California extends ban against Wells Fargo due to scandals
Wells Fargo was barred by California's treasurer from being hired for another year because of the bank's fraudulent account scandal, leaving the company largely cut off from underwriting work with one of the nation's biggest municipal-bond issuers.
Treasurer John Chiang on Monday said he decided to leave the sanctions in place against the San Francisco-based bank, whose reputation has suffered because of revelations employees opened bogus accounts in customers' names to meet sales quotas. Chiang's decision will prevent his office from hiring Wells Fargo as an underwriter or investment broker. The ban was imposed in September 2016 and was set to lapse after a year.
The scandal at Wells Fargo prompted a nationwide backlash, with public officials in New York, Washington and Illinois also moving to sever ties to the bank. Chief Financial Officer John Shrewsberry previously said such measures have cost it "tens of millions of dollars" in revenue, and it has lost ground to other municipal-bond underwriters this year.
Chiang said there has been an "alarming drumbeat of new reports of egregious, unethical or illegal actions by the bank over the past year," including allegations that it denied loans to those brought to the country illegally as children and overcharged veterans for mortgages.
"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.
Banking, Not Politics
Wells Fargo spokesman Gabriel Boehmer said the bank has taken steps to address Chiang's concerns, including rescinding some $180 million in compensation to executives. While California's ban prevents Wells Fargo from being hired as an underwriter, it can still bid on bond deals that are awarded through competitive auctions. In April, Wells Fargo won the bidding for a $604 million California bond issue.
"Wells Fargo is in the business of banking, not politics," he said in a statement. "We will continue serving the state and rebuilding trust with Californians as we take steps to become a better bank, regardless of politics."
While Wells Fargo doesn't break out revenue generated by the government business in its financial filings, company presentations show the operations produced roughly $570 million in 2016, about 2 percent of the wholesale division's revenue. Chief Executive Officer Tim Sloan on Friday told analysts there's been "a little bit of impact" on the unit because some municipalities have "put us on probation" or temporarily stopped working with the bank.
Wells Fargo shares were little changed Monday, climbing about 6 cents to $53.75 by 3:34 p.m. in New York.