Is It Tuesday? Time For Another Banking Scandal...

Authored by Simon Black via SovereignMan.com,

Another day, another major banking scandal.

It’s getting to the point where you can practically set your watch to these things.

The latest involves our old friend Wells Fargo.

The Wall Street Journal reported last night that Wells has been screwing its customers on foreign currency exchange rates.

According to the Journal, Wells Fargo conducted an internal review of its fee arrangements and found that they had massively overcharged 88% of the sampled customers.

For example, the bank might have signed a contract with a customer to charge 0.15% on foreign currency transactions, but instead charged as much as 4%… about 26x higher than agreed.

It’s absurd to begin with that a bank would charge even a small percentage-based commission on foreign currency transactions (much less 4%), especially given that most of the transactions were to exchange euros and US dollars.

Sure, commissions are common in many industries.

When you list your house for sale, for example, your real estate agent receives a commission when s/he finds a buyer and closes the deal.

Real estate commissions often range between 2% to 6%. But agents earn this money because houses are big, illiquid assets. And it often takes a lot of time and work to close a sale.

But Wells Fargo has been charging huge commissions on buying and selling MONEY.

The foreign exchange (FX) market trades around $5.3 trillion each day (compare that to about $200 billion for US equities). That makes the US dollar / Euro trade literally one of THE most popular financial transactions in the world.

Billions upon billions of dollars and euros are exchanged every single business day of the week, around the clock, through electronic trading platforms.

It’s not like some currency trader at Wells Fargo ever had to lift a finger trying to find a buyer for his customer’s euros.

Anyone who has ever traded FX knows that it takes a fraction of a second to buy/sell major currencies.

There’s zero work involved on Wells Fargo’s end. Yet they charge a steep commission as if they have to put in all sorts of time and effort to buy and sell currency. It’s ridiculous.

But even worse, the bank formally agreed with its customers to charge a set fee. And then they totally violated those promises simply because it suited their interests.

How utterly, completely pathetic.

Bear in mind, this is the same bank that was caught creating fake accounts and charging fees to unsuspecting consumers without their consent, also because it suited their interests…

… and that this is an industry that has a track record of constantly violating their customers’ trust.

These banks have been caught red-handed illegally colluding to fix interest rates and exchange rates.

They have manipulated asset prices and knowingly sold their customers toxic assets.

They have invested their customers’ hard-earned savings in astonishingly stupid, no-money down loans to borrowers who had no hope of repaying the debt.

They use every accounting trick in the book to misstate their true financial condition, including the utter farce of carrying Volcker Rule assets on their books at 100 cents on the dollar… or mysteriously reclassifying their bond portfolios in a way to hide losses.

They reward themselves the most magnificent bonuses when times are good.

And when the house of cards begins to fall, they go to the public with hat in hand, claiming that they’re too big and important to lose any money.

Despite taking the public’s bailout money, these banks treat their customers with such contempt and suspicion. They make you feel like you’re committing a crime when you request a cash withdrawal of your own money.

It’s truly remarkable that this industry has any credibility left.

The good news is that it won’t last.

Banks no longer have a monopoly on finance. Technology already makes it possible to conduct just about any transaction you need outside the banking system.

You can deposit and withdraw funds, borrow money, exchange currency, invest your savings, pay bills, transfer funds, make online payments, etc. with cryptocurrencies, Peer-to-Peer platforms, and various blockchains.

And these technologies are often better, faster, and cheaper than the traditional banking system.

History tells us that technology almost invariably puts entrenched industries out of business.

E-commerce is obliterating traditional retail. Digital media is destroying print media.

And it’s only a matter of time before cryptofinance displaces the banking system.

Whether or not you think Bitcoin is a bubble at $10,000, it’s still worth understanding the enormous potential (and opportunities) of what these technologies can provide.

Because the alternative of dealing with Wells Fargo isn’t that attractive.

Federal Prosecutors Are Investigating Wells Fargo"s FX Business

Last week, WSJ stoked fears that the Feds might be ramping up another probe into abuse and manipulation in the foreign exchange market when it reported that Wells Fargo had abruptly terminated four bankers from its FX business and transferred another. Now, Wall Street’s paper of record is reporting that Federal prosecutors are investigating Wells for abuses in its FX shop - but the scope of the investigated is limited to one disputed trade.

