Senator Elizabeth Warren

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On September 13, 2021, Senator Elizabeth Warren sent FED Chair Jerome Powell a letter https://www.warren.senate.gov/imo/media/doc/Letter%20from%20Senator%20Warren%20to%20Fed%20on%20Wells%20Fargo%20FHC%20Status%2009.13.2021.pdf

 

In the letter she wrote “Under Janet Yellen’s leadership, the Fed placed Wells Fargo under an asset cap in 2018 due to its ‘widespread consumer abuses and other compliance breakdowns. In the three years since then, numerous additional revelations have surface about Wells Fargo’s continued unethical and anti-consumer conduct. These new revelations have once again made clear that continuing to allow this giant bank with a broken culture to conduct business in its correct form poses substantial risks to consumers and the financial system.” Senator Warren goes on to ask that the FED revoke Wells Fargo’s status as a financial holding company. The action would require Wells Fargo to separate its bank subsidiary from it other financial activities.

 

Wells Fargo is an enormous financial services company with $1.9 trillion in assets. It serves 1 in 3 US households and 10% of US small business. In reply to Senator Warren’s demand Well Fargo replied, https://newsroom.wf.com/English/news-releases/news-release-details/2021/Wells-Fargo-Affirms-Focus-on-Building-Strong-Risk-and-Control-Foundation/default.aspx

 

In it’s reply it cites progress achieve under the new CEO Charles Scharf, including: 1) three business group have been split into five; 2) it has created four new functions to provide greater oversight and transparency; 3) it has brought on board 10 new Operating Committee members out of the total committee of 17; 4) created a new team design to facilitate oversight of consumer practices; 5) created new enterprise wide risk assessment with the intent to design new controls; 6) “Implemented a new incentive plan for bank branches that is governed by stronger oversight and controls, and focused on customer relationships.” Emphasis added by Dr. Isley.

 

Instructions

 

The FED continues to maintain that Wells Fargo has not done enough to rein in the incentive failures that revealed the failure of it corporate governance. We have seen that several of the largest conglomerate in the US decide that it is time to divide their agglomerate groups into smaller units for focus and function. J & J will separate it consumer products division and its pharmaceutical division. GE will divide into three units; aviation; energy, and healthcare. It is time for Wells Fargo to separate it’s banking business from it’s other enterprises? YES NO Explain

 

What is the principal-agent problem?
What is the role of corporate governance?
How is corporate culture different than governance?
Can incentive systems align culture with governance?
How might separating Wells Fargo’s banking business from it’s other enterprises improve depositor safety?

 

 

Sample Solution

Combatants are people who are involved directly or indirectly with the war and it is lawful to kill ‘to shelter the innocent from harm…punish evildoers (Begby et al (2006b), Page 290).However, as mentioned above civilian cannot be harmed, showing combatants as the only legitimate targets, another condition of jus in bello, as ‘we may not use the sword against those who have not harmed us (Begby et al (2006b), Page 314).’ In addition, Frowe suggested combatants must be identified as combatants, to avoid the presence of guerrilla warfare which can end up in a higher death count, for example, the Vietnam War. Moreover, he argued they must be part of the army, bear arms and apply to the rules of jus in bello. (Frowe (2011), Page 101-3). This suggests Frowe seeks a fair, just war between two participants avoiding non-combatant deaths, but wouldn’t this lead to higher death rate for combatants, as both sides have relatively equal chance to win since both use similar tactics? Nevertheless, arguably Frowe will argue that combatant can lawfully kill each other, showing this is just, which is also supported by Vittola, who states: ‘it is lawful to draw the sword and use it against malefactors (Begby et al (2006b), Page 309).’ In addition, Vittola expresses the extent of military tactics used, but never reaches a conclusion whether it’s lawful or not to proceed these actions, as he constantly found a middle ground, where it can be lawful to do such things but never always (Begby et al (2006b), Page 326-31). This is supported by Frowe, who measures the legitimate tactics according to proportionality and military necessity. It depends on the magnitude of how much damage done to one another, in order to judge the actions after a war. For example, one cannot simply nuke the terrorist groups throughout the middle-east, because it is not only proportional, it will damage the whole population, an unintended consequence. More importantly, the soldiers must have the right intention in what they are going to achieve, sacrificing the costs to their actions. For example: if soldiers want to execute all prisoners of war, they must do it for the right intention and for a just cause, proportional to the harm done to them. This is supported by Vittola: ‘not always lawful to execute all combatants…we must take account… scale of the injury inflicted by the enemy.’ This is further supported by Frowe approach, which is a lot more moral than Vittola’s view but implies the same agendas: ‘can’t be punished simply for fighting.’ This means one cannot simply punish another because they have been a combatant. They must be treated as humanely as possible. However, the situation is escalated if killing them can lead to peace and security, within the interests of all parties.

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