Fed Slaps Unusual Penalty On Wells Fargo Following 'Widespread Consumer Abuses'

Trump credited with success, but scandal not far behind

Mr Jerome "Jay" Powell, the Republican former investment banker tapped by United States President Donald Trump to lead the US Federal Reserve, will take the reins of monetary policy starting today.

The Fed's unexpected censure of Wells Fargo should also be a boon to its rivals.

"This is akin to the last scene in 'The Godfather,"' said Isaac Boltansky, an analyst at Compass Point Research & Trading. Fed Chair Janet Yellen said Wells Fargo will not be allowed to grow any larger until it can do so without endangering customers.

It's been a long time coming.

Wells Fargo became engulfed in scandal in 2016 after admitting its employees had opened 3.5 million phony deposit accounts and lines of credit without clients' knowledge as part of high-pressure retail sales tactics the bank touted to investors but has since repudiated. He was on a temporary Fed assignment when they met in 1977. "The banking system is more resilient". She also sent a letter on Friday to Senator Elizabeth Warren, a Democrat who's among the bank's most prominent critics.

Wells Fargo stated that the company is confident it will satisfy the requirements of the consent order it entered into with with the Board of Governors of the Federal Reserve System. The firm's compliance will be measured as an average of assets over two quarters, according to the regulator.

"We want to have this cap lifted as soon as possible". In an introduction Friday night, he and Chief Financial Officer John Shrewsberry maintained a cool spotlight on numbers. Shares briefly dropped by 6% at the bank during afterhours trading. And they're sticking with cost-cutting targets that include shaving about $4 billion in annual expenses by the end of 2019. But executives aren't expecting a surge in expenses from outside consultants or, for now, to boost their estimate of reasonably possible legal losses. "There's not much. There's no settlement sum or common cash punishment or anything like that", Shrewsberry said.


Yet more changes are pending atop the bank.

Nine current board individuals including Chairman Betsy Duke were on the board before the embarrassments started ejecting. After planned replacements this year, five may remain.

Powell, who has served on the Fed board with Yellen since 2012, ended his remarks by popping the collar of his suit jacket.

The Fed ordered the bank to submit a plan for improving board oversight and risk management.

Wells Fargo has paid $185 million in fines and offered redress to harmed customers. Ironically, this sanction actually provides an element of cover for the lender, which has found growth to be a challenge lately.

Before the end of past year, the OCC told the bank's board that experts may take extra requirement activities over the accident coverage and home loan shamefulnesses, individuals acquainted with the circumstance said.

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