Although banks are having to pay fines or make settlements now and again that are grossly inadequate relative to the damage they’ve inflicted on consumers and communities, I thought I’d single out this example.
The reason is simple. Wells Fargo has annoyingly tried to maintain that it is as pure as the driven snow, and has gone as making easily proven misrepresentations in meetings with Congressional staffers in doing so (which makes one wonder how much truth-stretching it has engaged in in communications with investors).
So I must confess to a bit of schadenfreude in reading this Bloomberg story:
Wells Fargo & Co.’s lending and foreclosure practices probably will draw an enforcement action that may include a fine, the bank said today in a regulatory filing.
“It is likely that one or more of the government agencies will initiate some type of enforcement action against Wells Fargo, which may include civil money penalties,” the San Francisco-based lender said in its annual report. “Wells Fargo continues to provide information requested by the various agencies.”
Wells Fargo said the high end of estimated litigation losses could be $1.2 billion beyond the reserve already set aside, according to the filing.
Although the story also mentioned the rumored $20 billion settlement with bank servicers, the language of this disclosure does not necessarily mean that Wells is talking about the same matter (you would probably not call something a “penalty” if it was the result of a settlement. Note that cease and desist letters have apparently been sent out to the major servicers without dollar amounts attached as a result of the eight week investigation. Of course, it is also possible that Wells has not decided yet whether it is prepared to settle….).
Update 7:30 PM Tom Adams puts this in perspective:
…the second largest mortgage servicer takes an incremental loss adjustment of $1.2 billion for a portfolio of with a balance of $1.8 trillion – works out to about 0.1% of the portfolio. Probably about $200 per borrower.
If this is indeed the level of the proposed settlement, you can see why we aren’t impressed.