LOS ANGELES: The state of California has suspended significant business ties with Wells Fargo, dealing another blow to the bank struggling to contain the fallout from a bogus accounts scandal. In a letter addressed to Wells Fargo Chairman John Stumpf and the board of directors, state Treasurer John Chiang said Wednesday he could no longer “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.” Wells Fargo, the second largest US bank by market value, has apologized and said it fired 5,300 people tied to the illegal conduct, which saw employees boost sales figures by opening unauthorized deposit and credit accounts and then covertly fund them with customers’ money. It has also paid $185 million in fines.
Abuse of customers
Chiang decried the bank’s “venal abuse of its customers” and said he was suspending state business with Wells Fargo in “its most highly profitable business relationships.” Effective immediately, the California’s treasurer’s office was suspending investments in all Wells Fargo securities, stopping use of Wells Fargo as a broker-dealer for investments and barring the bank from serving as managing underwriter on negotiated sales of California state bonds.
The California treasurer’s office oversees $2 trillion in annual banking transactions, manages a $75 billion investment pool, and is the nation’s largest issuer of municipal debt. The measures would remain in place for one year but could be extended if Wells Fargo is found to have continued to run afoul of regulations, Chiang said. Wells Fargo said in a statement to US media that it “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.”
Chiang also said in his letter that he would use his position as a board member on the nation’s two largest pension funds to push for reforms at Wells Fargo, including separating the chief executive and chairman positions, both currently held by Stumpf. The move by California comes one day after the bank’s board of directors announced that Stumpf would forgo $41 million in compensation as an independent investigation continues. Stumpf was grilled on Capitol Hill last week by members of the powerful Senate Banking Committee, some of whom have called for his resignation. He is scheduled to testify Thursday before the House Financial Services Committee. —AFP