Nation & World

Wells Fargo's $1 billion pact gives U.S. power to fire managers

The order is unprecedented

Pedestrians walk past a Wells Fargo and Co. bank branch in Los Angeles on April 19, 2018. (Bloomberg)
Pedestrians walk past a Wells Fargo and Co. bank branch in Los Angeles on April 19, 2018. (Bloomberg)

Wells Fargo and Co.’s $1 billion fine won’t close the book on fallout from its consumer scandals.

The nation’s third-largest bank submitted to an unprecedented order Friday that would give the Office of the Comptroller of the Currency the right to remove some of the lender’s executives or board members.

That comes on top of the penalties Wells Fargo will pay to settle probes into mistreatment of consumers, the largest sanction of a U.S. bank under President Donald Trump.

The OCC said it “reserves the right to take additional supervisory action, including imposing business restrictions and making changes to executive officers or members of the bank’s board of directors.”

The agency also could veto potential executive candidates.

The bank will pay $500 million in penalties each to the OCC and the Consumer Financial Protection Bureau, according to a statement Friday. Wells Fargo warned shareholders last week it soon would face a fine of that size, which it will book retroactively in the first quarter.

The bank remains under a Federal Reserve penalty that bans growth in total assets.

“CEOs who hoped the Trump administration would be universally lenient regulators missed the difference between a dislike for rules that stifle innovation and employment and a dislike for rules against wrongdoing,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business.

The settlement covers issues in Wells Fargo’s auto-lending and mortgage units. The bank revealed last year that it had forced unwanted insurance on customers who took out car loans, prompting investigations by U.S. and California regulators.

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It was also accused of imposing inappropriate charges for locking in interest rates on new home loans.

The bank will take a charge of $800 million for the first-quarter results it reported last week, reducing net income to $4.7 billion — the worst first-quarter performance in six years.

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