There's the door: Wells Fargo said it fired four senior retail banking executives following its board's independent investigation into the phony accounts scandal. While the bank has said it fired more than 5,300 employees over the past five years for improper sales practices, Tuesday's statement appears to be the first time Wells has publicly announced the firing of senior people in its retail bank as a result of the scandal. The executives won't get their 2016 bonuses and will forfeit unvested equity and vested outstanding options. Wall Street Journal, Financial Times, Washington Post, American Banker
A Fannie Mae logo is pictured outside their headquarters in Washington, DC, on Wednesday, December 29, 2004. Fannie Mae, the biggest provider of money for the U.S. mortgage industry, will sell as much as $4 billion of preferred stock after its regulator said it broke accounting rules and is ``significantly undercapitalized.'' Photographer: Jay Mallin / Bloomberg News
Jay Mallin/Bloomberg News
A bad bet: A federal appeals court Tuesday upheld a ruling that bars most legal claims by investors in Fannie Mae and Freddie Mac, who assert the government illegally seized billions of dollars from the two federal mortgage agencies. Investors who bought stock in the two companies sued the government after it unilaterally amended the terms of its bailout of Fannie and Freddie and captured billions of dollars in profits generated by the two agencies.
"The ruling was a setback for hedge funds and other distressed-asset investors who bought up shares in the companies over the past few years, betting that they could force Congress, the White House or courts to make a U-turn on plans to revamp the housing-finance companies and score a large windfall," the Wall Street Journal commented. Shares in both Fannie and Freddie plunged by a more than a third after the ruling was announced. Wall Street Journal, Financial Times, Washington Post, American Banker
Hard times: Shares in HSBC Holdings dropped nearly 7% Tuesday, its biggest one-day loss since 2009, after it reported unexpectedly weak fourth-quarter results and a mixed outlook for this year. "Executives at the bank said a changed U.S. stance on global trade, the rise of populism in Europe and Britain's planned exit from the European Union have added uncertainty in HSBC's key markets," the Journal reported. The bank's net loss widened to $4.23 billion in last year's fourth quarter from $1.33 billion in the year-earlier period. Full-year net profit dropped to $2.48 billion from $13.52 billion. Regulators apparently are also looking into the bank's anti-money-laundering processes. Wall Street Journal, Financial Times, American Banker
Wall Street Journal
A really big deal: Three big commercial banks – JPMorgan Chase, HSBC and Morgan Stanley – were awarded the lead underwriter spots for the planned initial public offering of stock in Saudi Arabia's state-owned energy company, which is expected to be the largest such deal ever. Saudi Arabian Oil Co., better known as Saudi Aramco, is planning to offer as much as a 5% stake that could realize as much as $100 billion to $150 billion.
Overexpansion: A growing glut of residential rental units is prompting big banks to retreat from financing new apartment projects, "forcing developers to look to nontraditional lenders and seek more expensive types of financing to complete projects," the paper reports. According to Axiometrics, a real estate research firm, nearly 400,000 new apartments, a 30-year high, are expected to be completed this year, amid signs that landlords are having troubling filling units that are already on the market. In last year's fourth quarter, only 50,000 of 88,000 new units were rented.
Quotable ...
"No one who was directly managing this has been held accountable except for lower-level team members." – A retail banking executive at Wells Fargo
Most big banks saw modest reductions in their requirements following this year's stress tests. The results come as the Fed prepares to smooth year-to-year swings with a new averaging rule.
The D.C. District Court held a hearing this morning and defendants filed briefs in a case to determine whether Federal Reserve Gov. Lisa Cook will remain on the Federal Reserve Board after her ostensible firing by President Trump earlier this week. No ruling was issued, but one is expected before the FOMC votes in mid-September.
Buy now/pay later lender Affirm hit profitability goals for its fiscal year 2025 and set aggressive guidance for fiscal 2026 ahead of Wall Street's estimates. Its stock soared more than 10% Friday.
The proposed Berkshire Hills-Brookline merger is expected to finalize on Sept. 1; Flagstar Financial has scheduled a special shareholders' meeting to simplify the bank's regulatory structure; former Credit Suisse executives agreed to settle a suit filed by shareholders claiming they failed to maintain adequate risk management; and more in this week's banking news roundup.
Housing regulator Bill Pulte lodged more fraud allegations against Fed Governor Lisa Cook as she filed a temporary restraining order regarding attempts to remove her.
Online lenders are urging the Office of the Comptroller of the Currency to force banks to disclose all account closures to the agency, following an executive order earlier this month.
