Wells Fargo will continue to be banned from doing business with the government of its home state for at least another year because of the bank’s “wanton greed” and “lack of institutional control,” California State Treasurer John Chiang announced Monday.
Last year, California suspended the state’s “most highly profitable business relationships” with Wells Fargo for at least one year in the wake of the bank’s fake account scandal.
Now that year has come and gone, but Chiang said Monday that not only has the bank not done enough to fix the fallout from the fake accounts, Wells Fargo’s subsequent scandals make extending the bank’s ban for at least another year an easy decision.
“The opaque manner with which the bank continues to do business and the frequency of new disclosures of wanton greed and lack of institutional control makes this decision so clear that there really was no choice at all,” Chiang said in a statement.
Among the additional issues cited by Chiang as reason for extending the ban are Wells Fargo’s recent announcement that it agreed to pay $108 million to the federal government to settle allegations that the bank overcharged military veterans for refinance loans and the bank’s $80 million payout for potentially wrongfully force-placing auto insurance on as many as 570,000 customers.
“The bad news has come with such regularity, I fear more Americans will become de-sensitized to the bank’s pervasive exploitation of the public’s trust,” Chiang said in a letter to Wells Fargo.
The extended sanctions include the suspension of investments by the Treasurer’s Office in Wells Fargo securities, suspension of the use of the bank as a broker-dealer for purchase of investments, and suspension of the bank as a managing underwriter for bond sales in which the Treasurer appoints the underwriter.
Chiang also said that his office is not satisfied with Wells Fargo’s response to the fake accounts, and Chiang’s letter to Wells Fargo lays out several demands that the bank must comply with before Chiang will consider lifting the ban, including:
- Providing written evidence each quarter that it is in full compliance with the terms and conditions of consent orders entered with the Consumer Financial Protection Bureau, the Los Angeles City Attorney and the Office of Comptroller of the Currency. If the bank is out of compliance, it must present a plan of recovery
- Providing information on the numbers of California consumers harmed, the concentration of those customers by branch location, ZIP code or city, along with the status of efforts to resolve grievances and make them whole
- Removing four directors who sat on the board during the unfolding of the bogus account scandal
- Commissioning and funding a study by a respected consumer organization on how financial institutions can better serve Californians, especially the unbanked
“Such accountability is needed more than ever if the bank hopes to repair the damage done to its customers, shareholders and employees following what is now known to be years of widespread consumer fraud,” Chiang said.
Chiang also said that because of the number of additional “questionable practices” were uncovered in the last year, he is calling the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Federal Reserve, and the Consumer Financial Protection Bureau to investigate the activities of other lines of Wells Fargo business, including divisions within the company that do business with the California Treasurer’s Office and other government entities.
“Wells Fargo committed fraud against millions of its retail customers, might it do the same with its government and public sector customers?,” Chiang’s office said in a statement. “Hundreds of public agencies that depend on the bank for their borrowing and investment needs deserve an answer.”
Chiang did note that the bank has made some progress on some of the demands his office laid out last year, including separating the roles of chairman and chief executive, and clawing back $70 million in pay from some of the bank’s top executives, but said that wasn’t enough.
“Given all that has – and has not – happened over the past year,” Chiang said, “The question I posed to Wells Fargo executives in September of 2016 remains: ‘How can I continue to entrust the public’s money to an organization that has shown so little regard for the legions of Californians who have placed their financial well-being in its care?’”
When contacted by HousingWire, a Wells Fargo spokesperson said that the bank met all of Chiang’s demands over the last year and noted the number of improvements the bank has made to its operations.
“Wells Fargo is in the business of banking, not politics,” Wells Fargo said in the statement.
“Over the past year, we have met and exceeded all of Treasurer Chiang’s expectations, including separation of chief executive and chair positions; expansion of the company’s customer complaint servicing and resolution process; establishment of a dedicated hotline for customers with concerns about their accounts; enhancements to the EthicsLine intake process and expansion of the ‘Raise Your Hand’ initiative to encourage team members to speak up; elimination of product sales goals for retail bankers; and compensation forfeitures and clawbacks that now exceed $180 million,” the bank continued.
“In the meantime, we have continued to serve the State of California, loaning $500 million this year to the Department of Water Resources for critical Oroville Dam repairs and underwriting a total of $800 million bond issuance for the state, the latter which saved the state’s general fund $1.3 million,” the bank added.
“We have served the Treasurer’s Office with distinction and integrity for a decade,” the bank concluded. “We will continue serving the state and rebuilding trust with Californians as we take steps to become a better bank.”
