Daily Archives: September 29, 2016

Wells Fargo executive departs as probe into scandal launches

Marketwatch:

Wells Fargo & Co. WFC, +0.49% said Tuesday afternoon that one executive has left the company and an investigation is being launched after a scandal that involved employees opening up accounts in unwitting customers’ names. The bank said that independent directors, working with law firm Shearman & Sterling LLP, will investigate the retail banking sales practices of the bank.

House Panel Questions Fed Chief on Wells Fargo Scandal

House lawmakers questioned Janet L. Yellen, the Federal Reservechairwoman, on Wednesday about the handling of the Wells Fargo accounts scandal, with some calling for tougher punishment of the biggest banks and their senior managers when they violate the law.

Ms. Yellen appeared before the House Financial Services Committee to discuss the agency’s supervision of the banking system, including revelations that thousands of employees at Wells Fargo had opened as many as two million unauthorized bank and credit card accounts to meet high-pressure sales goals. Ms. Yellen faced a number of tough questions during the hearing about how regulators are responding to the issue, with some lawmakers asking whether banks had simply grown too big.

Read on.

Part 7: THE HALF BILLION DOLLAR GLITCH

Part 7

Knight Capital made headlines around the world when one of its computers went on a shopping spree that ended up costing the company $440 million. So surely its secrets would come out now.

ON AUGUST 1, 2012, the Dow Jones Industrial Average opened the day at 13,007.47.

Business headlines that morning included conservative opponents of gay marriage celebrating “Chick-fil-A Appreciation Day,” the continued reluctance of Fannie Mae and Freddie Mac to offer debt relief to their borrowers, and profit declines at the video game company Electronic Arts.

And then the Glitch happened.

Knight Capital, the company Chris DiIorio had insisted to the SEC for a year was engaged in a monumental fraud, opened the day by inadvertently buying millions of shares in 154 different stocks. The company blamed an untested software installation that triggered the rapid-fire trades.

In an environment where milliseconds can mean millions, it took Knight Capital 45 minutes to turn the software off.

Stock values surged from the high demand, and when Knight sold back the shares it had bought by mistake, it was left with a net loss of around $468 million. The New York Stock Exchange canceled trades in six of the 154 stocks involved but deemed itself “hamstrung” by SEC rules that prevented it from breaking all of them.

Knight could have used the assets on its balance sheet to absorb the loss, but DiIorio had maintained for years that many of those assets were inflated or even fictional — ghost receivables intended to balance out the massive liabilities Knight had accrued by selling stocks it didn’t really have.

And DiIorio alleged that Knight’s immediate efforts to raise the full amount of its Glitch losses, instead of offsetting them with existing assets, proved that something was amiss on its balance sheet.

Read on.

Wells Fargo plans to eliminate sales goals sooner than planned

Embattled Wells Fargo & Co plans to eliminate sales goals for its retail banking business sooner than planned, according to prepared remarks its chief executive officer will deliver at a congressional hearing on Thursday.

Wells Fargo is under pressure to show it is holding top brass accountable after government investigators discovered that employees opened as many as 2 million accounts without customers’ knowledge in order to meet sales targets.

Read on.

CFPB: Minority borrowers to receive $9 million from Provident Funding

Hispanic and African-American borrowers who paid higher broker fees than white borrowers on mortgage loans from Provident Funding Associates from 2006 to 2011 will soon receive their share of a $9 million settlement.

Last year, the Consumer Financial Protection Bureau and the Department of Justice filed a complaint against Provident Funding, accusing the company of charging higher fees to minority borrowers based on their race or nationality, rather than their credit profile.

Read on.

California Treasurer John Chiang suspends business with Wells Fargo

California Treasurer website:

PR16:41
September 28, 2016

Contact: Marc Lifsher
916-653-2995

SACRAMENTO – Wells Fargo’s admission that thousands of its bank employees opened over two million fraudulent consumer accounts is a legal and ethical outrage that cannot go unpunished, State Treasurer John Chiang said today.

‘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,’ said Chiang.

As the state’s banker, the Treasurer oversees nearly $2 trillion in annual banking transactions, manages a $75 billion investment pool, and is the nation’s largest issuer of municipal debt. His office historically relies on financial institutions, such as Wells Fargo, to serve as partners to meet the state’s investment and borrowing needs.

The Treasurer announced in a letter to Wells Fargo Chairman John G. Stumpf and board members that he has ordered the suspension of Wells Fargo’s participation in its most highly profitable business relationships with the State of California.

Those sanctions include:

  • Suspension of investments by the Treasurer’s Office in all Wells Fargo securities.
  • Suspension of the use of Wells Fargo as a broker-dealer for purchasing of investments by his office.
  • Suspension of Wells Fargo as a managing underwriter on negotiated sales of California state bonds where the Treasurer appoints the underwriter.