Home » DealBook Briefing: How Monday’s Stock Plunge Ranks?
Will Wells Fargo miss out on the banking party?
A Federal Reserve regulatory action, announced Friday evening, placed a cap on the amount of assets (loans and securities) that Wells Fargo can hold. The Fed took this action in response to misconduct at the bank that involved deceiving its customers. The cap will be in place until the Fed is satisfied that the bank has made sufficient improvements in its operations and corporate governance.
Wells Fargo’s stock is down more than 7 percent Monday, suggesting that investors believe the growth cap will have some bite. With the economy strengthening and interest rates rising, banks can expect to earn higher profits as they make more loans and suffer fewer losses from defaults. Indeed, this optimistic scenario has helped send bank stocks on a tear in recent months. Now, the question is to what degree Wells Fargo will have to sit out the good times.
Wells Fargo executives on Friday suggested that the cap would have limited financial impact,…
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