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August 13, 2018 at 03:24 PM
Wells Fargo & Co. investors who were learning to live with an unprecedented penalty the Federal Reserve imposed for bad behavior will have their patience tested again as details emerge on another scandal.
The bank disclosed earlier this month that it faces a U.S. inquiry into its purchase of low-income housing credits. Late Friday, Bloomberg Opinion columnist Stephen Gandel reported that the Justice Department is looking into whether Wells Fargo and other banks colluded with developers on bids for the tax credits.
“This clearly does not seem like they are ready to move on from the challenges that the Fed is watching them for,” Stephen Beck, founder of management consultancy cg42, said Sunday in a telephone interview.
Investors had been taking comfort from Wells Fargo’s statements that the Fed penalty — a cap on growth until regulators decide it has fixed its missteps — was having a smaller impact than first expected. In June, the bank announced a big increase in dividends and stock buybacks, and the stock jumped about 6 percent in the past three months. It fell 0.9 percent in early trading Monday.
Now shareholders will have to decide if the latest disclosures mean they have to rethink that more optimistic view. The U.S. Attorney’s office in Miami convened a grand jury to look into the accusations against Wells Fargo, according to Gandel, who cited a person close to the investigation. Subpoenas have been issued to Wells Fargo and developers who have done the deals with the bank.
The disclosures add to almost two years of revelations about probes, misconduct and other lapses that have taken a toll on the firm’s reputation, business and relations with regulators.
