Why is Wall Street Public Enemy #1 in this election cycle?  Most Americans continue to seethe about the fact that not only was Wall Street bailed out for massive risks that lined their pockets with billions of dollars and lavish lifestyles, but it also was the public funds that actually bailed them out along with Fed Reserve policies and secret programs.

I have long said that Washington and Wall Street have an incestuous relationship that allows for largess and carelessness without regard or worry of incarceration or loss of income.

The latest example: Wells Fargo made headlines last week when it was revealed that thousands of employees ripped off customers through a scam known as “sandbagging.” Employees opened nearly  two million accounts in the Los Angeles area without customers’ consent. 

The scheme was uncovered back in 2011.  And last week, fines were finally handed out:

• $100 million to victims
• $35 million to the Office of the Comptroller
• $50 million to the City and County of Los Angeles

So, if you headed up a division called ‘Community Banking’ that ripped off the community, what would be your fate?

	Get fired
	Get arrested
	Get fired and arrested
	Get a nine-figure golden parachute

As it turns out, Carrie Tolstedt, who ran the division and worked at the bank for 27 years, received a $125 million retirement bonus.  Wells Fargo’s CEO John Stumpf said that Tolstedt had been one of the bank’s most important leaders, “a standard-bearer of our culture,” and “a champion for our customers.”

Wells Fargo Sandbagging Scam
Culprits	5,300 Employees
Victims	2,000,000 Customers
Fine	$185,000,000
Winner	$124,600,000 Carrie Tolstedt

Clawed

Wells Fargo set up a so-called “clawback”after the 2008 financial crisis as a means to take back money from and to dissuade executives from benefiting from schemes and scams that harm the public while enriching them and surrogates. 

Well, apparently that provision will not be used in this most embarrassing scandal. The only claws are those on the backs of customers at Wells Fargo.

The good news is management says that it’s halted product sales goals for its retail bankers.  Sadly, it seems they allowed it to linger even after knowing about the problem as far back as 2011.

I must say that I have zero hope this kind of behavior will ever get better. Unfortunately, the victims aren’t just those 2,000,000 (WFC customers),but it’s also the tens of millions of Americans that opted out of investing and banking because of the non-stop shenanigans of the industry.  It’s an industry where no one goes to jail. In fact, it’s mostly where the worst kind of theft is rewarded.

It’s the Economy, Stupid

Main Street got a raise for the first time in years as real median household income climbed to $56,516 after a record one-year improvement.

Economic Trends	2014	2015
Real Median Household Income	$53,718	$56,516
Living in Poverty	46.6 million	43.1 million
Without Healthcare	33 million	29 million

There are fewer Americans living in poverty, but the tally of 43,000,000 is still heartbreaking.  Moreover, there are 4 million fewer folks without health insurance at a total of 29 million, which is hard to fathom.   This is after years of Obamacare, which promised to remedy this situation.

However, there are additional signs of economic improvement but for many it’s too little, too late as large swathes of the economy continue to be left behind. The bottom segment of earners and the middle-class saw a 22% and 27% increase in wages from 1967 to 2015, while the top five percent enjoyed an 82% raise. 

This trend weighs heavily on this year’s election as voters must consider which candidate can speed along fast gains for everyone that isn’t already rich.

Income Inequality	1967	2015
95th quintile	$117,929	$214,462
50th quintile	$44,335	$56,516
20th quintile	$18,620	$22,800

So, the pitch from the Clinton campaign will be ‘let’s keep this momentum going’ while Donald Trump will say it’s too little, too late.

If you thought the coast was clear yesterday, you were wrong.  In fact, after an eerie calm this summer, we are in the eye of the storm as stocks took it on the chin again with the Dow Jones Industrial average losing 258 points. 

I don’t buy that this is all about crude oil, which dropped on a report of prolonged supply glut.  I think some of this is the result of poor and conflicting comments from Federal Reserve members. However, the fact is that this market has grappled for leadership. 

The market needs a catalyst, and it’s not going to be bad news being good news. 

Speaking of which, I do like the idea the Dow held above 18,000 on Tuesday and last Friday, and crude oil is higher in the aftermarket. What’s going to be the spark, or has the correction finally begun?

Today’s Session

The market was mostly unchanged this morning but the bias has clearly shifted to the downside, so its nuts to force the issue at the open.  It’s also nuts not to have a list of stocks to buy on board weakness, which has been enormously successful for us this year.

We have a list, and like Santa Claus, we will check and adjust it minute to minute.  If you are not already on this service, please contact your account representative, or visit us at wstreet.com.

Comments

I find it ironic that the same people who blame "Wall Street" for the meltdown ignore the role government played with the Community Reinvestment Act and that Dodd/Frank were conspirators in the crash, yet put in charge of "the fix". Both parties are to blame, but I think the bulk lies with the democrats' vision of "everyone gets a house". Things really haven't changed much! kev on 9/14/2016 10:37:39 AM

Ironic that Wall Street is so vilified when the real culprit is our government. Looking back at the collapse, if we start with the Fed lowering rates to stave off a collapse from their last wrongheaded intervention combined with Clinton's huge increase in tax free gains on the sale if residential real estate every two years. Then have the FHA allow mortgages with NO INCOME verification so there is no NEED to commit fraud. Then push 40% of the loans to people that cannot pay through Obama and the community lending strong arm on bank pending. The first people that should go to prison are in Washington!!!!!Oh, and lets not forget Standard and Poors rating mortgage paper like bonds, when the only time you know the value of the property or the credit worthiness of the borrower is at the time of issue! Wall street had it's part, but they are waaaay at the back of the line! Ray Weldon on 9/14/2016 11:30:56 AM

Ray, I must disagree on your comment, WS is way at the back of the line. They as well as the fed picked and choose who would survive and who wouldn't. Unfortunately my family had stock in a bank the conspirators decided not to bail out. I have traded most of my life and no one every bailed me out of my bad trades. Why should Goldman or the others who screwed up and then benefited be any different. This has gone on for far to long. A slap on the wrist, no one is ever held accountable nor goes to prison. Had prison sentences been doled out, I would imagine this WFC debacle would never had happened. If they knew about this since 2011 they should be shut down and loose there license at the very least. Dodd Frank has stiffled many industries and the economy. The people who drew it up were clueless. S&P should have been shut down as well. Wall Street always survives and always will. I believe in a free market economy. The more you meddle the worse the end result will be. The central banks of the world have dug deep holes they will not be able to get out of. Buy gold and silver, because eventually its going to be a race to the bottom for all currencies, especially the USD. Willie Walker on 9/15/2016 12:22:32 AM

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