Society

California Sanctions Wells Fargo, Suspends Relationship

| by Nik Bonopartis
California State Treasurer John ChiangCalifornia State Treasurer John Chiang

Wells Fargo is getting it from all sides.

While the bank's CEO John Stumpf was grilled by congressional lawmakers, who called his company a "criminal enterprise" and compared it to the defunct Enron, California’s state treasurer announced the state won't do business with the bank for a year.

State Treasurer John Chiang (pictured) announced the punitive move on Sept. 26, telling taxpayers that California will suspend investments with Wells Fargo, cease using the company as a broker and stop using the bank to underwrite state bonds, KNTV reported.

California suspended its financial relationship with Wells Fargo effective immediately, Chiang said, and will not do business with the company for at least a year.

"I have a duty as a leader in the financial marketplace to take action aimed at helping you understand that integrity and trust matter," Chiang wrote to Wells Fargo. "How can I continue to entrust the public's money to an organization which has shown such little regard for the legions of Californians who have placed their financial well-being in its care?"

Because California is the country's largest issuer of municipal bonds, losing the state's business will likely cost Wells Fargo millions in revenue, according to The New York Times.

The sanctions against the San Francisco-based banking and financial services company come in response to the news that Wells Fargo created as many as 2 million fake bank and credit card accounts for existing customers, without letting the customers know.

Bank employees transferred money from customers' accounts into the fraudulent accounts, KNTV reported, even opening credit and debit cards in the names of the customers who were impacted. In some cases, employees created fake email addresses to complete the registration process for new accounts.

Company leaders, including Stumpf, have blamed employees while acknowledging their own policies contributed to the problem -- Wells Fargo established "aggressive sales goals" that pressured the company's employees to create as many new accounts as they could or risk being fired.

Wells Fargo still hasn't relaxed those sales goals, but Stumpf told lawmakers Wells Fargo would eliminate sales goals by Oct. 1.

“We decided that product sales goals do not belong in our retail banking business,” Stumpf said on Sept. 28.

Trying to hold on to his job, Stumpf told congressional leaders he is “deeply sorry” and and said he'd “accept full responsibility for all unethical sales practices.”

That wasn't enough for Massachusetts Sen. Elizabeth Warren, a Democrat who has been a vocal critic of U.S. banks.

“This is a small step in the right direction," Warren said, "but nowhere near real accountability."

Sources: KNTV, The New York Times / Photo credit: Wikimedia Commons

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