Wells Fargo hit with unusual ban on growth in Yellen’s final act

Lender’s pattern of consumer abuses and compliance lapses call for sanction — Fed

After markets closed on her final work day 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’s 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.

“This is akin to the last scene Wells Fargo began stumbling through a spate of scandals 17 months ago, starting with revelations that employees opened millions of accounts without customer permission to meet sales targets. It kept coming under fire after revealing that auto-loan clients were forced to pay for unwanted car insurance and mortgage customers were improperly charged fees. 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.”

On Friday night, Fed officials said they had been working on their order for a while, and that the company had just finally agreed to it. The announcement came hours before Yellen’s term was to expire, hitting the biggest bank in her former district. She was president of the San Francisco Fed from 2004 to 2010.

Regulators can’t allow “pervasive and persistent misconduct at any bank,” Yellen said. She also sent a letter on Friday to Senator Elizabeth Warren, a Democrat who’s among the bank’s most prominent critics.

The growth restriction “is unique and more stringent than the penalties the Board has imposed against other bank holding companies for similar unsafe and unsound practices,” Yellen told the lawmaker.

Warren replied in a statement: “Her decision today demonstrates that we have the tools to rein in Wall Street — if our regulators have the guts to use them.”

Wells Fargo’s assets are now capped at $1.95 trillion.

— Bloomberg