There have been numerous opportunities this week to watch former Equifax CEO Richard Smith eat humble pie over the hack that exposed the Social Security numbers, birth dates, addresses, and other personal information of 145.5 million Americans. On Tuesday, Smith appeared before a subcommittee of the House Energy and Commerce Committee, where members of Congress complained about the company for several hours. But if you missed it, no worries! Smith also appeared before the Senate Banking Committee on Wednesday morning and the Senate Judiciary Committee later that afternoon. On Thursday, it’s back to the House, this time for a turn in front of the House Financial Committee.
Make no mistake, there is plenty of material to excoriate Smith over. In the days after Equifax announced the massive breach, it epically bungled its response. Web pages couldn’t handle the traffic. The complimentary credit-monitoring product offered up by the company—free for one year—initially required those signing up for it to waive their right to turn to the courts in the event of a dispute. The company’s Twitter feed directed desperate people seeking answers to a phishing site, for almost two weeks. Responses to questions from journalists were rude, and that’s when the company bothered to acknowledge them at all. Smith even gave out false information at the Tuesday hearing; it turns out that you don’t actually need to mail in your security PIN to lift a credit freeze.
Many commentators have been quick to point out that Equifax’s abysmal customer service can be explained by the fact that the word “customer” is a misnomer in this case. The 145.5 million people whose information is almost certainly compromised for the remainder of their lives are not, for the most part, purchasing services from Equifa (though the company appears quite happy to sell us credit-protection services if we are interested). Instead, it’s the banks and other firms interested in consumer data who buy Equifax products.
But something else also needs to be said: Equifax is hardly alone here. Corporate indifference to the public is a marker of our oligarchic age, and it doesn’t seem to matter who is paying the bills. Even as Smith was making the first of his three congressional appearances this week, Wells Fargo CEO Timothy Sloan was updating the Senate Banking Committee about how the too-big-to-fail bank encouraged its employees to keep up with unrealistic sales quotas by setting up millions of fake accounts for its customers. Other companies aren’t behaving much better. It was, after all, only a few months ago that United Airlines was the scandal of the moment, after a video went viral of airport security violently removing a passenger from a plane after he refused to give up his seat on an overbooked flight. Then there is Uber, which… well, what hasn’t Uber done?
These events, when they go public, are supposed to be game changers. Yet they never are, not in a way that truly means anything. Yes, a few corporate heads—like Smith’s and now former Wells Fargo CEO John Stumpf—may roll. Corporate apologies are offered and offered again. (Smith and Sloan, if you are wondering, both claimed they were “deeply sorry” in their testimony.) Congressional hearings are often held. Legislation is introduced to force better behavior, but these bills almost never go anywhere in our Republican-dominated Congress.
The fines and lawsuits that eventually lead to settlements sound significant, but are essentially peanuts when it comes to the corporate bottom line. That Wells Fargo $100 million fine, the largest ever levied by the Consumer Financial Protection Bureau? Republicans in Congress are using internal memos claiming a fine of $10 billion would not have been unjustified to smear the CFPB as malfeasant in an attempt to gut the agency. (Given the attitude of said Republicans toward the CFPB, this is the definition of chutzpah, but that’s a subject for another article.) The same is true of individual givebacks. Yes, Equifax CEO Smith is losing a $3 million bonus for 2017, but he’s also walking away with a payday that could ultimately turn out to be as much as $90 million. We should all suffer such shame and financial loss.
Stock-market analysts know the truth. When Smith’s resignation was announced last week, stock-research shop the Cowen Group quickly released a note applauding the company for playing its assigned role—oops, I mean getting out in front of the scandal. “This is the type of mea culpa that plays well on Capitol Hill,” an analyst for the company opined in a note to clients. They said something similar about Wells Fargo as well, after Representative Maxine Waters released a report late last Friday arguing regulators should consider putting an end to the bank for “disturbingly consistent” wrongdoing in areas including student-loan servicing, overdraft fees, and mortgage-lending practices. “This is really just about whether management can survive,” said a Cowen analyst about Waters’s paper.
Corporate America knows the score too. Little wonder that, in his Senate testimony, Wells Fargo’s Sloan would not agree to cease forcing customers victimized by the bank’s actions into arbitration. Why bother? The odds of meaningful action that could harm the company are slim. Corporations conduct business with that knowledge in mind. Silicon Valley disrupters like Uber and Airbnb barge into markets regardless of the legalities of their business models, all but daring regulators to do something about it. And then, of course, there are the banks and financial institutions who played no small roll in the real-estate blowup. It’s all but a cliché to note at this point that, while millions of Americans lost their homes to foreclosure, almost no senior executive responsible for the implosion spent as much as an hour in jail.
It used to not be this way. When Microsoft got too big for its britches in the late 1990s, the federal government took it on in an antitrust case, an action that likely opened up the pathway for a start-up named Google to turn into an industry giant. Senior executives at energy-giant Enron spent years in the slammer for their role in the financial shenanigans that led to the company’s collapse. Enron’s auditor, Arthur Andersen, was indicted for obstruction, and ultimately went under as a result of the scandal.
But as the power of money in politics—from the 1 percent and corporations alike—gained momentum, things changed. Why? In part, there was blowback from the end of Enron and Arthur Andersen, which sent thousands of people who did nothing wrong to the unemployment lines. But it’s also true, as Jesse Eisinger painstakingly recounts in his recently published book The Chickenshit Club, that lobbyists and lawyers for Arthur Andersen, not to mention other corporations, were among the most vociferous in pushing that argument. And the bigger the money, the more likely it is to dominate the political process. That’s how oligarchies roll.
And, in fact, even as millions of Americans pondered how to handle the fact that they would need to arrange for their credit to be monitored for the rest of their lives, and that would still likely not be enough to prevent damage, a number of Senate Republicans were scrambling to round up the votes to overturn a CFPB regulation set to take effect later this year that would ban financial-services firms from forcing customers to sign contracts waiving their rights to join class-action lawsuits. The Internal Revenue Service, for its part, announced on September 30 that it would pay the company $7.25 million to handle taxpayer-verification services.
So, no, the government is not going to take over the functions of the credit bureaus. No, it won’t force them to follow significantly beefed-up privacy laws. No, no one is moving in to end the dominance of the big three credit-reporting agencies, which, between them, control the vast majority of the market.
Equifax might try to act like it’s changing its ways, but don’t buy it. A busy man, Smith is participating in the great charade of American life, the one where politicians and corporations pretend they will do something, when, in fact, it is almost certain that business will continue on as usual—for Equifax, for Wells Fargo and all the others.