Editor's note: Morning Scan will not publish on Monday, Sept. 4 in observance of Labor Day. We’ll be back on Tuesday, Sept. 5.
Receiving Wide Coverage ...
Will it ever end?: Wells Fargo says it undercounted the number of “potentially unauthorized” accounts it opened by some 1.4 million, or 67%. The bank now says it opened 3.5 million accounts without customer permission, up from its original count of 2.1 million, which led to $185 million in fines when it was first disclosed last September. Of the 3.5 million accounts, it now says about 190,000 incurred fees and charges, up from the 130,000 previously identified. The bank said it will refund more than $6 million to customers who were charged fees.
As if that weren’t enough, Wells also said it enrolled about 528,000 customers in its online bill-pay service without their permission, and will refund an additional $910,000 to those people.
“The latest disclosure is likely to keep the bank in the regulatory spotlight and boost the possibility of future congressional hearings,” one banking analyst said. Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker here and here
“The disclosure prompted howls of outrage from Elizabeth Warren, the Democratic senator from Massachusetts, who said on Twitter that the whole board of the bank should be thrown out,” the Financial Times reports. “CNBC host Jim Cramer went further, saying the executive team should go too.”
Indeed, New York Times columnist Jeffrey Goldfarb says the new revelation “magnifies the spotlight” on Wells CEO Timothy J. Sloan, a 30-year Wells veteran who replaced John G. Stumpf last year after the scandal broke.
“Mr. Sloan’s long tenure, including as part of an executive team that should have known about the wrongdoing early on, makes it hard for him to credibly overhaul the culture at a huge institution under intense scrutiny,” Goldfarb writes. If Elizabeth A. Duke, who is scheduled to become chairman of the board next year, “believes in the case for keeping him, let her make it loud and clear for shareholders. If not, reconsidering his position should be high on her agenda.”
Thursday’s disclosures also raise questions about Stumpf’s truthfulness when he testified about the scandal last year before Congress, Times columnist Gretchen Morgenson says. In light of a series of other scandals at the bank revealed in recent weeks, it’s reasonable to ask: “Did Wells Fargo mislead the United States Congress during hearings last fall when it characterized its widespread opening of unauthorized bank accounts as a one-off problem in an otherwise clean operation?”
Several big investors revealed they voted against several Wells’ board members at the bank’s annual meeting earlier this year — well before Thursday’s announcement. Vanguard Group said it voted against nonexecutive chairman Stephen W. Sanger and two other directors, including Enrique Hernandez, Jr., head of the bank’s risk committee. BlackRock voted against seven Wells directors, including Sanger, while State Street Global Advisors voted against one Wells director.
Not talking: Consumer Financial Protection Bureau Director Richard Cordray responded to House Financial Services Committee Chairman Jeb Hensarling’s request that he declare whether or not he plans to continue in his job or leave soon to run for governor of Ohio. “At this time, I have no further insights to provide on that subject,” Cordray told the Texas Republican.
Yet, while Hensarling and other Republicans in Congress “have vehemently opposed the agency since its creation, [they] have also been unable to muster enough support to derail its work,” the Times reports. At the same time, the White House has been somewhat restrained in attacking the agency because it believes the CFPB is “too popular to pick a public fight with.”
“The public does not share the G.O.P.’s ire toward the agency or its mission,” said policy analyst Dean Clancy. “It is an agency about protecting the little guy, and that is tough to oppose.”
Wall Street Journal
Watch out above: Investors in Canadian banks need to be on their guard, warns the Heard on the Street column. “While there are substantial differences that make Canadian lenders more resilient” than their American counterparts were 10 years ago after the U.S. mortgage meltdown, “the market is underpricing the risks they face.” American Banker also looks at the challenges for Canadian banks.
Going down-market: The Federal Deposit Insurance Corp.’s second-quarter report on bank earnings was generally “pretty good” but for one glaring exception: a 25% rise in credit card charge-offs and a big jump in provisions for future losses. “This looks like the result of a collective effort to go down-market,” the paper says. “Big card issuers such as BofA, Chase and Wells Fargo spent the years after the crisis scrubbing their portfolios, lending mostly to prime and super-prime borrowers. Once that clean-up effort was out of the way, they dropped their standards, chasing higher returns from riskier customers.”
“We apologize to everyone who was harmed by unacceptable sales practices that occurred in our retail bank. Today’s announcement is a reminder of the disappointment we caused to customers and stakeholders.” — Wells Fargo CEO Timothy Sloan.