Sanctimonious Wells Fargo ‘Fesses Up That it Will Probably Pay Fines in Enforcement Actions

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.

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  1. Francois T

    If banks accept a 200 billion dollars settlement as a starting position, (as a floor, not a ceiling) we, the People, should be willing to signal our intention to think about listening to them.

    Otherwise, “see ya in Court!”

    1. jacke

      Not unless you have a big pile of money to pay the lawyers. The banks own biglaw, and biglaw knows every dirty trick in the book to get what the bank and/or its officers want. Corruption and unethical conduct by biglaw lawyers is expected.

  2. ian

    my case is going to cost ’em a bundle. They better jack up their estimate. Just when they think they see the light at the end of the tunnel,it turns out to be an oncoming train. I am that train.

    1. GuyFawkes

      I am suing them PRE-DEFAULT. Put that in your Wells Fargo pipe and smoke it!

      Everyone needs to file a quiet title action against all these criminal enterprises.

      Bring ’em down.

      1. Jack Rip

        That’s an interesting dream, I wonder what your therapist thinks of it. We are pawns serving a large criminal enterprise. The enterprise controls the justice system as well.

        So far, we have huge number of defaults with an administration that couldn’t care less and financial institutions built around the idea of cheating people. If you go to court in all likelihood, they’ll decide against you in summary judgment and the appeal court will hardly contain it belly laugh and give you the thumb down.

        1. jacke

          How true. In the case of a different bank whose corrupt inner circle decided to seize a property once the building project was 80% complete under its “at will” clause and sell the note for pennies on the dollar to an insider-connected holding company, the first act of the foreclosure attorney was to make calls to the construction company’s bank and bonding company to start the ball rolling to force it into bankruptcy. Once the target doesn’t have any money, they can’t fight in court, no proof of cause is needed and summary judgments destroy what little is left. If there is any fight left in people so destroyed, threatening other attorneys to stop them from taking a winnable case works (“if your partner takes this case, he’ll never work in this city again”). The banks own the court system, and someone who has what their top officials want will never see the inside of the courtroom. Corrupt, big money law firms know every dirty trick in the book and care nothing about ethics.

    2. Allen C

      It seems that enough malfeasance exists for the ambulance chaser type attorneys to profit. A perplexing lack of action in an era where a company is sued within days of reporting surprise, disappointing news.

  3. steelhead23

    “$1.2 billion beyond the reserves already set aside.” Pray tell, how much had you already set aside? It had better be enough to move that decimal point. I am tending to dream today – I am wondering whether there might be cause for not merely actual damages but punitive damages as well. After all, these guys ruined lives, that oughta cost em.

  4. F. Beard

    I’ve been reading The End of Money and the Future of Civilization by Thomas H. Greco, Jr. Just skimming ahead, I am impressed so far.

    We had best arm ourselves with knowledge. The reactionary gold bugs are scheming.

  5. Fraud Guy

    From this evening’s NYT “DealBook” column:

    “Indeed, many regulators in Washington are wary of too punitive a settlement for fear of hobbling their recovery just as they are turning around. Memories of the financial crisis in the fall of 2008 and the subsequent federal bailout are still vivid.”

    This is the elephant in the room that I think even Yves dwells on too little. The conventional wisdom in Washington is that we can’t afford to enforce justice with the banks, as it will just necessitate another bailout.

    1. GuyFawkes

      There are pleny of small local banks who will step in and take their place.

      We need to let these criminal banking institutions fail. They should never have been given a bail out. It was us that were sold an empty bill of goods.

    2. Yves Smith Post author

      I’ve talked about this repeatedly. There is no need for big banks. Every study every done says big banks are less efficient on a cost per dollar of assets basis once you pass a not very high threshold.

      This is all about not showing the Administration to have been engaged in a big con during the stress tests.

      1. Allen C

        The sad reality Yves is that the economic show is likely over if they move in on even one of the big banks. Many clever book titles here. Crimes so perfect that you have regulators and politicians with dual incentives to help sweep it under the rug and the criminals get to continue the game. Then we have Team Whitewash consisting of the likes of Dimon, Buffett, and Munger working to have the average American ignore the crimes. Folks such as William Black and yourself seem to have no chance other than to provide clues to historians. At least we have that.

    3. Fran

      Plus, the failure of the banks to make a decent, fair, settlement for the homeowners they have harmed (with great profits to themselves) is causing the real estate market to languish – which, in itself, is putting a huge dent in our economy. So, what? we are afraid to let some banks fail, but it is OK to let our economy fail?

  6. Fraud Guy

    I didn’t mean to criticize Yves, whom I consider the best financial journalist writing today.

    Yes, she and others have made a major theme of the idea that the large banks are a drag on our economy and society. I was making a narrower point, which is that there often seems to be a sense of perplexedness on the part of many as to why the Obama administration seems unwilling to pursue the serious wrong-doing on the part of the banks. Often, Yves’ and readers’ frustration leads to an implication that the administration has corrupt motives. I am arguing that the explanation is both simpler and less sinister, which is that the administration’s inaction is driven by fear of provoking another crisis/bailout cycle. The administration is wrong in this conclusion, but I think that’s what motivates it.

    1. CHRIS

      If that is true than the present administration is even more lame than I thought….that would mean they don’t have the stones to show leadership and do what is right. Being ignorant can be sinster if it causes harm to the masses. there is no excuse for what the stance of the president and the administration. Doing nothing and then bringing bank execs and The head of GE into the Adminstration has to be considered more than just ignorance.

    2. Yves Smith Post author

      Shiela Bair was fighting tooth and nail to force changes on Citigroup, like getting it to break up and getting Pandit out. Even that level of action against a big bank would have shown the regulators had some real ammo.

      She was undermined by the Treasury (the Fed and OCC may have joined in too).

      This was not about saving the banks or the system. They may rationalize it that way and have conned the more observant members of the public into believing it, but the extent of the inaction against the banks goes way beyond what was arguably necessary to save the economy (not that I buy that rationale either).

      The GSE 2.0 plan is also proof that the administration is deeply in bed with the banks.

  7. Bravo

    Guy Fawkes:

    “Everyone needs to file a quiet title action…”. Why not organize and take collective action on behalf of all homeowners now saddled with title issues caused by MERS and its members. Walk like the Egyptians American style?

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