Fed lifts restrictions placed on Wells Fargo in 2018 because of its fake-accounts scandal
NEW YORK (AP) — The Federal Reserve said Tuesday that Wells Fargo is no longer subject to the restraints the Fed placed on the bank in 2018 for having a toxic sales and banking culture.
It's a win for Wells Fargo, which has spent nearly a decade trying to convince the public and policymakers that it had changed its ways.
'We are a different and far stronger company today because of the work we've done,' said Wells Fargo CEO Charlie Scharf in a statement. Scharf also announced that each of the 215,000 employees at Wells Fargo would receive a $2,000 award for turning the bank around.
Wells Fargo used to have a corporate culture where it placed unreasonable sales goals on its branch employees, which resulted in employees opening up millions of fake accounts in order to meet those goals. Wells' top executives called its branches 'stores' and employees were expected to cross-sell customers into as many banking products as possible, even if the customer did not want or need them.
After an investigation by The Los Angeles Times, Wells Fargo shut down its sales culture and fired much of its leadership and board of directors. The fake accounts scandal cost Wells Fargo billions of dollars in fines and lost business, and permanently tarnished its reputation, particularly because the scandal broke only a few years after the Great Recession and financial crisis. It was later revealed that Wells Fargo opened up roughly 3.5 million accounts that were not wanted or needed by customers.
In order to push Wells to fix itself, the Federal Reserve took the unusual step of placing Wells Fargo in a program where the bank could grow no larger than it was in 2018. No bank had previously been placed into such a program, known as an asset cap.
Since taking over in 2019, Scharf's goal has been to convince the Federal Reserve that Wells Fargo had fixed its toxic banking practices.
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CNN
15 minutes ago
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Analysis: Trump is increasingly hostile to China. He's playing with fire
Despite widespread concerns that the trade war is dragging down America's economy, President Donald Trump has notched quite a few wins on his economic belt in recent weeks. Inflation keeps falling. Jobs remain plentiful. And there's growing evidence the economy could be booming this quarter. That's why Trump's increasingly hostile rhetoric about China over the past week was particularly concerning ahead of his call Thursday with Chinese leader Xi Jinping. Trump's economy is cookin' – for now. But the economic Jenga tower the Trump administration has constructed is precariously balanced on a host of economic caveats and unproven theories. Renewed trade tensions with the world's second-largest economy threatens to knock the tower to the ground. May 12 represented a major turning point for the global trade war. Delegates from China and the United States announced they would significantly roll back their historically high tariffs on one another. Markets were elated. 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Over time, the Fed targets 2% inflation, so America is, at long last, nearing that long-term target after a yearslong bout with historic price hikes. Trump, citing America's low inflation rate, has been bullying Federal Reserve Chair Jerome Powell to cut interest rates to boost the economy – even summoning Powell to the White House last week to give him a talking to. As Powell has noted, economic data is looking strong. Jobs data, although weakening, has steadied in recent months. The unemployment rate is hovering at just over 4%, and employers have added a solid number of jobs each month. The number of available jobs in America unexpectedly increased in April, a potential indicator that the labor market remains robust. And a positive effect of trade tensions could at least temporarily benefit America's economy. Gross domestic product, the broadest measure of the economy, shifted into reverse in the first quarter as businesses stockpiled goods in anticipation of tariffs. This quarter, imports from foreign countries – particularly China – have fallen dramatically. In April, the US trade deficit shrank by its steepest monthly pace on records, which go back to 1992. That should give America a big, albeit momentary, boost. The Atlanta Fed's GDPNow tool currently predicts the US economy will grow at an adjusted annualized rate of 4.6% this quarter, a huge number that would more than make up for the -0.2% rate in the first quarter. But Trump's ramping up of restrictions and public scrutiny of China risks putting sugar in the gas tank just as the engine started humming again. Trump on Wednesday said in a Truth Social post that Chinese leader Xi Jinping was 'extremely hard to make a deal with.' Trade talks have stalled, Bessent said, apparently frustrating Trump. Last week, Trump posted on social media that China 'TOTALLY VIOLATED ITS AGREEMENT WITH US.' 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CNN
21 minutes ago
- CNN
Analysis: Trump is increasingly hostile to China. He's playing with fire
Despite widespread concerns that the trade war is dragging down America's economy, President Donald Trump has notched quite a few wins on his economic belt in recent weeks. Inflation keeps falling. Jobs remain plentiful. And there's growing evidence the economy could be booming this quarter. That's why Trump's increasingly hostile rhetoric about China over the past week was particularly concerning ahead of his call Thursday with Chinese leader Xi Jinping. Trump's economy is cookin' – for now. But the economic Jenga tower the Trump administration has constructed is precariously balanced on a host of economic caveats and unproven theories. Renewed trade tensions with the world's second-largest economy threatens to knock the tower to the ground. May 12 represented a major turning point for the global trade war. Delegates from China and the United States announced they would significantly roll back their historically high tariffs on one another. Markets were elated. 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This quarter, imports from foreign countries – particularly China – have fallen dramatically. In April, the US trade deficit shrank by its steepest monthly pace on records, which go back to 1992. That should give America a big, albeit momentary, boost. The Atlanta Fed's GDPNow tool currently predicts the US economy will grow at an adjusted annualized rate of 4.6% this quarter, a huge number that would more than make up for the -0.2% rate in the first quarter. But Trump's ramping up of restrictions and public scrutiny of China risks putting sugar in the gas tank just as the engine started humming again. Trump on Wednesday said in a Truth Social post that Chinese leader Xi Jinping was 'extremely hard to make a deal with.' Trade talks have stalled, Bessent said, apparently frustrating Trump. Last week, Trump posted on social media that China 'TOTALLY VIOLATED ITS AGREEMENT WITH US.' Trump said that he made a 'fast deal' with China to 'save them from what I thought was going to be a very bad situation.' He added: 'So much for being Mr. NICE GUY!' The Trump administration had expected China to lift restrictions on rare earth materials that are critical components for a wide range of electronics, but China has so far refused, causing intense displeasure inside the Trump administration and prompting a recent series of measures to be imposed on the country three administration officials told CNN last week. For example, the White House warned US companies against using AI chips made by China's national tech champion Huawei. It stopped US companies from selling to China software that is used to design semiconductors. And the US State Department announced it would 'aggressively revoke visas' for some Chinese students in America. China, in turn, has accused the United States of 'provoking new economic and trade frictions.' 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And the Fed's beige book, a collection of business leaders' reactions to the economic environment, showed that companies across industries are remaining deeply uncertain about the economy – particularly because of the trade war. So good news could ultimately turn bad, even without escalating tensions with China. But a return to tit-for-tat tariffs and closed borders could make matters significantly worse.
an hour ago
Americans filing for jobless benefits last week rises to highest level in months
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