According to WSJ, prosecutors have subpoenaed information from Wells and from the recently fired bankers as they investigate a trade and ensuing dispute between Wells and one of its clients, Restaurant Brands International Inc.

RBI owns several fast-food franchises, including Burger King, Tim Hortons and Popeyes Louisiana Kitchen. In an amusing twist, both companies count Warren Buffett’s Berkshire Hathaway as one of their largest shareholders.

In a statement, Wells Fargo said it “learned of an issue associated with a foreign exchange transaction for a single client. The matter was reviewed, the client was promptly notified regarding the issue, and Wells Fargo leadership took steps to hold accountable the individuals who were involved. Wells Fargo remains committed to our foreign exchange business, meeting our clients’ financial needs in an ethical way, and ensuring ongoing review of this and all business operations.”

The foreign-exchange issue revolves around a trade made within the past three years that included positions running into the billions of dollars, the people said. The trade resulted in a loss to Restaurant Brands, the people added, which led to a dispute between it and the bank. WSJ pointed out that the investigation into Wells Fargo’s foreign-exchange business, which is housed within its investment bank, are separate from sales-practices issues that rocked the bank more than a year ago. Wells Fargo is planning to refund Restaurant Brands hundreds of thousands of dollars related to the trading loss, WSJ"s sources said.  The Federal Reserve is also looking into the issue. Specifically, Federal prosecutors are looking into the sequencing of the trade in question and whether it could have involved so-called front-running, some of the people familiar with the matter said. That should send a chill down the spine of the fired bankers, as earlier this week a US jury found a former HSBC currency trader guilty of fraud related to front-running a large trade that netted the bank some $8 million in profits. The US is also in the process of extraditing another UK-based FX trader to face front-running related charges in the US.

Last year, a wide-ranging investigation into abuse and front-running in the global foreign-exchange market led to a rash of settlements worth billions of dollars involving Barclays and a handful of other global banks. 

While probes like this are never convenient, the investigation comes at a particularly trying time for the bank and its management. Earlier this month, WFC CEO Tim Sloan received a widely publicized tounge lashing from Massachusetts Senator Elizabeth Warren during Congressional testimony (Sloan became the second straight Wells CEO whom Warren said should resign during a public hearing). He has also participated in a handful of media interviews lately as he tries to burnish the bank"s once-wholesome reputation and bolster its lagging share price, which has never quite recovered from last year"s cross-selling scandal.

However, as WSJ explains, front-running is often difficult to gauge given the ambiguity around pre-hedging strategies in currency trading. Typically a bank must purchase currency as part of a trade and price it differently than it would price a stock. Wells Fargo’s investment-banking, securities and markets division, known as Wells Fargo Securities, is a fraction of the size of its U.S. big-bank peers, as is its foreign-exchange business. The bank doesn’t break out financial results or metrics for that group or its foreign-exchange business.

And while the investigation is the latest embarassment for the bank, which over the summer disclosed that it had overcharged mortgage and auto-loan borrowers, there is, at least, one mitigating factor: Unlike the retail banking scandal, which stoked widespread public outrage, few Americans understand how the foreign-exchange market works - indeed, many don"t even realize that such a market exists. This means that even in the worst-case scenario, Wells"s brand should remain untarnished from this latest scandal.

The US Attorney’s Office for the Northern District of California is leading the investigation.

Wall Street Hypocrisy Exposed: Bank Behind "Fearless Girl" Statue Fined For Systemically Underpaying Women

The bar for Wall Street hypocrisy has just been raised.

In a controversy that can only be described as hilariously ironic, Boston-based bank and asset manager State Street Corp – which famously created and installed the “fearless girl” statue, purportedly symbolizing Wall Street’s progress toward gender equality in the workplace - to be a symbol of Wall Street’s progress toward gender equality, earlier this year - has agreed to pay $5 million to settle claims that it systematically underpaid female and minority employees, according to the New York Post.

State Street assented to the fine – but refused to admit wrongdoing - after being audited by the US Department of Labor’s Office of Federal Contract Compliance Programs. The DOL alleges that the firm’s systemic pay discrimination dates back to at least 2010 and affected hundreds of employees, primarily in senior-level positions.

“OFCCP’s analysis demonstrates that a statistically significant disparity in compensation remained even when legitimate factors affecting pay were taken into account,” the Labor Department said Thursday in its filing.

The department alleges that black employees were also discriminated against, with at least 15 individuals being paid less in base salary and total compensation than their “similarly-situated” white peers.

