Editorial: Abusive banking and drug-maker practices elevate need for effective regulation to protect consumers

Posted September 30, 2016

A CBC Editorial: Friday, Sept. 30. 2016; Editorial# 8061
The following is the opinion of Capitol Broadcasting Company

“You have regulations on top of regulations, and new companies cannot form and old companies are going out of business. And you (Hillary Clinton) want to increase the regulations and make them even worse. I’m going to cut regulations.”

Even as Donald Trump’s words were echoing in the Hofstra University auditorium Monday night, outraged members of Congress – Democrats and Republicans -- had been grilling pharmaceutical and banking executives over bilking American consumers.

Mylan inflated profits for lifesaving drugs with sky-high pricing and Wells Fargo Bank set up phony consumer banking accounts, without customers’ knowledge or permission. On the state level, the failure of Duke Energy – the nation’s largest investor-owned electric utility -- to adequately monitor and handle coal ash waste at power generation sites has been the subject of hearings, lawsuits and paltry fines.

These high profile examples of corporate excess make it more obvious than ever why necessary regulatory oversight of these institutions and businesses is so fundamental to our economy and public health.

How is it that pharmaceutical maker Mylan can charge $600 for two EpiPens in the United States while in the United Kingdom a similar set costs $69?

How can one of the nation’s largest banks, Wells Fargo, set up more than 2 million phony and unauthorized accounts, fire 5,300 low-level employees and be fined $185 million, but not a single top executive be held accountable ?

It was only after a verbal pummeling that James Stumpf, the CEO of Wells Fargo Bank, endured in the U.S. Senate last week that he was forced to forfeit $41 million in stock options and go without his 2016 bonus over the phony account mess.

And Thursday, when he appeared before the House Financial Services Committee, Jeb Hensarling, the Republican committee chair told him: “Fraud is fraud and theft is theft. What happened at Wells Fargo … cannot be described in any other way.”

Other members of Congress got some good licks too. “Do you think what you did was criminal?” said Rep. David Scott, D-Georgia. “Why shouldn’t you be in jail?” asked Michael Capuano, D-Mass.

During a Senate Banking Committee hearing, Sen. Elizabeth Warren grilled Stumpf on accountability for the scandal. She called on the U.S. Justice Department and the Securities and Exchange Commission to investigate Stumpf and other top Wells Fargo execs. “You make it clear that Wall Street won’t change until we make it change,” Warren said to Stumpf.

Change is needed but regulation, despite Donald Trump’s assertions, is certainly not the problem holding Wells Fargo back.

No doubt the pressures for profits and stock growth are immense. Short cuts – even illegal ones – can be very tempting.

That is exactly why regulation and supervision, on a federal and state level, must be high priority.

Slap-on-the-wrist fines and tongue-lashings before congressional committees aren’t going to change bad behavior themselves. Regulators need to be positioned and have the authority to protect consumers and prevent companies from profiting from inappropriate and illegal schemes and scams.

Strong regulation coupled with attentive oversight won’t hinder growth of well run companies that play by the rules. It will, however, provide a better shot at stopping consumer abuse, illegal activities and dangerous shortcuts before the damage is so widespread that the financial security of the nation and its well-being are damaged.


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  • Aiden Audric Oct 4, 11:16 a.m.
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    Hard to wash down a 0.687% increase with Duke water, isn't it?

  • Ken Ackerman Sep 30, 9:11 a.m.
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    The companies that many people think of as "big pharma" are not interested in developing "life-saving drugs". They are interested in "life-style" drugs. I've worked in the pharmaceutical industry for years. Creating a cure doesn't get them their next blockbuster drug.

    R&D is expensive and a company should be able to recoup that cost AND make a profit but don't believe for a second that cures are what they are making.

    As for Regulation equaling higher prices, there is a reason drugs cost more in the US than any other country in the world. That reason is a complete lack of regulation beyond safety supervision by the FDA.

    Do a little research and find out why the FDA exists at all. Read about what corporations did to us before the FDA was created.

  • Ken Ackerman Sep 30, 9:01 a.m.
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    The amount of regulation has no real impact on prices. Corporations may tell you so to allow them to charge more...

    A corporation will charge the absolute maximum price you will pay and use any means of justification you will accept. It's in their best interest.

  • Teddy Fowler Sep 30, 8:00 a.m.
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    More regulation = Higher prices

  • Matt Clinton Sep 30, 7:55 a.m.
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    You know it'd probably be better if drug companies just wouldn't make life-saving drugs at all. Then they couldn't profit from their sale, and that's what really matters right? Making sure that evil corporations don't make profits?

  • Ken Ackerman Sep 30, 7:55 a.m.
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    Deregulation would simply allow corporations more wiggle room to use and abuse their employees and to deceive consumers and stockholders. More regulation does not equate to less competition provided all are held to the same standard.

    Many employees used to have at least some protection with unions but conservatives have convinced so many people unions are evil that they have been in steady decline for years.

    North Carolina is a prime example. NC is a "right to work state". That means that employers can treat and mistreat employees in any way they wish because that employee always has the right to quit.

    When automakers take jobs that pay $40/hour to Mexico where they pay $6 to $10/DAY do we see a savings? Nope! Dodge is moving production of all of its cars to Mexico see if the prices go down, stay the same, or increase!!!

  • Ken Ackerman Sep 30, 7:34 a.m.
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    The other way the shortage made up was the salaried employees work longer and longer hours. I estimated some of my coworkers worked 80 or more hours a week for years.

    The second is factor is human nature and how companies use it against their employees. Wells Fargo applied increasing pressure on its employees to the point where they couldn't achieve their required goals without inventing business. As I understand it, these bogus accounts for the most part were opened then immediately closed. The sole purpose being to inflate the count of accounts opened.

    It's easy for others on the outside to say, "I would never do such a thing.". However, it has been shown experimentally that approximately 65% of people can be pushed into doing virtually anything. A psychologist at Yale named Stanley Milgram demonstrated this in 1963.

  • Ken Ackerman Sep 30, 7:22 a.m.
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    There are two types of human behavior in action here:

    A few years ago I did some research. This is somewhat of an oversimplification but, essentially a Corporation is legally a person. The corporation has one goal, maximize the stock price and thus management's pay, options, and bonuses. What Wells Fargo Management did unfortunately wasn't illegal, it wasn't ethical but based on corporate law that doesn't matter. Corporations announcing layoffs are often only motivated by the stock price, investors equate fewer employees to fewer expenses. I worked for one of the big pharmaceutical companies that was taken over in 2001 by another. Every Christmas from 2001 until 2015 there was a "restructuring" or "headcount reduction". The amount of work didn't decline just the number of people available to perform that work. Some of the shortage was made up by efficiency gains, by cutting what we did from what we thought we should do to what we were legally required to do. Continued...

  • Kenneth Jones Sep 30, 6:51 a.m.
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    So, what would be the correct course of action, more regulation or deregulation? More regulation means less competition which always means more out of the consumers pocket. Deregulate for competition so prices go down.