Content adapted from this Zerohedge.com article : Source
by Tyler Durden
Is this what a "soft nationalization" looks like?
Wells Fargo may be Warren Buffett's favorite bank, but the endorsement of America's favorite benevolent plutocrat hasn't spared it from an unusually severe punishment: two hours after markets closed on Janet Yellen's last day in office, the Fed announced unexpectedly harsh sanctions against Wells for a host of consumer and oversight abuses dating back to its infamous cross-selling scandal, barring the bank from growing until it fixes its criminal culture.
In a late Friday press release - one which is certain to exacerbate today's selloff when markets reopen on Monday- the Fed said it would bar Wells from expanding its assets beyond their end-2017 level until it "sufficiently improves its governance and controls."
Also, the Fed is demanding that Wells replace three current board members by April and a fourth board member by the end of the year. The release says the board of directors must also improve its oversight practices. The bank will not be allowed to grow until the Fed approves a detail plan of action to be submitted by the bank.
"The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers," Yellen said in a statement. "The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers."
As the release explains, in recent years, Wells pursued a business strategy that prioritized growth over managing risks and offering sufficient oversight of the firm's lending practices. As a result, the firm cheated customers of its auto-lending division and also overcharged some mortgage borrowers. And that was AFTER the cross-selling scandal mentioned above. The bank is also facing a criminal probe into its foreign-exchange desk, which allegedly overcharged its large corporate clients. The firm also lacked "an effective firm-wide risk management framework in place that covered all key risks." This, the Fed says, prevented the serious compliance breakdowns from being adequately reviewed by the board.
Emphasizing the need for improved director oversight of the firm, the Fed's disciplinary board sent a letter to Wells Fargo board members confirming that the firm's board of directors did not meet supervisory expectations during the period when these abuses were perpetrated. Letters were also sent to former Chairman and Chief Executive Officer John Stumpf and past lead independent director Stephen Sanger stating that their performance in those roles, in particular, did not meet the Federal Reserve's expectations.
Wells has provoked a vociferous public outcry because of these abusive lending practices, which have impacted millions of Americans. The pension funds of several states and municipalities have even divested their WFC shares in protest. Responding to the letter, Wells promised to make things right and its board said it would deliver its improvement plan within 60 days.
As a result of Yellen's "parting gift" which came after today's market bloodbath which in point terms was the biggest Dow plunge since the financial crisis, even greater than the US downgrade in August 2011, WFC shares plunged a staggering 8% in after-hours trading now that the Fed appears to also be finally a regulator as well.
Or maybe not, because now Wells at least has an excuse justifying why its business model is in secular decline. Remember that earlier this month we showed that Wells reported the worst mortgage numbers since the crisis. It's not as if the bank needed the Fed to tell it it is prohibited from growing - there just was no demand for its core products: mortgage loans.
Now Wells has a convenient scapegoat to explain away why it sucks so bad at what it does: the Fed's crackdown on its criminal culture... an act which may have just bought Wells 2-3 quarters of time before it has to explain to Wall Street why its "bread and butter" mortgage lending business is in the shitter.
After what Wells Fargo did, those a-holes deserved punishment far more severe than this, but at least this goes beyond the typical, tap on the wrist fine that's easily paid usually doled out to banks. It would be great if the regulators got serious about holding banks and their management teams accountable. But after seeing bankers get off scot-free after causing the 2008 financial crisis without having to serve jail time I'm skeptical there will be real accountability in the financial industry, which has more or less taken over our government.
They hire almost all young people, not that young people do not need jobs. They do. The Millennials are underemployed. They hire college grads, paying most of them low wages. But that algorithm thing just sounded like a way to get new salespeople to assume the sale. It is actually hard to make yourself do that at first, but it works. If you ask everyone religiously, amazingly, you sell something every day or almost every day. You have to do it over and over and over and over again, finding a charming way to do it that does not annoy customers. Well, it will annoy many of them, and you have to learn to not be cowed by that, while still being respectful to them. The algorithm just forced the salespeople to do it. Because, they could not get to the service screens without offering the customers a product. I really do not see the criminality in that. The Fake Accounts were different, and that Foreign Exchange Bank thing sounds bad.
Janet Yellen, chairman of the Federal Reserve, will join the Washington-based research center on Monday after the end of her presidency of the US central bank, the Brookings Institution said in a statement. "I am happy to join" Brookings, the statement quoted Helen as saying.
Yelen led the Fed to move away from the near-zero interest rates adopted by the US central bank to help restore the economy and stimulate job growth after a recession from 2007 to 2009.