By installing the statue, State Street hoped to kill two birds with one stone: Burnishing its reputation as a female-friendly employer while helping to market its new “SHE” ETF, which invests in female-led companies.

However, the statue was quickly denounced as a transparent marketing ploy, and the bank was roundly criticized by a memorable coalition of feminists, bankers and even the Italian sculptor who created Wall Street’s charging bull. Though that didn’t stop the judges at the Cannes Ad Festival from lavishing McCann, the advertising firm that helped create the statue, with three top awards.

Compounding the irony, State Street used the statue’s installation as an opportunity to tout its efforts to promote more women to senior level positions – a program that was reportedly initiated by CEO Joseph Hooley in 2010 – the same year that the bank began underpaying women, according to the DOL’s complaint.  

For what it’s worth, the bank has denied the allegations.

“State Street is committed to equal pay practices and evaluates on an ongoing basis our internal processes to be sure our compensation, hiring and promotions programs are nondiscriminatory,” a spokesperson said. “While we disagreed with the OFCCP’s analysis and findings, we have cooperated fully with them, and made a decision to bring this six-year-old matter to resolution and move forward.”

The findings from the audit were filed in Boston on Wednesday, along with the settlement agreement.

Twitter users quickly blasted the bank for its hypocrisy and blatant cynicism.

Ironic: the Raging Bull is a piece of guerilla art. Fearless Girl is a marketing ploy by State Street, a company that underpays women. https://t.co/yT9jCyJnUM

— Stanley Pignal (@spignal) October 6, 2017

Couldn’t have said it better ourselves.
 

Warren Slams Wells CEO "You Should Be Fired" As Buffett Counters "He Has My Faith"

In a repeat of what she said almost exactly one year ago, when Senator Elizabeth Warren told then-Wells Fargo CEO Stumpf "You should resign, you should be criminally investigated" - not long before Stumpf indeed resigned, moments ago the kangaroo court was back in session and Warren doubled down her attack on Stumpf"s replacement, Wells CEO Tim Sloan, blasting that he should be fired as he was part of a culture that pushed the bank to create millions of fake accounts for customers without their knowledge.

In prepared testimony, Sloan apologized for the creation of unauthorized accounts and said the bank has hired back more than 1,000 workers who were wrongly fired or left under a cloud. In late August, Wells admitted that as many as 3.5 million accounts were created for customers without their permission, nearly 70% more than originally thought. The scandal led to the departure of several executives including former CEO John Stumpf.

While the practice had been going on for years at the bank, it only became public last year, when Wells agreed to pay a $185 million settlement with regulators. Since then, it was revealed that the tactics extended to enrolling customers in auto insurance that they didn"t need as we previously reported and as CNBC noted. Wells paid a $142 million class-action settlement and $2.8 million in refunds to affected customers.

Meanwhile, Warren attacked Sloan over his past comments to investors, saying he “bragged” about high levels of new accounts even though he was aware of sales-practice problems at the bank: "You went to the stock market and you bragged about it," Warren said at the Senate Banking Committee hearing Tuesday.

"At best you were incompetent, at worst you were complicit," the Massachusetts Democrat lashed out at Sloan, adding that "either way, you should be fired" as “you enabled this fake account scam, you got rich off it, and you tried to cover it up."

Warren pushed Sloan on transcripts she found in earnings calls that she said showed the CEO was bragging about the bank"s sales ability even as he knew about the cross-selling problems. "I"ve read through them, and on these calls no one, not even John Stumpf, who was the CEO at the time, bragged more about Wells Fargo"s ability and commitment to open new accounts for existing customers," Warren said, referring to earnings calls between 2011 and 2014.

"I"m proud of the credit card products we have at Wells Fargo," Sloan defended himself, saying comments cited by Warren were taken "out of context."

Warren wasn"t alone, and other members of the committee also pressed Sloan about how the bank could have allowed the sales scandal to get so out of control. "What in God"s name were you thinking?" asked Republican Sen. John Kennedy of Louisiana, quoted by CNBC.

As a reminder, as many as 3.5 million accounts were violated as employees tried to meet aggressive cross-selling goals that have since been scrapped, and while Sloan vowed that the bank was making strides in restoring its reputation, Warren and others weren"t impressed. "Wells Fargo needs to start over, and that won"t happen until the bank rids itself of people like you who led it into this crisis," said Warren, who previously had demanded that the 12 board members in place during the scandal be removed, only to be defied by Warren Buffett during the bank"s last shareholder meeting.

