California hits Wells Fargo where it hurts Halts investments with bank for its ‘ fleecing’ of customers
California Treasurer John Chiang on Wednesday said the state will suspend several key banking relationships with Wells Fargo to sanction the firm following allegations of “fleecing its customers.”
Serving up the first direct blow to Wells Fargo’s business following this month’s allegations of fraud at the bank, the treasurer will halt investments in Wells Fargo securities for 12 months. During that time, the state’s treasurer will also stop using Wells Fargo as a broker- dealer for buying investments and not use Wells Fargo as an underwriter for California state bonds where the treasurer assigns the role. California’s treasurer is one of the largest bond issuers in the nation. The state treasurer’s office oversees $ 2 trillion in banking transactions and handles an investment fund of $ 75 billion.
“Wells Fargo’s fleecing of its customers by opening fraudulent accounts for the purpose of extracting millions in illegal fees demonstrates, at best, a reckless lack of institutional control and, at worst, a culture which actively promotes wanton greed,” Chiang said in a statement. In addition to being the state’s treasurer, Chiang sits on the board for the state’s massive public pensions including California Public Employees’ Retirement System and California State Teachers’ Retirement System. Chiang says he will press for additional corporate changes at the company, including a review of executive pay and new ethics reporting processes.
Wells Fargo is reeling from a scandal in which thousands of bank employees opened accounts for customers without their consent. Hundreds of thousands of accounts, some say upwards of 2 million, were opened, although the actual number hasn’t been verified. Wells Fargo says it has reimbursed fees incurred and more than 5,000 employees were fired. California’s move comes as Wells Fargo CEO John Stumpf is expected to tell lawmakers Thursday that the bank will act more quickly than planned to alter its sales practices.
Some of the pain from the widening scandal is starting to sting. Late Tuesday, the company said two key executives, including Stumpf, agreed to allow the bank to claw back gains. Stumpf will surrender $ 41 million in unvested stock awards and a senior executive in charge of community banking will surrender $ 19 million in unvested stock awards.
Losing a key business account, though, stands to hurt the company’s business. “We certainly understand the concerns that have been raised,” Wells Fargo spokeswoman Jennifer Dunn says. “We are very sorry.”