in his costs to be able to afford a new hire… someone who just came on the market – Gary Cohn?

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“I’m In”: Trump And Kelly Reach A Truce

When White House Press Secretary Sarah Huckabee Sanders told reporters on Thursday that Kelly “is not going anywhere,” it appears she meant it. Because less than a day after CBS speculated that Kelly could be the next senior White House staffer to be pushed out, the Wall Street Journal reported that President Donald Trump and Kelly have reached an (uneasy) truce.

Kelly

While Kelly’s relationship with the president had deteriorated markedly by mid-week, the two men had a “productive” meeting on Thursday, and apparently ended it with an understanding that Kelly would remain on board – for now, at least.

Jarred by the treatment of former Secretary of State Rex Tillerson, whom the president fired by tweet on Tuesday morning, Mr. Kelly suggested to colleagues that he may be the next to be pushed out of the White House. Mr. Kelly’s cryptic comments left several White House staffers with the impression that Mr. Kelly would force the issue with the president, and that they should start looking for new jobs, too.

The internal drama heightened when Mr. Kelly flew with the president to California on Tuesday, but returned alone and was working in his West Wing office on Wednesday morning. Mr. Kelly’s allies in the White House, however, said the chief of staff had always planned on flying the 4,500-mile round-trip between Washington and San Diego in less than a day.

This dance culminated on Thursday when “Trump and Kelly had a productive meeting that left both men reassured.” Trump told advisers afterward that Kelly was “100% safe.” Kelly, according to the WSJ, told his associates that, at least for the moment, he and the president had patched things up. “I’m in,” Mr. Kelly told staff.

But how long the peace lasts is anyone’s guess:

The back-and-forth between Mr. Trump and the chief of staff suggested that the easing of tensions may be more of a temporary detente than a ironclad peace agreement. The president and Mr. Kelly are well known around the White House for engaging in tense arguments, and Mr. Trump has made repeated public comments that manage to both underscore his satisfaction with Mr. Kelly, while also raising doubts about how long the two will continue to work together.

“He likes what you do better than what he does,” Mr. Trump told a group of Marines in San Diego about Mr. Kelly, a former four-star general in the Marines. “But he’s doing a great job. He misses you.”

The exchange between the retired four-star general and the prime-time TV star-turned president was just one storyline playing out in a particularly tumultuous week. The president has often said he encourages conflict among his staff, and has spoken favorably about the internal skirmishing. “They’re fighting over who loves me the most,” he said about his staff last summer.

WSJ also reaffirmed that Trump told his allies that he’s planning on firing McMaster  despite vehement denial from the White House. The only question is timing: “one official saying it could happen “imminently” and another saying it could be weeks, even months.”

Gen. McMaster had told associates earlier in the week that he believed he was safe, and that the president urged him to remain in the job until after the midterm elections in November.

Gen. McMaster attended a White House event Thursday evening honoring the Irish prime minister and joked with reporters there, including responding to one question that appeared to touch on his future by asking: “Have you heard anything?”

All this happens as Trump warned a group of reporters that he’s preparing to clean house, and that there are more high-profile firings to come (in an administration that has lost one senior figure, on average, every 17 days).

Meanwhile, in what may be the day’s biggest news – if confirmed – Fox Business reporter Charlie Gasparino tweeted that the firings are mostly a smokescreen for Trump to safely get rid of his true target: Attorney General Jeff Sessions.

 

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WTI Suddenly Spikes Above $62

WTI Crude futures just suddenly spiked above $62 (with no obvious news catalyst)…

Bloomberg points to today’s gains (pre-spike) as being driven by investors weighing surging U.S. crude production against a warning from the International Energy Agency of an impending shortfall in global supplies.

“The market is probably less concerned about the rise in U.S. oil production because the global economy is doing quite well, so there is demand for the additional oil,” said Jens Pedersen, senior analyst at Danske Bank A/S.

“It seems like oil has found its feet following a volatile start to the year.”

But this is not the first sudden spike to run stops above $62..

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Will the New ‘100 Percent Fatal’ Mind-Uploading Service Work?

DigitizedBrain Nectome, a new startup, declares that it is “comitted to the goal of archiving your mind.” How? By vitrifying your brain so as to preserve the structure of all of your synapses. That way, the thinking goes, the connections in your stored brain can one day be digitized and uploaded into a computer, perhaps a century hence.

The processs of “archiving” involves flooding your brain with the chemical fixative glutaraldehyde to rapidly solidify synapses and prevent decay, then storing it in liquid nitrogen. Since vitrification is, as the company says, “100 percent fatal,” the process would ideally take place just as a client is succumbing to a fatal illness. To upload your mind, your brain would have to be destroyed.

