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Stephen Dobyns 8:30 a.m., July 20
University of San Diego Professor of Law and Finance Frank Partnoy, along with Pulitzer Prize-winning Pro Publica reporter Jesse Eisinger, say in the January/February issue of the Atlantic magazine that even the most discerning analyst cannot comprehend the financial reports of the nation's large banks. The 2008 financial crisis resulted from a "lack of transparency" that is still rampant today. "Banks today are bigger and more opaque than ever, and they continue to behave in many of the same ways they did before the crash," say the authors. "Large global banks have been accused by U.S. government officials of helping Mexican drug dealers launder money" as well as funneling cash to Iran. In opinion polls, fewer than 25% of people have trust in the banking system. The authors quote a former Federal Reserve board member who says that banks' official disclosures obfuscate more than inform, "and the government is not just permitting it, but seems to be encouraging it."
The authors then go through Wells Fargo's annual report, and find it filled with inscrutable references and opaque footnotes. They went to Wells Fargo with questions, and the bank told them to read the annual report.
"As trust diminishes, the likelihood of another crisis grows larger," write Partnoy and Eisinger. "The next big storm might blow the weakened house down." And then they zero in on the basis of most corporate fraud: "Clever bankers, aided by their lawyers and accountants, can find ways around the intentions of the regulations while remaining within the letter of the law."