Washington – Connecticut is reviewing its relationship with Wells Fargo after the bank admitted opening potentially millions of bogus accounts to collect fees from unwitting customers.
The state is among the first to take action in response to the scandal.
Connecticut plans a $650 million bond sale in mid-October. Wells Fargo had been named as the lead manager of that sale, which would bring the company substantial fees.
But State Treasurer Denise Nappier has added a co-manager to that sale, Morgan Stanley, and plans to review all of the state’s business with Wells Fargo, which includes holdings of the bank’s securities through its pension and trust funds.
The addition of Morgan Stanley, Nappier said, was made in an “abundance of caution to help ensure the success of the sale.”
Nappier said she is “closely monitoring ongoing investigations” of Wells Fargo and moved to alter the state’s relationship with the bank after it was sanctioned by the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency.
On Thursday, Wells Fargo chairman and CEO John G. Stumpf was grilled by members of the House Financial Services Committee about the bank’s behavior.
“I am sincerely sorry that we were unable to fulfill our obligation to our customers, to our team members and to the American public,” Stumpf said.
Many lawmakers were not pleased with Stumpf’s responses to their questions and with his defense that the bank had self-reported and self-policed the problem.
“This is theft, plain and simple,” said Keith Rothfus, R-Pa.
As many as two million bogus bank and credit and debit card accounts were created by Wells Fargo employees. Some were closed almost immediately after they were opened, but others were not. Customers learned about them only after being charged unexpected fees or receiving debit or credit cards they did not request.
The practice began in 2011, and Wells Fargo has fired more than 5,000 employees the bank says were involved in the scandal. Many of those employees told federal regulators they felt extreme pressure to open as many accounts as possible.
California, the nation’s largest issuer of municipal bonds, has taken the most decisive action against the bank.
It has barred Wells Fargo from underwriting state debt and handling its banking transactions for a year, and it will not add to its investments in Wells Fargo securities. A “permanent severance” will occur if the bank doesn’t change its practices, State Treasurer John Chiang said Wednesday.
New York City, a giant in municipal bonding, is also reviewing its relationship with the bank.