Wells Fargo Fined But Its A Drop In The Bucket

Wells Fargo fined $1 billion for insurance and mortgage abuses

by Donna Borak   @donnaborakApril 20, 2018: 10:23 AM ET

Wells Fargo draws bipartisan anger from Congress

Two federal regulators are fining Wells Fargo $1 billion for forcing customers into car insurance and charging mortgage borrowers unfair fees.

The penalty was announced Friday by the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency.

It is the harshest action taken by the Trump administration against a Wall Street bank.

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Wells Fargo (WFC) apologized last year for charging as many as 570,000 clients for car insurance they didn't need.

An internal review by Wells Fargo found that about 20,000 of those customers may have defaulted on their car loans and had their vehicles repossessed in part because of those unnecessary insurance costs.

In October, the bank revealed that some mortgage borrowers were inappropriately charged for missing a deadline to lock in promised interest rates, even though the delays were Wells Fargo's fault.

The two regulators provided a roadmap for Wells to fix practices that led to consumer abuses, including the creation of a compliance committee to oversee the process.

The bank will now be required to update regulators on its progress. Wells must also show how it plans to identify customers hurt by its misconduct and explain plans to compensate them.

Regulators said the bank had already begun to take steps to fix the wrongdoing. CEO Timothy Sloan said the scandal-plagued bank has made progress toward "delivering on our promise to review all of our practices and make things right for our customers."

"Our customers deserve only the best from Wells Fargo, and we are committed to delivering that," he said following the penalty announcement.

Wells Fargo was fined $500 million by each agency. It will need to pay its penalty to the consumer watchdog within 10 days. The OCC did not specify a payment deadline.

Such a large fine is noteworthy for the CFPB under Mick Mulvaney, the acting director appointed by President Trump.

As a congressman, he called for the bureau's destruction. And under his leadership, the bureau has delayed payday-loan rules, dropped lawsuits against payday lenders and stripped a fair-lending division of its enforcement powers.

He told a House hearing this week that the bureau has not launched any enforcement actions since he took over last fall.

Related: The Fed drops the hammer on Wells Fargo

Other regulators have come down hard on Wells, too. In February, the Federal Reserve handed down unprecedented punishment against Wells Fargo for what it called "widespread consumer abuses," including its creation of as many as 3.5 million fake customer accounts.

Under that penalty, Wells Fargo won't be allowed to get any bigger than it was at the end of last year — $2 trillion in assets — until the Fed is satisfied that it has cleaned up its act.

Home Sales Down, Wages Down--You Call This A Recovery?

Mortgage Bankers: 2014 Home Sales to Fall for 1st Time in 4 Years

Thursday, 19 Jun 2014 06:54 PM

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Sales of new and existing homes in the U.S. will fall in 2014 for the first time in four years, the Mortgage Bankers Association said in a forecast Thursday.The MBA lowered its outlook to 5.28 million homes — a decline of 4.1 percent from the previous year. The industry group also said mortgage lending for purchases would total $595 billion this year, down 8.7 percent from 2013, and the first retreat in three years, according to Thursday’s MBA projection.
Rising home prices and stagnant wages make it difficult for Americans to get mortgages amid tight credit standards. The median price of an existing home gained 11.5 percent last year, second only to the 12 percent gain in 2005, the highest on record, according to the National Association of Realtors. The median U.S. household income rose less than 1 percent in 2013, according to data from Sentier Research LLC in Annapolis, Maryland.
“Even though we’re technically in a recovery, household income is lower now than it was in the recession,” said Gordon Green, a Sentier partner who formerly directed the Census Bureau office that compiles wage statistics. “It makes it a lot harder to buy a house.”
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Will Your Banking Costs Go Down If Only Mega-Banks Exist? Hardly! Will Service Get Better? No Way! Why Is Government Trying To Put Small Banks Out Of Business? Could It Be Contributions?

