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Miami Herald
5 days ago
- Business
- Miami Herald
Wells Fargo analysts reboot stock price targets after Fed action
Pervasive and persistent misconduct. Those were the words that then-Federal Reserve Chairwoman Janet Yellen aimed directly at Wells Fargo (WFC) on Feb. 2, 2018, in light of what the Fed called "widespread consumer abuses and other compliance breakdowns," which included employees routinely opening fake accounts and credit cards. Don't miss the move: Subscribe to TheStreet's free daily newsletter Clients noticed the fraud after being charged unanticipated fees and receiving unexpected credit or debit cards or lines of credit. Initial reports blamed individual Wells Fargo branch workers and managers for the problem, as well as sales incentives associated with selling multiple solutions or financial products. Blame was later shifted to top-down pressure from higher-level management to open as many accounts as possible through cross-selling, which is a bank associate attempting to sell a current customer additional financial products. In response, the Fed restricted the bank's total asset size until it sufficiently improved its governance and controls. PATRICK T. FALLON/Getty Images Wells Fargo, founded in 1852 in response to the California Gold Rush, was required to improve its governance and risk-management program and to complete a third-party review of these improvements. "We cannot tolerate pervasive and persistent misconduct at any bank, and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again," Yellen said in a statement. More Economic Analysis: Hedge-fund manager sees U.S. becoming GreeceA critical industry is slamming the economyReports may show whether the economy is toughing out the tariffs The fake-accounts scandal reportedly continued to cause legal, financial and reputational headaches for Wells Fargo and former bank executives as recently as September 2023. But that came to an end on June 3, 2025, when the Fed said Wells Fargo was no longer subject to the asset-growth restriction from the central bank's 2018 action, removing the roughly $1.95 trillion cap on the bank's assets. Other provisions in the 2018 enforcement action will remain in place until the bank satisfies the requirements to end them, the Fed said. Chief Executive Charlie Scharf said the Fed's decision "marks a pivotal milestone in our journey to transform Wells Fargo. "We have been methodically investing in the company's future while improving our financial results and profile." Scharf praised Wells Fargo employees and said all full-time workers will receive a $2,000 award. "This is why we have been long Wells Fargo all this time," said TheStreet Pro's Stephen Guilfoyle. Scharf, "whom your author is a fan of, took the job in 2019 with the stated mission of resolving the bank's regulatory issues and cleaning up its reputation," the veteran trader said. "Mission accomplished, Charlie. Nice job." Earlier this year Wells Fargo was ranked as the third largest U.S. bank by assets at $1.71 trillion, coming in behind JP Morgan Chase (JPM) and Bank of America (BAC) . In April, Wells Fargo posted lower-than-expected quarterly revenue and a decline in net interest income. Scharf said the bank expected "continued volatility and uncertainty" and is "prepared for a slower economic environment in 2025, but the actual outcome will be dependent on the results and timing of the policy changes." Wells Fargo's stock is up 8.2% in 2025 and has climbed nearly 30% from a year ago. The stock closed June 4 regular trading at $75.38, off 0.4%. Several investment firms issued research reports on Wells Fargo after the Fed decision. TD Cowen said that it did not "dispute that this is good news for Wells" but that much of the optimism around the lifting of the asset cap has already been priced into the stock, according to The Fly. Related: Analyst initiates SoFi coverage, mulls loans, growth prospects The investment firm, which has a hold rating and $83 price target on Wells Fargo shares, said it expected "a modest positive reaction to the news" but was "far more excited on what this action could mean to longer-term revenue growth." Bank of America analyst Ebrahim Poonawala raised the investment firm's price target on Wells Fargo to $90 from $83 and affirmed a buy rating. Removal of the asset cap is a catalyst, both fundamentally and for stock valuation, Poonawala said. He does not think investors should "sell the news"; rather, he said that the focus should now shift to management's ability to deliver high-teens percent return on tangible common equity. And Evercore ISI raised its price target on Wells Fargo to $88 from $72 and maintained an outperform rating. The near-term benefit to the shares is likely a modest positive given that the removal of the asset cap was widely expected. But the firm remains "particularly constructive on the longer-term outlook" for WFC shares, as it expects investors to shift their focus to the removal's implications for earnings going forward. Related: Apple analyst raises alarm about earnings, revenue growth The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
UPI
17-05-2025
- Business
- UPI
Moody's becomes final credit agency to downgrade U.S. debt rating
Moody's Ratings downgraded U.S. debt, becoming the last of the three major credit rating agencies to move in that direction. File Photo by Pat Benic/UPI | License Photo May 17 (UPI) -- Moody's Ratings downgraded U.S. debt, becoming the last of the three major credit rating agencies to move in that direction. The New York-based agency downgraded government long-term issuer and senior unsecured ratings to Aa1 from Aaa this week, while also changing its outlook to negative from a previous rating of stable, Moody's said in a media release. "This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns," Moody's said in the company's statement. "Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs. We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration." Standard & Poor's in 2011 became the first of the three nationally recognized statistical rating organizations to lower its U.S. debt rating. It later accused the Justice Department of "retaliation" for filing a $5-billion lawsuit against the credit rating agency. Fitch Ratings followed in 2021, dropping its American long-term foreign-currency issuer default rating from top-ranked AAA to AA+ amid a political battle over the U.S. debt ceiling. That move elicited then-Treasury Secretary Janet Yellen to blast the move at the time, calling it "unwarranted." Moody's in 2023 signaled it could move in the same direction, putting U.S. banks on a negative watch list and warning of a 'mild' recession, and later that year lowering its outlook of U.S. debt. The agency in November then warned of a potential downgrade. "Over more than a decade, U.S. federal debt has risen sharply due to continuous fiscal deficits. During that time, federal spending has increased while tax cuts have reduced government revenues. As deficits and debt have grown, and interest rates have risen, interest payments on government debt have increased markedly," Moody's said in its statement this week. "If the 2017 Tax Cuts and Jobs Act is extended, which is our base case, it will add around $4 trillion to the federal fiscal primary deficit over the next decade. While we recognize the U.S.' significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics." The White House attempted to shift the blame to former President Joe Biden's administration. "The Trump administration and Republicans are focused on fixing Biden's mess by slashing the waste, fraud, and abuse in government and passing The One, Big, Beautiful Bill to get our house back in order," White House spokesperson Kush Desai told reporters Friday. "If Moody's had any credibility, they would not have stayed silent as the fiscal disaster of the past four years unfolded." Moody's said it does not expect further downgrades in the near future. "The U.S. economy is unique among the sovereigns we rate. It combines very large scale, high average incomes, strong growth potential and a track-record of innovation that supports productivity and GDP growth. While GDP growth is likely to slow in the short term as the economy adjusts to higher tariffs, we do not expect that the US' long-term growth will be significantly affected," the agency said in its statement.