The four-year term of the Yellen presidency of the Federal Reserve ends on Saturday.
It will be replaced by Jerome Powell, a member of the board of governors of the Federal Reserve, who is expected to stick to the policies adopted by Yelin.
Yelen previously said she would step down from the Fed's board of governors after her term ends.
The Federal Reserve said on Wednesday that Powell would become the new president of the central bank on Saturday and will be officially sworn in on Monday.
In Brookings, Yelen will join Ben Bernanke, former chairman of the Federal Reserve.
They hire almost all young people, not that young people do not need jobs. They do. The Millennials are underemployed. They hire college grads, paying most of them low wages. But that algorithm thing just sounded like a way to get new salespeople to assume the sale. It is actually hard to make yourself do that at first, but it works. If you ask everyone religiously, amazingly, you sell something every day or almost every day. You have to do it over and over and over and over again, finding a charming way to do it that does not annoy customers. Well, it will annoy many of them, and you have to learn to not be cowed by that, while still being respectful to them. The algorithm just forced the salespeople to do it. Because, they could not get to the service screens without offering the customers a product. I really do not see the criminality in that. The Fake Accounts were different, and that Foreign Exchange Bank thing sounds bad.thanks for sharing
Wells Fargo CEO John Stumpf's statement to appease the bank's fake account scandal did not satisfy Congress members.
Massachusetts Senator Democrat Elizabeth Warren said that the value of Wells Fargo's shares, which Stumpf had privately owned, exceeded $ 200 million and said, "You brought your employees to such a breaking point to deflect their customers so that their value is higher and they can put hundreds of millions of dollars in their pocket." used expressions.
He also told Stumpf that he had to be investigated within the scope of the scandal, saying, "You must resign.
Ohio Senator Democrat Sherrod Brown told Stumpf: "Where were thousands of people getting out of the office while the news was being written, while official officials were coming and going?" He directed the sorusun.
Stumpf said he was continuing his on-premises investigation of Wells Fargo and seeing how the Board needed to do something about the managers.
Wells Fargo, one of the largest banks in the US, has been sentenced to $ 185 million two weeks ago on grounds that it has opened more than 2 million deposits and credit card accounts unauthorized and confidential to its customers since 2011. @zer0hedge
Nice post thanks
Restemeed and upvote!
Thank you, my friend, you have informed us @zer0hedge
Resteemed, hopefully the FEDs crush those four directors and show no mercy
Let's see if some of the prohibitions placed on them make a difference.
Good read.... Summed up in two words "criminal culture" - Thanks @zer0hedge
I've got a Wells Fargo Mortgage loan because it was sold to them... I was pretty pissed about it.
Love to see at least something happening to banks
The Fed and the FDIC have categorized eight banks that have exceeded 50 billion dollars in assets under the "Dodd-Frank Banking Reform", which has been frowned upon since the financial crisis of 2007-2008, and have brought some obligations to prevent financial stability in the event of bankruptcy.
These two institutions rejected the initial resolution plans of the five banks out of eight banks last April because they were missing.
Wells Fargo, one of the largest banks in the US, has also been sentenced to $ 185 million in the recent past, claiming that over 2 million deposits and credit card accounts have been unauthorized and confidential from customers. The Bank's Chairman and Chief Executive Officer, John Stumpf, has decided to make a retirement on public reaction to the "fake account" scandal.
Let's see how they play this time.
This is a huge list of scandals committed by Wells Fargo. This looks to have been going on for a long time. Now lots of customers' accounts have been affected. The situation is in control under the feds and Wells Fargo should replace it's board members and also work on improving it's oversight practices for them to get back into business. Though I feel they have a lot to do to win customers' trusts.
This is wall street culture! This is what also interested me in decentralized currencies as it is the community who decides the path of the projects by consensus. This is only a slap in the wrist for what they have done. The new administration is now looking to turn back some regulation that was meant to help consumers so we need to keep an eye out for ourselves.
Wells Fargo deserves every ounce of this and more.
By rights they should have been dissolved and their top executives thrown into prison already.I'm actually shocked. Banks crashed the world economy a decade ago and almost everyone got off scott-free, many even profited from the crash. No one went to jail. No one was even succesfully prosectued. The government stepped in and saved their asses and wagged their finger at the banks and said "don't do that again".
If the government doesn't step in an severely punish gross malfeasance like this what is to stop them next time?
@zer0hedge wonder if this will result in a crash in the overextended rally thats lasted well over a year in the US and also the global markets.. waiting to see this next week