Receiving Wide Coverage ...
More lumps: It was another bad for Wells Fargo. Following a quiet period, the bank disclosed Thursday it is in talks with federal and state prosecutors, including the U.S. Justice Department, over potential abuses related to residential mortgages, which would be unrelated to the phony accounts scandal in its retail banking unit.
The bank confirmed the Securities and Exchange Commission is looking into its retail sales practices. It also disclosed that it increased its litigation reserves during the third quarter to $1.7 billion, from $1 billion in the prior period.
As if that weren't enough, the bank received another letter from Sen. Elizabeth Warren, D-Mass., one of its most prominent and aggressive critics on Capitol Hill. Warren and two other Democrat senators asked the bank to answer charges that it had retaliated against employees who tried to blow the whistle on the accounts scandal. "Currently available information suggests that the bank may have filed defamatory statements to retaliate against employees who questioned aggressive cross-selling practices," the senators said.
Nevertheless, Wells' new CEO and its new head of community banking said they have no intention of abandoning the bank's cross-selling strategy, which has gotten it into so much trouble. "Can we continue to grow using the same strategies, in particular cross sell? The short answer is yes," Sloan said at an investor conference, his first since taking on the top job. Mary Mack, the new retail chief, said employees would continue to be rewarded for generating new business. "The vast majority of our team members did the right thing, and still do the right thing," she said. "We want to make sure that is properly reflected in their compensation."
The Wells debacle has dragged banks back into the political fray after having faded into the background as a presidential campaign issue. "Any relief has been short-lived, thanks to the sales-tactics scandal at Wells Fargo," the Wall Street Journal said. "For banks, it feels like dodging a bullet only to step on a land mine." According to Ed Skyler, Citigroup's head of global public affairs, "Any event that causes people to question the motives of any bank is bad for every bank." Financial Times, New York Times, Washington Post, American Banker
Wall Street Journal
Walmart-Chase deal: Walmart said it will let customers use JPMorgan Chase's Chase Pay service for purchases on the store's website, and its app, including the Walmart Pay mobile service. "The move is the latest iteration of a long-simmering strategy by Walmart to find ways to minimize fees it pays to take debit and credit card payments," the Journal said. "Chase has said that merchants who use its suite of payments services could pay lower fees to process many card transactions than they would otherwise."
Dilemma: Homebuilders and developers say recently reduced limits on the size of FHA-backed loans "make it nearly impossible" for them to build homes for first-time homebuyers, the primary users of the government-insured loans. The problem is particularly acute in many higher-cost housing markets still recovering from the housing bust, including markets in California, Nevada and Arizona. "It's basically put a lid on the market," said Michael Maples, a California builder and developer. "For builders, if you're above that FHA limit your buyer pool is significantly lower." As a result, developers have had to build homes below the FHA limit or risk losing money, or not build them at all.
Quotable ...
"There's nothing wrong with cross-selling done right — it's about growing customer relationships, serving our customers, meeting their needs." –Timothy Sloan, speaking at an investor conference for the first time since he was named Wells Fargo CEO.