Yahoo
09-05-2025
- Business
- Yahoo
Bessent urges Congress to act on debt limit by mid-July
Treasury Secretary Scott Bessent called on Congress Friday to raise the nation's debt ceiling by mid-July to keep the federal government from defaulting on its more than $36 trillion debt. In a letter to Speaker Mike Johnson (R-La.), Bessent said there is 'reasonable probability' that the government's 'cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess.' 'Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July, before its scheduled break, to protect the full faith and credit of the United States,' he said. Republicans are hopeful they will be able to raise the debt limit on their own this year using a process known as budget reconciliation. The aim is to raise the debt ceiling using the same vehicle being put together to advance wide swaths of President Trump's agenda with only GOP votes. This would allow Republicans to avoid Democratic demands for concessions in exchange for their votes, but it would also set a hard mid-summer deadline for the massive bill that has spawned numerous divisions on the right. The debt limit was last suspended by Congress as part of a bipartisan bill struck between former President Biden and GOP leadership in 2023, staving off the threat of national default through early 2025. However, then-Treasury Secretary Janet Yellen said in January that the government would have to implement 'extraordinary measures' after the government was expected to reach the new limit later that month. The debt limit caps how much money the Treasury Department can owe to pay the country's bills. Trump urged the previous Congress to raise the debt limit before he assumed office, as Republicans argued Democrats could use the leverage point to demand major concessions. House GOP leaders also used the debt limit during the Biden administration to get Democrats to come to the negotiating table, but only after months of an intense game of chicken between both sides. The high stakes battle eventually resulted in a debt limit suspension and a bipartisan deal for new limits on spending, but not without another downgrade of the nation's credit rating. In his note to lawmakers on Friday, Bessent said 'prior episodes have shown that waiting until the last minute to suspend or increase the debt limit can have serious adverse consequences for financial markets, businesses, and the federal government, harm business and consumer confidence, and raise short-term borrowing costs for taxpayers.' 'These risks were underscored by the Treasury Borrowing Advisory Committee in a report issued on April 29, 2025, raising concerns including increased volatility and costs, negative impacts on U.S. financial strength, and a heightened risk of a default,' he said. Updated at 5:14 p.m. EDT Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Yahoo
09-05-2025
- Business
- Yahoo
Treasury secretary calls on Congress to raise or suspend the debt ceiling by mid-July
WASHINGTON (AP) — The U.S. is on track to run out of money to pay its bills as early as August without congressional action, Treasury Secretary Scott Bessent warned Friday. He is calling on Congress to either raise or suspend the debt ceiling by mid-July. 'A failure to suspend or increase the debt limit would wreak havoc on our financial system and diminish America's security and global leadership position,' Bessent wrote in the letter to House Speaker Mike Johnson. 'Prior episodes have shown that waiting until the last minute to suspend or increase the debt limit can have serious adverse consequences for financial markets, businesses and the federal government.' Earlier this week, Bessent twice testified in front of congressional committees that the Treasury's debt ceiling is 'on the warning track.' After the debt limit was reinstated in January, Treasury Secretary Janet Yellen — in one of her last acts in the position — said the agency would institute 'extraordinary measures" intended to prevent the U.S. from reaching the debt ceiling. Since then, the Treasury Department has stopped paying into certain accounts, including a slew of federal worker pension and disability funds, to make up for the shortfall in money. Bessent has continued to notify Congress about the use of extraordinary measures in an effort to prevent a breach of the debt ceiling. In his latest letter, Bessent attributed the August deadline, known as the 'X-date,' in part to receipts from the latest tax filing season. A Bipartisan Policy Center analysis released in March estimated that the U.S. could run out of cash by mid-July if Congress did not raise or suspend the nation's debt limit. President Donald Trump had previously demanded that a provision raising or suspending the debt limit — something his own Republican Party routinely resists — be included in legislation to avert the last potential government shutdown under his Democratic predecessor, President joe Biden. 'Anything else is a betrayal of our country,' Trump said in a statement in December. That deal did not ultimately address the debt limit. The letter to Johnson comes as Republicans consider a massive tax cut and border security package that includes an increase in the debt limit. Bessent's request could give GOP lawmakers greater incentive to reach an agreement.
Bloomberg
01-05-2025
- Business
- Bloomberg
Yellen Warns US Recession Risk Is ‘Way Up' After Trump's Tariffs
Janet Yellen warned that the risk of a US recession has 'gone way up' after Donald Trump's sweeping tariffs rattled financial markets, consumers and businesses. The former Federal Reserve chair said in an interview with the Financial Times that the tariffs on major trading partners will have 'tremendously adverse consequences' for American consumers and firms.
