Another Great Success for Government Regulation

The AP is reporting the story of a man fired by Wells Fargo bank because in 1963, he put a cardboard dime in a washing machine at a laundromat and got caught. That may sound like a strange story, but the firing is the result of new federal rules that penalize banks if they employ anyone convicted of a crime involving dishonesty, breach of trust or money laundering. (No, this was not money laundering; it was dishonesty.) According to the AP article, since the government adopted the new tougher rules last year, thousands of bank employees across America have been fired. The govenment does have a procedure under which the fired employee can seek a waiver if he can show himself fit to work at a bank despite a past criminal conviction; that process, however, six months to a year to be approved. Meanwhile, the employee is out of a job.

This is a good example of why rules coming from Washington do not work as intended. The supposed basis for the new harsh rule is the financial crisis of 2008. This rule does nothing to prevent such a crisis from happening again. The problem in 2008 was not that there were people with a criminal history working in banks. The problem was that banks bought mortgage backed securities that turned out to be worth much less than expected. Until last year, banks had to scrutinize their employees, but there was not comprehensive rule requiring the firing of employees. Each bank was allowed to make its own decision based upon the circumstances. That is why Wells Fargo employed the guy who is the subject of this article for over 40 years. Only when the geniuses in Washington centralized control and made general decisions for the entire country did we see thousands of individuals who have done nothing wrong get caught up in the web of regulations and fired.