State Treasurer John Chiang extends sanctions on Wells Fargo for another year
The state of California will continue its financial sanctions against Wells Fargo for a second year following a string of new disclosures about bad practices at the bank since its sham accounts scandal unfolded.
State Treasurer and gubernatorial candidate John Chiang said Monday that revelations of wrongdoing at multiple business units have undermined confidence in the San Francisco bank, which also has failed to complete necessary reforms.
For the record:
9:35 PM, Oct. 16, 2017An earlier version of this report misspelled former Wells Fargo Chief Executive John Stumpf’s last name as Stump.
“The opaque manner with which the bank continues to do business and the frequency of new disclosures of wanton greed and lack of institutional control makes this decision so clear that there really was no choice at all,” he said in a statement.
The sanctions suspend investments by the Treasurer’s Office in Wells Fargo securities, bar use of the bank as a broker-dealer for the purchase of investments and bar the bank as a managing underwriter for bond sales in which the treasurer has the authority to appoint the underwriter.
The measures were imposed in September 2016, just weeks after the bank agreed to a $185-million settlement with regulators for creating millions of unauthorized checking, savings and other accounts. The next month, then-CEO and Chairman John Stumpf was ousted.
The practice was traced to an overbearing sales culture documented in a 2013 Los Angeles Times investigation.
“We will continue serving the state and rebuilding trust with Californians as we take steps to become a better bank, regardless of politics,” the bank said.
Cited by Chiang in making his decision to continue the sanctions were disclosures the bank overcharged veterans in a federal mortgage-refinancing program and charged auto-loan borrowers for insurance they didn’t need. He called on federal regulators to expand their inquiry into the bank.
In a letter sent Monday to the Wells Fargo board and Chief Executive Tim Sloan, Chiang made several demands that he said must be met before he would retract the sanctions. They included removing remaining board members who had watchdog positions at the time of the accounts scandal and the funding of a study on how Wells Fargo can better serve California communities underserved by banks.
A department official estimated last year that the bank earned several million dollars annually in state brokerage and underwriting fees, a mere fraction of the bank’s annual profit, which totaled $22 billion in 2016.
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