Wells Fargo Gets Green Light For Small Business Loans
The U.S. Federal Reserve broke a mandate Wednesday to temporarily remove lending restrictions on Wells Fargo. It's to allow the troubled bank to lend to small businesses struggling to survive the coronavirus. But this is the first easing on the bank since investigations uncovered a company wide account scandal a few years ago that largely centered in Arizona.
The Fed's decision will allow Wells Fargo to participate only in emergency lending programs that provide financial relief for small businesses harmed by the fallout from COVID-19. That includes funding a payroll protection program designed to incentivize small business owners to keep employees on payroll.
Loans made under the new government programs will not count toward the $1.95 trillion asset cap the Fed imposed on the bank in February 2018. The Fed has said it would only remove the cap when Wells Fargo had improved its governance and risk controls following a wave of sales practice scandals. Under the new conditions, Wells Fargo will have to turn over any fees generated from its participation in the program to the U.S. Treasury or to nonprofits approved by the Fed.
Wells Fargo is one of the nation's largest lenders to small businesses, receiving over 170,000 indications of interest for the small business resuce program within the first two days, according to bank CEO Charlie Scharf in a statement Wednesday.
Since 2018, Wells has been under an imposed lending limit placed by the Fed, a punishment placed on the bank for opening fake accounts and charging unauthorized fees to customers without permission. Wells paid more than $185 million in fines to regulators and fired four top managers including the bank's then Arizona president, Pamela Conboy.