Category: market

Well’s Cargo Unethical Business Practices

Wells Fargo has a scandal about the creation of fraudulent savings and checking accounts without the consent of the clients. It involved the transfer of money from legitimate accounts. The company has been fined 185 million dollars by the Consumer Financial Protection Bureau because of the illegal activity (Koren, James). Wells Fargo customers started noticing the fraud after they were charged unexpected fees and receiving unanticipated credit and debit cards. Initially, the blame was put on the branch managers and workers but was soon shifted to the top-down pressure from the high-level management. Workers were encouraged to order for credit cards for those clients who were yet to be approved without their authorization. Employees were supposed to use unapproved client’s information when filling out the requests. The process of creating new accounts was made possible by the pinning process, which involved setting the customer’s pin as “0000”. By this, bankers were able to control the account of the client making it easy to enroll them in programs such as online banking. In September 2016, the number of unauthorized deposit accounts was 1,534,280 while the credit card accounts were 565,433.

Furthermore, estimates released in May 2017 showed that that the number of fraudulent accounts approximated to 3,500,000. Nearly 85,000 accounts opened incurred fees, which amounted to $2 million. Additionally, the client’s credit scores were affected by the fake accounts. The clients could not be able to take any legal action towards the bank because the process of opening an account required customers to enter into a private arbitration with the bank. The scandal also affected the non-management Wells Fargo employees (Koren, James). This is because the employees found it difficult to gain employment in other banks during the scandal. Banks are required to offer documents to departing employees showing their record on unethical conducts. Wells Fargo issued defamatory documents to the employees indicating that they had been involved in the creation of unwanted accounts. The company later released news that it would rehire 1000 employees who had been wrongfully terminated because of the fraud.

Wells Fargo remains under pressure from the politicians and customers over the issue of fake accounts. The Company is also facing a legal backlash from the borrowers who claim that they were charged fees for the bank to lock in the pledged rates on the new mortgages. However, the company has promised to pay $10.7 million to compensate the clients for opening fake accounts in their names without their authorization (Koren, James). This would include $7 million for refunds and $3.7 million for the complaint process and mediation. Moreover, the firm is also willing to pay $80 million to those affected by the auto insurance misfortune with more money for those who lost their cars.

CEO Stumpf should be arrested and prosecuted for criminal charges against the customers. This is because he failed in his duty to govern and control the acts of the employees. Furthermore, the manager encouraged the employees to create fake accounts. Those who did not follow the order were illegally terminated from employment. Employees should also be prosecuted for interfering with the accounts of the clients. It is against the code of ethics to try and access customer’s accounts without their consent. In case they are found guilty of creating accounts, they should be forced to compensate the customers. Furthermore, the affected clients should be allowed to testify against CEO Stumpf and the employees.

States Intervention in Market Economy

Recently, there has been development concerning free market trends adjustment in Africa and the world. But despite that, generally free market has remained a subordinate instrument of the national political system and their policies. The popularity and free trade policies being enjoyed by the market at the present moment wouldn’t be possible without government intervention in business affairs; concerning State involvement it is necessary to point out that, the primary objective of the state is to facilitate market competition and assist markets to achieve their national policy objectives.

Notably, the role of State policies intervention should be more than just addressing more than the purpose of rationalizing trade, but rather address the factor that effects the market trends. These rationalized objectives often result to do marketing practices to conform mechanically to the modern model. Market interventions should take into consideration of marketing network proven capability. Main reason for developing policies is to make the market work within the existing system, but not to replace it. Some States get more involved in the market to change free market systems, raising the costs of marketing, hurting consumers, distorting resources allocations, as well as damaging the economy.

Policy makers or free market conservatives should view trading as a necessary and socially desirable activity carried out under favorable regulations and friendly environment. General advice regarding their intervention is that they should play a facilitation role rather than a direct role in the market. There should be limited regulatory responses. Developed countries have a long involvement in nature, and they have three aims: to improve market infrastructure, to improve information flow, and to improve institutional infrastructure.

The concept of free market is created, maintained, and curated by the government. Conservatives of free market behave as if free market has the same idea as the state of nature in which tyrannical government arrives after the fact and wrecks the policies when, in fact, it is the opposite. The difference is that in State of nature, you have permanent war, while, traders and entrepreneurs in a free market can only exist if there are monsters to enforce things such as private property, contracts, and money, of which the State creates all of it.  The States sets free market rules and policies, and without their intervention, there would be no free market.

For instance, France has an average retail price of 20% higher than that in Germany, despite the fact that Germany has a higher VAT than France. Evidently, this is because retail market in France is cartel based; in this case, the biggest retailers hold local monopolies. Hence, there is no competition (Gobry, N.p). However, State involvement is based on the strength of the government, and free markets require a vigorous and active government. For instance, United States is more open market than Europe considering the power of their government, but they have been outshined because Europe has a government that is less concerned about maintaining a free market(Gobry, N.p).

In conclusion, involvement of State in every market economy is based on their strength on market policy. Regulations play a role of zoning laws which then prevent the opening of situations such as dumping, reduced price regulations, and squeezing of suppliers. Some States have more involvement because their big companies have created comfortable alliances that suppress other firms from merging. Lastly, it is recommended that government intervention creates a free market, nonetheless, there can be harmful interventions, such as France’ scrapping wrongheaded regulations, but primarily positive interventions have been witnessed with government involvement with the market economy.