Regulations Could Wipe Out Your Local Bank, Leaving Only Mega-Banks

December 4, 2013 by Sam Rolley 

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A “tidal wave” of Federal regulations meant to protect American financial consumers from predatory practices of Wall Street banks is creating big problems for Main Street banks and credit unions, small bank advocates told Congress on Tuesday.

Currently, the number of banks in the United States is at its lowest level since the Great Depression, due to a combination of regulatory hurdles that are forcing many community banks out of business and lack of the same government support of larger institutions enjoy.

Since 2008, 486 small banks throughout the Nation have been shuttered by the FDIC. In many cases, the smaller banks were forced to close because of risky lending practices that were not mitigated by a Federal bailout like the risky practices of mega-banks.

Furthermore, while most of the financial rules imposed by the Dodd-Frank Act, the international Basel 3 capital standards and new regulations on credit cards apply mainly to larger banks, the spillover that pertains to smaller banks is devastating to those institutions which are not “too big to fail.”

“The overwhelming tidal wave of new regulations in recent years is having a profound impact on credit unions and their ability to serve some 96 million member owners nationwide,” Linda Sweet, head of the Big Valley Federal Credit Union in Sacramento, Calif., told a House Small Business subcommittee hearing Tuesday.

The heavy regulatory burden on small banks could mean a future where American financial consumers will be forced to choose between a handful of “too big to fail” institutions for all of their banking needs.

“We’re moving towards a system where we’re going to end up with several very large financial institutions, and that is going to leave needs unmet. Small businesses and consumers are going to find it much harder to get their financial needs met,” Hester Peirce, a senior research fellow at the George Mason University’s Mercatus Center, explained.

In January, a series of new Consumer Financial Protection Bureau (CFPB) rules for mortgage lenders will take effect, burdening mega-banks and community banks equally. Many smaller banks will likely lack the revenues to stay in the mortgage business because of the rules, according to financial experts.

“It will decrease the amount of mortgages that we make,” B. Doyle Mitchell, president of the Washington-area Industrial Bank, told lawmakers on Tuesday. “There will be a lot of people that won’t get home mortgage financing.”

Lawmakers on both sides of the aisle have expressed support for a two-tiered financial regulatory system to exempt community banks from some Federal regulations.

One example of legislative efforts to help smaller banks is Representative Blaine Luetkemeyer’s (R-Mo.) Community Lending Enhancement and Regulatory (CLEAR) Relief Act. The bill, which has 87 co-sponsors but hasn’t moved since April, would exempt small financial institutions and their loans from a handful of regulations imposed by the Dodd-Frank and the 2002 Sarbanes-Oxley Acts.

Representative Gary Miller’s (R-Calif.) Regulatory Relief for Credit Unions Act, which hasn’t been touched by Congress since June, would similarly exempt credit unions from certain Federal regulations.

Banks Need Poison Pill Not More Bailouts

We are posting this article for one of our faithful readers who loves the banks and everything about them--wrong!  This will be red meat to him and it should be to us all. 

Not very often do we agree with our Senator from Michigan, Carl Levin, however on this one, we do.  The banks obviously are being irresponsible and their history has shown this to be true.  When Chase can lose billions on derivatives after they got billions from the taxpayers, this is a problem.

The real issue is not the derivatives, but the measures that have been taken to protect the banks from failure. If they make stupid plays, they should be allowed to go out of business, period.  No bailouts, let the chips fall where they may.  If they know that Uncle Sugar will NOT be there to pick up the pieces, maybe we can get some common sense back in the board rooms of these monoliths.

However, if we are going to bail them out every time they get in trouble, they should not be able to do anything more risky than a mortgage. Forget the foreign derivatives and swaps, if they want our money, go back to banking and forget the "fancy" stuff.

