NEW YORK: After markets closed on her final workday in office, Federal Reserve chair Janet Yellen delivered a blow to one of the nation’s largest banks: Wells Fargo & Co won’t be allowed to grow until it cleans up.
Fed officials said the San Francisco-based lender’ pattern of consumer abuses and compliance lapses called for an unprecedented sanction.
Until Wells Fargo addresses shortcomings in areas including internal oversight, it can’t take any action that would boost total assets beyond their level at the end of 2017, without the Fed’s permission.
The bank said after-tax profit in 2018 would be reduced by US$300mil to US$400mil and its stock slumped in late trading last Friday. “This is akin to the last scene in The Godfather,” said Isaac Boltansky, an analyst at Compass Point Research & Trading.
“Chair Yellen decided to handle unfinished business on her way out the door.” Yellen’s act stands out at a time when the Trump administration is looking to dial back some of the financial regulations put in place after the 2008 global financial crisis. Those moves include watering down enforcement actions at the Consumer Financial Protection Bureau and proposing revisions to Dodd-Frank reforms on Wall Street.
Wells Fargo began stumbling through a spate of scandals 17 months ago, starting with revelations that branch employees opened millions of accounts without customer permission to meet aggressive sales targets. — Bloomberg
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