03 February 2018

A Major Smackdown Out the Door

As one her last official acts as Fed Chair, Janet Yellen froze the level of its assets in response to repeated wrongdoing:
After markets closed on her final workday in office, Federal Reserve Chair Janet Yellen delivered a blow to one of the nation’s largest banks: Wells Fargo & Co. won’t be allowed to grow until it cleans up.

Fed officials said the San Francisco-based lender’s pattern of consumer abuses and compliance lapses called for an unprecedented sanction. Until Wells Fargo addresses shortcomings in areas including internal oversight, it can’t take any action that would boost total assets beyond their level at the end of 2017, without the Fed’s permission. The bank said after-tax profit in 2018 would be reduced by $300 million to $400 million and its stock slumped in late trading Friday.

“This is akin to the last scene in ‘The Godfather,”’ said Isaac Boltansky, an analyst at Compass Point Research & Trading. “Chair Yellen decided to handle unfinished business on her way out the door.”

Yellen’s act stands out at a time when the Trump administration is looking to dial back some of the financial regulations put in place after the 2008 global financial crisis. Those moves include watering down enforcement actions at the Consumer Financial Protection Bureau and proposing revisions to Dodd-Frank reforms on Wall Street.


Regulators can’t allow “pervasive and persistent misconduct at any bank,” Yellen said in a statement. She also sent a letter on Friday to Senator Elizabeth Warren, a Massachusetts Democrat who’s among the bank’s -- and the financial industry in general’s -- most prominent critics.

“The firm has much to do to earn back the trust of its customers, supervisors, investors and the public,” Yellen told the lawmaker. The growth restriction “is unique and more stringent than the penalties the Board has imposed against other bank holding companies for similar unsafe and unsound practices.”
I expect this to be overturned within the next 12 months, but it is seriously gangsta.


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