President Donald Trump took aim at the third-largest U.S. bank on Friday, writing on Twitter that government fines and penalties against Wells Fargo & Co could be hiked amid an ongoing sales scandal. “Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!” Trump wrote. Reuters reported on Thursday that the new acting head of the U.S. consumer finance watchdog agency was reviewing whether Wells Fargo should pay tens of millions of dollars over alleged mortgage lending abuse, according to three sources familiar with the dispute.
It was not clear whether Trump was reacting to the Reuters’ report. San Francisco-based Wells Fargo has been rocked by a sales scandal in which thousands of its employees enrolled perhaps millions of customers in products they did not want or need. Last year, the bank paid a record $100 million fine to the CFPB over an earlier phony accounts scandal.
The White House referred questions about Trump’s tweet to a spokesman for Mick Mulvaney, the new interim head of the Consumer Financial Protection Bureau (CFPB). John Czwartacki, senior advisor at the CFPB, said the regulator would not comment on any pending enforcement matters, but added that “as a matter of principle, Acting Director Mulvaney shares the President’s firm commitment to punishing bad actors and protecting American consumers.” The Republican president has pledged to roll back rules put in place under his Democratic predecessor Barack Obama that put Wall Street on a tighter leash after the 2007-09 financial crisis. The financial industry is hoping regulatory agencies will adopt a less aggressive approach to fines under the Trump administration.
Those hopes were raised when Mulvaney, Trump’s pick to lead the CFPB on a temporary basis, told reporters this week that he was reviewing more than 100 enforcement actions currently in the works, including litigation, cases that are being settled and investigations. Mulvaney said he would delay at least two enforcement actions, without naming them. “The notion that this administration is or will be tough on Wall Street doesn’t pass the laugh test, and that fact is evident in deeds, not tweets,” said Lisa Donner, the executive director of Americans for Financial Reform, a coalition of groups advocating for tougher oversight of the financial system.
CHANGING OF THE GUARD
Mulvaney is part of a changing of the guard, and change of approach, at key U.S. financial regulatory agencies, as Trump administration promises to unburden banks from red tape and crisis-era rules are slowly being implemented. The Comptroller of the Currency (OCC), the agency that regulates many of the largest U.S. banks, wants to ease up on severance pay restrictions imposed on Wells Fargo in the wake of its sales scandal, according to a Reuters report. In addition, the Republican-controlled Congress in October killed a rule that allowed customers to band together to sue financial firms over disputes.
Wells Fargo said in October that it would refund homebuyers who were wrongly charged fees to secure low mortgage rates, a black mark against a lender that already had been roiled by scandal over its treatment of customers. Richard Cordray, the Obama-era official who left as head of the CFPB last month, had approved the terms of a possible settlement with Wells Fargo over the fees, according to three sources familiar with the matter. That proposal envisioned a Wells Fargo payout of tens of millions of dollars but likely short of the record $100 million payout it made to the CFPB last year.
Legal experts said it is highly unusual for presidents to weigh in on specific financial enforcement actions. Even regulatory chiefs typically do not comment on ongoing investigations, concerned that public remarks could compromise the case in some way.
Trump’s talk of potentially higher fines appeared to have only a moderate impact on shares of Wells Fargo, which generates more than $20 billion in annual earnings. Its stock was up about 0.05 percent to $59.39 in afternoon trading, down from a session high of $59.89. Wells Fargo spokesman Mark Folk declined to comment on Trump’s tweet.