Wells Fargo Actions Could Cause Headaches For Big Banks

Wells Fargo, which is coming under intense fire for the widespread practice of opening fake accounts to meet sales goals, could be part of a broader problem in the banking industry, despite the increased regulation and scrutiny.

That’s according to Cowen Analyst Jaret Seiberg, who said in a research report covered by the media that investors shouldn’t underestimate the political risks to Wells Fargo, Bank of America, Citigroup and JPMorgan in light of the fake account scandal. The analyst said the scandal gives people in the “break up the big banks” camp more ammunition. The analyst noted that Wells Fargo has had a special status compared to the other big banks ever since the financial crisis, but that is about to end. The “fall from golden child to problem child can be difficult and expensive,” the analyst wrote.

Late last week, the Consumer Financial Protection Bureau announced Wells Fargo agreed to pay a $185 million fine and refund $5 million in fees that the bank wrongly charged customers. Wells Fargo has also let go of 5,300 employees that the bank said opened false accounts in an effort to meet sales goals.

While some industry watchers have said the actions at Wells Fargo aren’t an industry-wide problem, PYMNTS’ Karen Webster applauded the actions of the CFPB: “The business practices that the CFPB exposed reflect a serious, systemic failure on the part of Wells Fargo, and the CFPB deserves all of the credit for exposing it.” While Webster has been critical of the CFPB in the past, she argues the activities at Wells Fargo that resulted in the largest fine the CFPB has ever levied show that the CFPB is fed up and outraged about what some of the banks have been doing. “If one of the oldest, biggest and most storied banks in the country behaves this way, then the banking industry generally in the U.S. has become unhinged,” Webster wrote.