Any change in Dodd-Frank should have a poison pill attached to it which would say that the bank will be allowed to go out of business should its  exposure to derivatives (foreign and domestic) and other goofy financial products gets them into trouble.  The only bailout should be for basic banking (checking and savings accounts, well underwritten mortgages, well underwritten personal and business loans, safe deposit boxes and the like) any thing else exposes the bank to a death sentence.

Agree or disagree, the United States cannot afford to bail out companies which get in trouble due to mismanagement and greed.

Conservative Tom

Wall Street Wins Under Swap-Rule Changes Moving in House

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MARCH 21, 2013

By Bloomberg News Service

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U.S. House lawmakers advanced legislation that would ease Dodd-Frank Act derivatives rules and give banks greater ability to trade swaps overseas.

The House Agriculture Committee voted today to move seven measures, including one to allow trading of almost all types of derivatives by units of banks that hold government-insured deposits -- such as JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C) A separate bill would restrict U.S. regulators’ ability to apply rules to overseas transactions.

The measures, which would need approval from the House and Senate before heading to President Barack Obama, are part of an effort to amend or limit the regulatory overhaul the president signed into law less than three years ago. Dodd-Frank requires the Commodity Futures Trading Commission and Securities and Exchange Commission to create swap-market rules after largely unregulated trades helped fuel the 2008 credit crisis.

The bills are “common-sense tweaks,” Representative Frank Lucas, the Oklahoma Republican who leads the agriculture panel, said at the meeting. “They are intended to restore the balance that I believe can exist between sound regulation and a healthy economy.”

The lawmakers are working to undo Dodd-Frank provisions even as the CFTC and other regulators are trying to complete the overhaul. The House panel’s moves were assailed by Senator Carl Levin, the Michigan Democrat who last week released a report and held a hearing on a derivatives bet that cost JPMorgan more than $6.2 billion in 2012.

‘Watering Down’

“Last year, some members of Congress supported watering down Dodd-Frank derivative safeguards, but abandoned those efforts after the world learned that JPMorgan Chase had lost billions of dollars on derivative trades,” Levin said in a statement. “It is incredible that less than a week after new JPMorgan Whale hearings detailed how the bank’s London office piled up risk, hid losses, and dodged regulatory oversight, that some House members are again supporting the weakening of derivative safeguards.”

One measure, approved on a 31-14 vote, calls for altering a requirement that banks with access to deposit insurance and the Federal Reserve’s discount window move some derivatives trades to affiliates that have their own capital. Commodity, equity and structured swaps tied to some asset-backed securities would be allowed in banks under the legislation.

“You’re putting the taxpayers on the hook,” said Representative Collin Peterson of Minnesota, the panel’s top Democrat, at the hearing. “This could come back to haunt you.”

Opposed Changes

Americans for Financial Reform, a coalition including the AFL-CIO labor federation as well as other unions and consumer groups, has opposed changes to the so-called push-out rule.

A second bill would require the CFTC and SEC to complete joint rules defining when swaps rules apply to cross-border transactions. The full rulemaking process requires agencies to conduct analysis of costs and benefits; federal courts have overturned rules based on inadequate economic assessments.

The CFTC’s proposed guidance, which lacks an economic analysis, has spurred opposition from JPMorgan, Goldman Sachs Group Inc. (GS) and other U.S. banks, which say they will be hurt compared with foreign-based rivals.

“What this bill is is an attempt to derail the guidance and tie down the ability of the CFTC to do anything,” Marcus Stanley, policy director for Americans for Financial Reform, said in a telephone interview.

Joint Determination

Representative David Scott, a Georgia Democrat, said the measure allows the two agencies to jointly determine if rules should apply to certain countries. He said Dodd-Frank’s other requirements for bank registration and higher collateral and clearing standards limit the “re-importation of risk” from other countries.

Additional legislation approved today exempts commercial and manufacturing so-called end users from having to post collateral to support trades. A separate bill advanced prevents trades between company units from being considered swaps and subject to clearing and other Dodd-Frank regulations.