Will it work? Lots of neuroscientists doubt it. Over at LiveScience, Sam Gershman, a computational neuroscientist at Harvard, points out that while the “connectome is without a doubt necessary for memory,” there’s lots more going on in our brains that’s probably crucial to constructing our memories. For example, “You need to know the synaptic strengths, if they’re excitatory/inhibitory, various time constants, what neuromodulators are present, the dynamical state of dendritic spines. And that’s all assuming that memories are even stored at synapses!”

And of course, there is the philosophical question of whether or not a computer simulation of your brain would really be you.

The current alternative of regular cryonics involves freezing and preserving bodies and brains in liquid nitrogen with the hope that advances in nanotechnology will enable the repair of the damage caused by death and freezing, allowing patients to “wake up” restored to health in their own bodies.

Is this ethical? Since clients will be volunteers using their own resources, yes. Most people who decide to avail themselves of these experimental services recognize that they are extremely long shots that are likely going to end up being expensive versions of mummifcation. On the other hand, we already know what happens to the control group.

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When a Mash Note to a War Criminal Hit the Top 40

Today marks the 50th anniversary of the My Lai massacre, in which a group of American soldiers slaughtered hundreds of unarmed Vietnamese civilians. You can read more about that grisly episode in Lucy Steigerwald’s story on the subject, posted elsewhere on this site today. I just want to highlight something Lucy mentioned in passing as she described the trial of Lt. William Calley, the one man convicted for his role in the crime. Back in the U.S., she writes, “Calley became a twisted sort of folk hero.”

It’s true. The most infamous of the killers in one of America’s most infamous war crimes had a cheering section in the States. No, not everyone: Of course many Americans were revolted by the rapes and murders at My Lai. But then there were the people who told themselves a different story about what had happened. The people who made a gold record and a top 40 hit of a deeply dishonest apologia called the “Battle Hymn of Lt. Calley.”

“Battle” was written by Julian Wilson and James Smith, a couple of businessmen from Muscle Shoals, Alabama, and it was recorded by a DJ named Terry Nelson at FAME Studios, the legendary birthplace of dozens of soul, pop, and country hits. Tex Ritter was going to release a version of the song too, but the higher-ups at Capitol Records decided that would be a bad idea. (“[I]f we want to glorify a war hero,” one executive told Billboard, “let’s find someone other than Lt. Calley.”) The folks at Plantation Records had no such scruples, and they put out Nelson’s recording right after Calley was convicted:

“I’m just another soldier from the shores of U.S.A.,” the song’s Calley declares, even if “they’ve made me out a villain, they have stamped me with a brand.” The real villains are elsewhere: “While we’re fighting in the jungles they were marching in the street/While we’re dying in the rice fields they were helping our defeat/While we’re facing V.C. bullets they were sounding a retreat.” In real life, My Lai was an assault on unarmed civilians. In the song, “We responded to their rifle fire with everything we had.”

The rifle fire may be imaginary, but I guess the “everything we had” part was true:

The record peaked at #37 on the Billboard charts. To hear Casey Casem introducing it on American Top 40—right after a snappy little number called “(For God’s Sake) Give More Power to the People“—go to the 2:28 mark here. For eight more pro-Calley songs, go here. For past editions of the Friday A/V Club, go here.

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Drums Along The Potomac

Authored by James Howard Kunstler via Kunstler.com,

The amateur psychologist in me suspects that the more the USA heaps Russia with censorious opprobrium and punishments, the closer this floundering polity actually is to completely losing its shit. Friday morning’s front-page headline in The New York Times appears to have been written by Pee Wee Herman:

I can just hear Vlad Putin blowing a raspberry out of the Kremlin: “Nyah, nyah, nyah… I know you are, but what am I…?” We’re also informed today by that august journal that U.S. Accuses Russia in Cyberattacks on Power Plants. (Oh, wait a second, they changed the headline at 8:02 to Russia Wormed Its Way Into Access at Power Plants, U.S. Says.)

Hmmmm… well, the amateur detective in me suspects that A) this is exactly the kind of bullshit that US intel excels at making up; plus B) the public was actually told last year that our intel has the ability to place any kind of cyber-footprint and time-stamp it wants on digital information, so that C) this assertion can be neither proved nor disproved.

