Wells Fargo investors got yet another jolt of bad news on Thursday with the disclosure that regulators are poised to impose a $1 billion penalty on the bank for infractions related to mortgage rate extensions, auto loans, risk compliance and other matters.
That comes on top of the $4.25 billion the bank set aside last year for liabilities related to its fake accounts scandal and the mortgage-backed securities issues it had before the financial crisis. It also paid a fine of $185 million in 2016 over the accounts scandal.
In February, the Federal Reserve took Wells Fargo to the woodshed, ruling that the bank could not expand its balance sheet beyond the nearly $2 trillion in total assets that it reported at the end of 2017; it’s believed to be the first time the Fed has imposed such a curb on growth at a major bank. “We cannot tolerate pervasive and persistent misconduct at any bank,” said the former Fed chairwoman, Janet Yellen, as she announced the move on her last day in the job.
Even President Trump, ordinarily a champion of bank deregulation, piled on, saying on Twitter in February that fines and penalties against Wells Fargo for “their bad acts against their customers and others” will be “pursued and, if anything, substantially increased.”
I’ve been a harsh critic of Wells Fargo’s previous management for fostering a culture of rule breaking and customer abuse, and for marginalizing as disloyal and even firing anyone at the bank with the courage and integrity to try to stop the illegal practices.
After all, the bank’s bad management is gone. Whether they’ve paid adequately for their multiple transgressions is an open question — no one has gone to jail, or even faced criminal charges. But Wells Fargo shareholders have been battered, with the company’s stock down about 16 percent this year, while shares of banking rivals like JPMorgan and Bank of America have fared much better, both with slight gains.
Over the past five years, a period that spans Wells Fargo’s fake accounts scandal, the comparison is even more dramatic: shares in JPMorgan and Bank of America have more than doubled. Wells Fargo’s stock has gained just about a third.