Sloan defended his role at the bank, sidestepping questions over why he hadn"t acted sooner and instead focusing on the steps he was taking now. Sloan was chief operating officer before succeeding Stumpf, who was forced out as CEO last October, a month after the bank settled charged with regulators over the cross-selling practice. Sloan outlined a number of steps Wells Fargo is taking to improve operations and prevent a similar scandal.

"I don"t believe your criticisms of the board are accurate," he later said. "I think the reason I am the right person to run this company today, notwithstanding your criticisms, is because I have been making change at this company for 30 years."

"I"m not afraid to make hard decisions when it"s needed, and I have the support of 270,000 people," he said, referring to the bank"s employees. "That"s why I think I"m the right person."

"Are you kidding?" Warren responded.

One person who wasn"t kidding, was prominent democrat and billionaire Warren Buffett, who earlier told Becky Quick that he still believes in the CEO of Wells Fargo after the fake accounts fallout at the bank. "Tim Sloan has my faith," said the CEO of Berkshire Hathaway. "When you find a problem, you have to jump on it... Somebody messed up and the job is to find out who messed up."

Berkshire remains Wells Fargo"s largest shareholder, with a 9.4% stake. When asked whether he sold any shares of Wells Fargo, Buffett said "only enough to stay under 10 percent, which was something the Fed requires."

And since the decision whether Sloan stays or goes ultimately is in the hands of Wells Fargo"s shareholders, perhaps Warren should target her anger at the Omaha billionaire: it was his input during the last Wells Fargo proxy vote that made sure the current board escaped unscathed from the bank"s ongoing scandals.

Georgetown Bank Teller Steals $185,000 From Homeless Customer With Garbage Bag Full Of Cash

Where did all this money come from?

That’s probably the first question that Phelon Davis of District Heights, Maryland, asked himself when a homeless man shuffled into the Wells Fargo branch in Georgetown where Davis worked as a teller three years ago and tried to deposit a garbage bag full of cash.

His next question was probably "do you think he"d notice if some of it went missing?"

Instead of helping the customer deposit the money into his account, Davis instead decided to take advantage of the situation, setting up a fraudulent second account under the customers’ name and eventually stealing more than $185,000 from the man, according to the Washington Post.

The 29-year-old bank teller stole more than $185,000 from a homeless customer who tried to deposit a garbage bag full of cash at a Wells Fargo branch in Georgetown.

In a deal with prosecutors, Davis pleaded guilty this week to one federal felony count of interstate transportation of stolen property, which is punishable by up to 10 years in prison.

Deepening the intrigue surrounding the story, the court filings didn’t name the man, or furnish an explanation as to how he came to possess such a large sum of cash. It describes the man only as a "street vendor."

Here’s WaPo with more:

The victim was unnamed in court filings but was described as a homeless street vendor and longtime Wells Fargo customer who had more than one account that had gone dormant because of a lack of activity.

Court filings did not identify the customer or say why a homeless person would have a large amount of cash in a bag when he showed up at the M Street NW branch where Davis worked. Outside the courtroom, Davis’s attorney, Bruce Allen Johnson Jr., said he also did not know how the individual came to have the cache of cash. “That’s the million-dollar question,” Johnson said.

In plea papers, Davis acknowledged that the customer had “thousands of dollars of cash” that he wanted to deposit in October 2014, but he lacked identification. Davis told the customer where to get ID documents and a Social Security card, and also noted the customer “had a surprisingly large balance with the bank,” according to a signed, three-page statement of the crime.

Soon after the customer tried to deposit the cash, Davis fraudulently opened a new account by forging the customer’s signature, set up an ATM card, personal identification number, email address and online logon that he controlled.

He initially funded the account with $3,000 from one of the customer’s other accounts, according to WaPo.

Slowly over the next two years, Davis transferred $177,400 between the customer’s accounts, withdrew $185,440, and transported at least $5,000 withdrawn from ATMs in DC to his home in Maryland – triggering the federal charge.

The customer remained oblivious to the fraud, as he could only see the balance by checking on his account at an ATM.

Davis used the stolen money for a down payment on his home, to pay off personal debt, and fund vacations in Aruba, Jamaica, the Dominican Republic and Mexico.