The amateur international relations analyst in me sees in these shenanigans a desperate search for a casus belli, an excuse to go to war. But that only brings me back to amateur psychology: the US apparently wants to commit suicide. Wouldn’t war be a great idea a week after Russia announced it had new hypersonic missiles that the US can’t defend itself against?  Hmmmm. Maybe the Russians made that shit up. And maybe they didn’t. Perhaps we’d like to test that, say, by bombing a bunch of Russian military personnel in Syria, just to see what happens.

There is also the matter of the poisoning in Salisbury, UK, of the Russian Sergei Skripal and his daughter Yulia with a suspected nerve toxin, Novichok, first developed by the old Soviet military. The two remain in critical condition. A nasty bit of business. Skripal was a Russian-to-British double agent who was exchanged some years back in one of the infrequent swaps of captured intel “assets” by the so-called great powers. British Prime Minister Theresa May had a whack attack over the Skripal hit, reeling out new sanctions and booting a boat-load of Russian diplomats off-island.

Forgive me for seeming callous, but it’s a little hard, in the first place, to give a fuck one way or the other about the poor Skripals. Being a double agent carries some serious occupational hazards. This is generally understood among observers older than age six. Mr. Skripal came to an unhappy fate, and his daughter is apparently what we like to call collateral damage — of the sort, say, when one of our drones in a foreign land blows up a wedding party by some targeting error. Whoops! Our bad. One lesson here is that people with ambitions in the intel sector should consider sticking with one side or the other.

Interestingly, and secondarily, the accusation itself is unaccompanied by evidence. The Brits will not release samples of this Novichok for analysis. But are we also to believe that the Brits (or one of their close allies, say) could not concoct a bit of this poison themselves in a lab? After all, when you’re in the world of double-agentry, you’re in a hall of mirrors, and who, really, is to be trusted? Least of all in a matter such as this, would you start banging war drums.

But that, alas, is where things rest for the moment. War drums beating and war cries wafting across America’s spacious skies. The hysteria is palpable and we are making ourselves ridiculous — if not getting ready to blow up the world. Oh, I might also add that it is impossible to believe that there is not some room in the giant NSA facilities full of computer jocks trying sedulously to worm their way into every computer system in every foreign land the world over. The question you’d have to ask is: why would we not be doing that?

The amateur theologian in me thinks: when the Shining City is at hand, will someone please hitch Rachel Maddow to the back bumper of a Toyota Landcruiser and drag her over six miles of broken lightbulbs? Of course, I can’t say that because it would by misogynistic.

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In “Stunning Judicial Ruling”, South Africa’s Zuma Hit With Corruption Charges

Just weeks after his forced resignation as South Africa’s president, Jacob Zuma was charged with corruption on Friday over a $2.5 billion state arms deal, an outcome which Reuters  called “a stunning judicial ruling on a continent where political ‘Big Men’ rarely face their day in court.“

South Africa’s chief prosecutor, Shaun Abrahams, said that he would bring back a case against Mr Zuma relating to a 1990s arms deal to buy European military kit that had cast a shadow over politics in Africa’s most industrialized economy for decades.

As a result, Zuma will face 16 charges relating to 783 counts of corruption over the 30 billion rand ($2.5 billion) deal.

Abrahamas told a media conference that Zuma’s attempts to head off the charges that have been hanging over him for more than a decade had failed.

“After consideration of the matter, I am of the view that there are reasonable prospects of successful prosecution of Mr Zuma on the charges listed in the indictment,” Abrahams said and added that “I am of the view that a trial court would be the most appropriate forum for these issues to be ventilated and to be decided upon.”

The charges were initially dropped by the National Prosecuting Authority (NPA) shortly before Zuma ran for president in 2009. Then deputy president, Zuma was linked to the arms deal through Schabir Shaikh, his former financial adviser who was jailed for corruption.

The 75-year-old Zuma disputed all the allegations against him, he added. Since his election, his opponents fought a lengthy legal battle to have the charges reinstated. Zuma countered with his own legal challenges.

As Reuters adds, Zuma has also been implicated by South Africa’s anti-corruption watchdog in a 2016 report that alleges the Gupta family, billionaire friends of Zuma, used links with him to win state contracts. The Guptas and Zuma have denied any wrongdoing.

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Larry Kudlow Is a Big Upgrade for Trump’s White House: New at Reason

President Donald Trump will reportedly name Larry Kudlow head of the White House National Economic Council. For fans of pro-growth policies—deregulation, low taxation, and open trade—it’s great news for obvious reasons. As David Harsanyi notes, Kudlow has been a decades-long champion of these ideas, and those with coherent philosophies tend to offer some stability and continuity. This administration could use more of those things, not less.

View this article.

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