Recently, Congress engaged in a bipartisan barrage of CEO bashing.
The Senate Banking Committee assailed Wells Fargo CEO John Stumpf for pushing employees to create as many as 2 million bogus bank and credit card accounts without customer consent — making customers pay overdraft and late fees on accounts they never knew they had.
Louisiana Republican David Vitter pressed Stumpf on when he knew about the wrongdoing. “In 2011, about 1,000 employees were fired over this,” said Vitter, incredulously, “and you were never told about that?”
Meanwhile, the House Committee on Oversight and Government Reform criticized Mylan NV CEO Heather Bresch for raising the price of its EpiPen, an emergency allergy treatment, forcing customers to pay $608 for a two-pack that had cost $100 in 2009.
Noting that Mylan had sought legislation to increase the number of patients who receive prescriptions for EpiPens, Rep. Mick Mulvaney, R-South Carolina, angrily told Bresch: “You get a level of scrutiny and a level of treatment that would ordinarily curl my hair, but you asked for it.”
Such shaming before congressional committees tends to reassure the public that the US Congress is taking action. But, especially with Republicans in charge, Congress is doing nothing to prevent the wrongdoing from recurring.
Can we be clear? CEOs have only one goal in mind: making money. If they can make more money by misleading or price-gouging, they’ll continue to do so until it’s no longer as profitable.
For years we’ve watched Congress grill CEOs of Wall Street banks about bank fraud. If it’s not Wells Fargo’s sham accounts, it’s JPMorgan Chase’s Jamie Dimon, whose bank failed to report trading losses. (Remember the “London Whale”?) Or it’s Goldman Sachs’ Lloyd Blankfein, whose firm defrauded investors.
Republicans rage at the CEOs who appear before them, but they haven’t given the Justice Department enough funding to pursue criminal charges against corporations and executives who violate the law.
They haven’t even appropriated enough money for regulatory agencies to police the market. Funding for the Consumer Financial Protection Bureau, for example, is capped at 12 percent of the Federal Reserve’s operating expenses. Even now, Republicans are trying to put the CFPB’s funding into the appropriations process, where it can be squeezed far more.
The Wells Fargo board announced late Tuesday that it’s forcing both Stumpf and Carrie Tolstedt, the former Wells Fargo executive in charge of community banking, to forfeit more than $60 million in bonuses and unvested stock awards.
Well and good. But we shouldn’t have to wait until public pressure forces the hands of bank boards. Congress should give regulators authority to order such clawbacks when such frauds are first discovered.
More basically, Congress has allowed Wall Street banks and pharmaceutical companies to accumulate the sort of vast market power that invites wrongdoing.
Wall Street’s five largest banks (including Wells Fargo) now have about 45 percent of the nation’s banking assets. That’s up from about 25 percent in 2000.
This means most bank customers have very little choice. Every big bank offers the same range of services at about the same price — including, most likely, services that are unwanted and unneeded.
Similarly, for years we’ve watched Congress condemn CEOs of pharmaceutical companies for price-gouging. If not Mylan’s Bresch, it’s Turing Pharmaceuticals’ Martin Shkreli, who jacked up the price of Daraprim — used to treat life-threatening infections — from $13.50 to $750 a pill. Or Valeant Pharmaceuticals’ Michael Pearson, who quadrupled the price of Syprine, used to treat an inherited disorder that can cause severe liver and nerve damage. Or Amphastar Pharmaceuticals CEO Jack Y. Zhang, who hoisted the price of naloxone, used in cases of heroin overdoses, to more than $400 a pop.
Yet Congress has not enacted any laws prohibiting such price-gouging. To the contrary, as with the banks, Congress has allowed pharmaceutical companies to accumulate the sort of vast market power that invites wrongdoing.
Mylan and other pharmaceutical companies can engage in price-gouging because they’re the only ones producing these lifesaving drugs.
Congress has made it illegal for Americans to shop at foreign pharmacies for cheaper versions of same drugs sold in US, and it hasn’t appropriated the Food and Drug Administration enough funds to get competing versions of lifesaving drugs to market quickly.
So here’s an idea: Instead of setting up further rounds of CEO perp walks for the TV cameras, Congress should give the Justice Department and regulatory agencies enough funding to do their jobs.
While they’re at it, break up the biggest banks. And regulate drug prices directly, as does every other country.
It’s easy to holler at CEOs. It’s time for to stop hollering and take action.
By Robert B. Reich
Former US Secretary of Labor Robert Reich is chancellor’s professor of public policy at the University of California at Berkeley and senior fellow at the Blum Center for Developing Economies. — Ed.