As part of his plea, Davis agreed to pay back the stolen money, and Assistant US Attorney Kondi J. Kleinman said he would likely face a sentence of 18 to 30 months under federal guidelines. However, the sentencing judge has discretion to assign a longer, or shorter, sentence.  

“Did you, in fact, take money from an account as Mr. Kleinman described?” U.S. Magistrate Robin M. Meriweather asked in the Thursday plea hearing.

“Yes, ma’am, I did,” said the soft-spoken Davis.

Davis’s attorney, Johnson, said outside of court that “he greatly regrets the decisions he made and is dedicated to doing everything he can to make it right, including restitution. He is putting everything aside to repay the money and do what he can to repair what he’s done to his name, his reputation and to the victim.”

WaPo reports that a date for Davis’s sentencing hasn’t been set.
 

Wells Chairman Out Following "Unbelievable, Outrageous" Scandal

Two weeks after the latest consumer scandal involving Warren Buffett"s favorite bank, Wells Fargo, broke when the NYT reported that as many as 800,000 people who took out car loans from Wells were also charged for auto insurance they did not need, with many of them still paying for it, while some were forced to default as a result of this obligations, and just days after the NYC Comtroller Scott Stringer, said that what happened at Wells Fargo is an "unbelievable, outrageous, full-blown scandal"... 

This is a full-blown scandal — again. It’s unbelievable, outrageous, sad, and yet quintessential Wells Fargo. This isn’t just a corporate debacle. It’s caused real human harm. It’s reflective of a system that Americans feel is rigged against the little guy, and sadly symbolic of a culture that puts short-term profits ahead of creating sustainable value for shareowners. Everyday families have suffered and tens of millions of hard-earned dollars were stripped from unsuspecting Americans, many of whom are struggling just to get by. In the end, shareowners ultimately suffer the long-term consequnces.

... moments ago Dow Jones reported that Wells Fargo Chairman Stephen Sanger is likely to step down.

• WELLS FARGO NONEXECUTIVE CHAIRMAN SANGER LIKELY TO STEP DOWN -- SOURCES


• WELLS FARGO ACTIVELY WEIGHING BOARD CHANGES -- SOURCES


• WELLS FARGO VICE CHAIR ELIZABETH DUKE COULD REPLACE SANGER -- SOURCES


• WELLS FARGO PLANNING TO NAME AT LEAST ONE NEW DIRECTOR BY LABOR DAY -- SOURCES

And now the lawsuits begin.

Wells Meeting Turns Into Screaming Match, Shareholder Kicked Out After "Physical Approach" Toward Board Member

What may be the most controversial annual shareholder meeting in Wells Fargo history, in which the board is seeking re-election after last year"s misselling scandal, devolved into a screaming match on Tuesday morning and was briefly halted following interruptions by angry shareholders as the bank"s chairman and chief executive tried to calm nerves ahead of a vote that could oust the majority of its board.

According to Reuters, at least one shareholder was ejected and the meeting went into recess after he made what Chairman Stephen Sanger called a "physical approach" toward a board member. Others were escorted out and the meeting was interrupted several times as investors demanded answers related to the bank having created as many as 2.1 million unauthorized accounts in customers" names without their permission.

"You"re saying we"re out of order. Wells Fargo has been out of order for years!" the first angry shareholder said, before being ejected. Board Chairman Sanger and Chief Executive Tim Sloan repeatedly asked him to sit down because he was out of order, and then called a recess, only to have other shareholders stand and shout.

The meeting is unusual in that a dozen of Wells Fargo"s 15 directors on the ballot, who have come under fire after it was discovered that employees in its retail banking business had been creating accounts under customer"s names without their knowledge for years, face a rare negative recommendations from Institutional Shareholder Services (ISS). The influential proxy adviser argued that the group, including Chairman Stephen Sanger, failed in their oversight duties, although Wells Fargo"s top investor Berkshire Hathaway has already voted in favor of the bank"s board. According to the WSJ the board is expected to remain having clinched a majority of the votes.

Wells Fargo"s guidelines require that directors offer to resign if they fail to receive a majority of votes cast. But in practice, directors who win with less than 80 percent support should consider exiting the board, said Charles Elson, a University of Delaware expert on corporate governance, Reuters notes. "If they"re below 80 (percent) I"d say they have a lot of soul-searching to do," he said.

