By Robert Reich
Recently week, 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 two million bogus bank and
credit card accounts without customer’s 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 Pharmaceutical’s CEO Heather Bresch for
raising the price of its Epipen, an emergency allergy treatment, by 500 percent
– 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, Representative Mick
Mulvaney, Republican of 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 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.
If it’s not John Stumpf’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’s Lloyd Blankfein, whose bank defrauded
investors.
Wells Fargo’s Strumpf made $19 million last year, partly
because all those new accounts helped maintain the bank’s profit machine. Sure,
the bank was fined $185 million by the Consumer Financial Protection Bureau for
the fraud, but that’s chicken feed relative to what the bank pulls in. Between
April and July, 2016 alone it had revenues of $22.16 billion.
Why should we expect Wells Fargo or any other big bank to
stop such frauds, when they’re so lucrative?
For years we’ve watched Congress condemn CEOs of
pharmaceutical companies for price gouging: If not Mylan’s Heather Bresch, it’s
Turing Pharmaceutical’s Martin Shkreli, who jacked up the price of Daraprim –
used to treat HIV patients – from $13.50 to $750 a pill.
Or Valeant Pharmaceutical’s Michael Pearson, who quadrupled
the price of Syprine, used to treat an inherited disorder that can cause severe
liver and nerve damage.
Or Amphaster Pharmaceuticals CEO Jack Y. Zhang, who hoisted
the price of naloxone, used in cases of heroin overdoses, to more than $400 a
pop.
Heather Bresch made $18.9 million last year. Mylan’s incentive plan
will bestow additional bonuses of $82 million on top executives if they hit
certain high profit targets by 2018.
Why should we expect Mylan or any other pharmaceutical
company to refrain from yanking up the price of lifesaving drugs as high as the
market will bear?
Republicans may 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.
Meanwhile, Congress has allowed Wall Street banks and
pharmaceutical companies to accumulate 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.
Nearly half of American households have a Wells Fargo bank within a few
miles of home, for example.
Every big Wall Street bank offers the same range of services
at about the same price – including, most likely, services that are unwanted
and unneeded.
Similarly, 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 U.S., and hasn’t
appropriated the Food and Drug Administration enough funds to get competing
versions of lifesaving drugs to market quickly.
So 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.
ROBERT B. 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. He served as Secretary of Labor in the
Clinton administration, for which Time Magazine named him one of the ten most
effective cabinet secretaries of the twentieth century. He has written fourteen
books, including the best sellers "Aftershock", "The Work of
Nations," and "Beyond Outrage," and, his most recent,
"Saving Capitalism." He is also a founding editor of the American
Prospect magazine, chairman of Common Cause, a member of the American Academy
of Arts and Sciences, and co-creator of the award-winning documentary,
INEQUALITY FOR ALL.
