naked capitalism

Even though deciding which TBTF is the worst is like a having an ugly contest between Cinderella’s sisters, Wells Fargo may deserve pride of place. Yes, the Vampire Squid sorta owns the government. JP Morgan has too many people believing it didn’t need a bailout during the crisis. Ahem, what about a $76 trillion derivatives clearing operation don’t you understand? If AIG or Morgan Stanley had failed post Lehman, JPM would have been next. And it is the most aggressive bank I have come across in the “gotcha” fees and bait and switch as far as retail customers are concerned.

But Wells is sanctimonious and too often has taken the position that it is less badly behaved than other banks, which grates on me. It has played fast and loose with its balance sheet reporting, and has lied to Congressional staffers, claiming it hadn’t engaged in robo signing when there were depositions in the public domain to the contrary.

Hopefully, not many NC readers are having to think seriously about filing for bankruptcy. But the practice described in this post at the San Diego Bankruptcy Attorneys Blog reads as bad faith dealings (and if someone from Wells reading this might dare to disagree, we can have a conversation about the past and ongoing certifications, which are included in SEC filings, that your bank has made as trustee in numerous mortgage backed securities offerings):

Wells Fargo has an interesting corporate policy, and by “interesting” I mean to say “bordering on the criminally fraudulent.” If you have a regular checking account at Wells Fargo, and file for bankruptcy, the bank will freeze your assets — even if you don’t owe them a dime.

Think on that for a second….. You’ve never bounced a check in your life and have never borrowed money from Wells Fargo, not a credit card, not a mortgage, nothing.

But you fall behind on your debts and…you decide your best option is to file for Chapter 7 and get a fresh start. You list a Wells Fargo checking account on Schedule B as an asset, as you’re required to do by federal law, and provide the address of the bank branch and account number.

A week after filing, you go to the ATM but the machine eats your card. You go inside and ask the teller what’s going on, and he says “Sorry, your account’s been frozen.” You ask to speak to the manager, who looks at the same computer screen and also says it’s frozen.

How do you get it unfrozen? How do you not default on your car and mortgage and power bill? According to Wells Fargo’s national policy, they will only release these funds if the bankruptcy trustee appointed in your case asks them to, or if they’re ordered to do so by the court. Which takes at least a month.

My advice to every single one of my clients is to take that money out of Wells Fargo immediately and park it at another bank or credit union where you don’t have any loans or credit cards.

Update 5:30 AM: Reader JoJo in comments confirms my suspicions. This story comes from ABC,
“Bank confusion turns into $10,000 problem”

PETALUMA, Calif. (KGO) — The common banking practice of making a deposit turned into a $10,000 nightmare for a Bay Area man and his daughter. Their money disappeared.

Myron Hinrich of Petaluma helps support his daughter, Anne, while she studies film-making at USC.

“She’s struggling in graduate school; she needed to make a rent payment,” Hinrich said.

Anne was low on cash so Hinrich deposited a $10,000 check into Anne’s account at Wells Fargo Bank. However, what happened after that came as a complete shock.

“They said the check was fraudulent, they canceled the account and they didn’t want to see her again,” Hinrich said.

Wells Fargo refused to give Anne the $10,000. Instead, the bank abruptly closed her account and told her to go away. The only explanation? The bank claimed the check was a fraud.

It gets worse. Wells refused to return the money to her father….