For years, the mantra of Corporate America has been that they are drowning in government rules and regulations. Small business has echoed that refrain, as has Wall Street. The problem is that these same entities continually shoot themselves in the foot.
Over the last two weeks, thanks to Wells Fargo in the banking sector, and Mylan Labs in pharmaceuticals, Corporate America has once again reminded us of that business just can’t be trusted. In the case of Wells Fargo, over two million fictitious customer accounts were opened over several years in order to meet sales goals.
Critics say that Mylan Labs’ 500% increase (since 2007) in the cost of a device called EpiPen that treats severe allergic reactions is simply another case of rampant greed within the drug industry. They are not alone. Gilead Sciences and Valeant Pharmaceuticals have both been caught instituting similar price hikes on some of their drugs. And who can forget Martin Shkreli, the former head of Turing pharmaceuticals, who jacked up the price of a life-saving drug, Daraprim, from $13.50 to $750 per tablet (while giving the finger to all of us on tape).
Not only has the public reacted with anger over these incidents, but it has kept the idea alive that existing rules and regulations are justified. What’s worse is that many politicians will use these events to pile even more restrictions on the nation’s corporations.
Hell hath no fury compared to a politician with a meaty issue in an election year. Senators from both parties jostled for air time on Tuesday during a hearing over Wells Fargo’s indiscretions. To say that Wells’ Chief Executive Officer was trashed up one side and down the other would be an understatement.
CEO John Stumpf, once the “pretty boy” of the financial industry, due to his company’s relatively clean bill of health during the financial crisis, was vilified for going easy on the bank’s leadership while firing thousands of lower-level workers. Legislatures used terms like “gutless leadership”, “fraud” and “out of touch” executives to decry managements response to the scandal.
Next week, it is Mylan Lab’s turn to testify before the House Oversight and Government Reform Committee. Heather Bresch, the CEO of the massive pharmaceutical company, will be on the hot seat. Politicians running for re-election will be vying for the microphone. Expect to hear how her and her company are guilty of price gouging among other charges.
While the hearings and their aftermath might provide entertaining reading, the consequences of these cases of corporate greed may have far-reaching effects on all of our industries. There is a great deal of truth in the complaints of many businessmen, especially small businessmen, that Federal, state and local regulations are making it almost impossible to run a profitable business, but at the same time, one bad apple after another pops up justifying the chains that bind the entire cart.
After the 2009 Financial Crisis, a flood of new regulations and reforms swamped the banking industry. The Dodd-Frank Wall Street Reform and Consumer Protection Act were signed into law in 2010. Among other things, it created yet another agency: the Consumer Financial Protection Bureau.
The Federal Reserve was given more power as were a slew of other governmental agencies. Lending practices, reserve requirements, trading restrictions and countless more new regulations were foisted on the banking industry. The idea behind this avalanche of rules and regulations were to ensure that “never again” will Americans be subjected to these “too big to fail” bail outs.
Hillary Clinton has already promised to deal with these outrageous pricing issues in the drug sector. As such, does anyone want to guess the chances of reducing regulations on either the pharmaceutical or banking industry? As long as industry continues to shoot itself in the foot, what else can one expect?