In vowing to come down hard on Wells Fargo, President Trump left many in Washington speechless on Friday—literally.
After Trump wrote on Twitter that fines against the $1.9 trillion-asset bank will be pursued and possibly strengthened, the first time in recent memory that a president vowed tough action against a specific bank that remains under investigation, nearly everyone held their fire.
That included the major trade groups, such as American Bankers Association, Independent Community Bankers of America, and the Consumer Bankers Association, which had little incentive to antagonize a president whose regulatory agenda they support.
But it also included Democrats, such as Sen. Elizabeth Warren and Rep. Maxine Waters, who have fiercely criticized both the bank and the Republican president, and likely did not want to give the appearance of defending either one. Even Wells Fargo itself declined to comment.
Analysts said that Trump's tweet was shrewd, though some also voiced concern about its implications for the independence of the Consumer Financial Protection Bureau.
“The best move politically is always to bash the biggest bank. The president fundamentally understands this,” Jaret Seiberg, an analyst at Cowen Washington Research Group, wrote in a note to clients.
The president's attack appeared to be a response to a Reuters story that was published the day before. That story cited anonymous sources who said that acting CFPB Director Mick Mulvaney is reviewing the terms of a tentative settlement with Wells regarding alleged wrongdoing in its mortgage business. The report said that former CFPB Director Richard Cordray approved the proposed terms before stepping down in November.
Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!
— Donald J. Trump (@realDonaldTrump) December 8, 2017
For all the silence the tweet engendered, however, Trump's comments added fuel to the growing controversy regarding the independence of federal financial regulators. Mulvaney's appointment to head the CFPB has drawn sharp criticism from Democrats, in part because the former GOP congressman also serves as the head of the White House Office of Management and Budget. Mulvaney has vowed to place a political appointee at the top of each division at the CFPB.
The CFPB, like the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, is an independent agency. Such agencies have certain statutory protections from White House edicts.
“Independence from political judgment is a core precondition for a fair, safe and sound banking system,” Aaron Klein, policy director at the Brookings Institution’s Center on Regulation and Markets, wrote on Twitter. “The president’s reckless tweet … is chipping away at the bedrock of our financial system.”
At a recent congressional hearing, Sen. Sherrod Brown, D-Ohio, asked Trump's nominee for Fed chair, Jerome Powell, how he would maintain the Fed's independence from political pressure, especially from the White House.
"I'm strongly committed to an independent Federal Reserve," responded Powell, who is currently awaiting a Senate confirmation vote. "I would add, nothing in my conversations with anyone in the administration has given any concern on that front."
Some observers read the president’s tweet as holding significance beyond Wells Fargo, since it conveyed the message that bad actors in the financial sector will not be tolerated.
“To the extent that he is sending a broader message, he really does seem to be pushing back against the message that this administration does not care if the financial sector deceives or cheats,” said Brian Knight, a senior research fellow at George Mason University’s Mercatus Center.
Like many in Washington, San Francisco-based Wells Fargo declined to comment on the president’s tweet.
The bank has agreed to refund fees to mortgage customers who were improperly charged to extend the period of time in which they had locked in a specific interest rate.
The mortgage woes are just one of several scandals involving Wells, whose reputation was tarnished after revelations that employees opened as many as 3.5 million unauthorized customer accounts.
The CFPB declined to comment Friday on any pending enforcement actions. "However, as a matter of principle, Acting Director Mulvaney shares the President's firm commitment to punishing bad actors and protecting American consumers," John Czwartacki, an aide to Mulvaney, said in an email.