California treasurer imposes year-long ban on working with Wells Fargo
Discovery that the bank ‘fleeced’ its customers demonstrates ‘at worst, a culture which actively promotes wanton greed’, says state treasurer John Chiang
|"Yessir, jus' drove the stage right off a cliff!"|
The Guardian Jana Kasperkevic in New York 28 September 2016 (The pictures that accompany this article did not appear in the original)
The move by the US’s largest state comes as the bank faces another grilling in Congress over the scandal that has already led the bank to pay $185m in penalties and clawback millions in bonuses from top executives.
“The recent discovery that Wells Fargo & Company fleeced 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,” John Chiang, California’s state treasurer, wrote in a letter to the bank on Tuesday.
Chiang’s office oversees nearly $2tn in annual banking transactions and manages a $75bn investment pool.
|"I'm gettin' off this wagon!"|
“My office has long relied on Wells Fargo, our oldest California-based financial institution, as a partner to meet the state’s investment and borrowing needs,” wrote Chiang. “But, to borrow from Albert Einstein, ‘Whoever is careless with the truth in small matters cannot be trusted with [larger] matters.’ In the case of Wells Fargo, how can I continue to entrust the public’s money to an organization which has shown such little regard for the legions of Californians who have placed their financial well-being in its care?”
The $185m settlement announced at the end of the month was a result of an audit that revealed that Wells Fargo staff created as many as 1.5m deposit accounts and 565,000 credit card accounts without customers’ consent. As a result, the bank fired more than 5,300 employees. The bank denies that the creation of these accounts was part of an orchestrated effort.
According to bank’s critics, the bank’s staff opened such unauthorized accounts in order to meet their sales quotas. The bank announced yesterday that it is terminating all of its sales quotas starting 1 October.
In light of this scandal, Chiang’s office has effective immediately suspended its investment in all Wells Fargo securities, use of Wells Fargo as a broker-dealer for investment purchases and use of Wells Fargo as managing underwriter on negotiated sales of California state bonds.
These sanctions are in effect for 12 months during which Chiang asked that Wells Fargo quarterly report back its compliance with the terms of its $185m settlement with the Consumer Financial Protection Bureau, the Los Angeles city attorney, and the Office of the Comptroller of the Currency.
|"How come nobody told me stage was pulled by jackasses?"|
Chiang has also called for separation of the chief executive and chair positions at Wells Fargo – both of which are currently held by John Stumpf, a review of Wells Fargo’s compensation practices and clawbacks of pay for those executives who are linked to the predatory sales practices.
“Wells Fargo has diligently and professionally worked with the state for the past 17 years to support the government and people of California. Our highly experienced and proven government banking, securities and treasury management teams stand ready to continue delivering outstanding service to the state,” a Wells Fargo spokesperson told the Guardian.
“We certainly understand the concerns that have been raised. We are very sorry and take full responsibility for the incidents in our retail bank. We have already taken important steps, and will continue to do so, to address these issues and rebuild your trust.”