The bank"s board and management have said steps taken to fix problems and punish employees responsible for abuses show there is now strong oversight, and that directors nominated deserve to be elected. But the public firestorm that hammered its shares and led to the resignation of then-Chairman and Chief Executive John Stumpf last year was not forgotten. They repeated those messages on Tuesday.

"It"s been a busy seven months but we are focused on making things right," Sloan said.

At most S&P 500 companies, director support averages around 95 percent of votes cast, according to pay consulting firm Semler Brossy. Typically a recommendation from ISS that investors vote "against" a director will reduce the support they receive by an average of 17 to 18 percentage points.

Should Wells Fargo directors win narrow majorities - between 50 to 80 percent of votes cast - the board would have to decide whether to accept any individual director"s resignation. University of Pennsylvania law professor Jill Fisch said a likely outcome, in the event of a close vote, would be for the board to bring in fresh faces over a period of months or longer. "From a business perspective that may be the best response you could make," she said. "You don"t want the whole leadership to be in flux."

Just How Crowded Is The "Long Dollar" Trade? The Answer In One Chart

Until last night"s Trump statement that the US dollar is overvalued, it was smooth sailing for Wall Street"s momentum chasers, who happily piled into what until recently was Wall Street"s most crowded trade. How crowded?

For the latest answer, we go to the latest just released monthly Fund Managers Survey conducted by BofA"s Michael Hartnett who shows that according to Wall Streeters themselves, the dollar is the most crowded trade by orders of magnitude. In fact, in January the number of respondents who said the "Long USD" is the most crowded trade has risen from 35% in December to a whopping 47%, the highest response rate in the last few years of the survey. Far behind, in second and third place, are "short government bonds" and "long high quality/minimum vol" both at 11%.

What makes this observation paradoxical is how reflexive it is, because in the same report BofA writes that contrarians note "long US dollar seen as most crowded trade by a country mile", and adds that the percentage of investors who think USD is overvalued is the highest in over a decade, or since Nov’06 (net 22%).

Still, they refuse to sell... until now. Because now that the president-elect has publicly taken the other side of the trade, we urge readers to take a second look at RCB"s warning that the "Pain Trade", i.e. the inversion of Long-USD positions, has begun.

How Rising Rates Are Hurting America's Largest Mortgage Lender, In One Chart

While one can argue that both JPM and Bank of America posted results that were ok, with some aspects doing better than expected offset by weakness elsewhere, even if moments ago JPM stock just hit an all time high, there was little to redeem the report from the scandal-ridden largest mortgage lender in America, Wells Fargo. Not only did the company miss revenues significantly, reported $21.6bn in Q4 topline, nearly $1 bn below the $22.4bn consensus, but it had to reach deep into its non-GAAP adjustment bag to convert the $0.96 EPS miss into a $1.03 EPS beat (net of "accounting effect"), but the details of its core business were, well, deplorable, which perhaps was to be expected following the recent drop in new credit card and bank account growth, following last year"s fake account scandal.

Incidentally, Wells Fargo reported its latest customer metrics alongside 4Q earnings, and in December the bank said that the retail public continued to shy away, as new checking accounts plunged 40%Y/Y while new credit card applications tumbled 43%.  On the other hand, deposit balances debit card transactions continued growing which probably is not a good sign, if only for the Keynesians in the administration: it means that consumers are saving.

But back to Wells results, which revealed that in Q4, the bank"s ROE, one of Buffett"s favorite indicators, fell to 10.94%. which was the lowest quarterly level posted in years accordint to the WSJ. "While the return had been grinding lower for some time, largely due to the declining interest-rate environment, the fourth quarter also marked the first, full reporting period since the bank’s sales-tactics scandal erupted in September."

More troubling however, was that in Q4, Wells overall profit fell to $5.27 billion, or 96 cents a share (excluding the various non-GAAP addbacks), down from $5.58 billion, or EPS of $1 in Q4 2015.

So back to Wells Fargo"s retail banking business. Here the bank reported that while credit card outstandings rose 5% compared to $33.14 billion last quarter and jumped 8% from $34.04 billion in the year-earlier period, new accounts tumbled 52% to 319,000 from 667,000 last quarter and fell 47% from 597,355 in the year-earlier period, once again this is a reflection of the bank"s ongoing legal scandals.

But it was the bank"s bread and butter, mortgage lending, that was the biggest alarm because as a result of rising rates, Wells" residential mortgage applications and pipelines both tumbled, and after hitting multi-year highs in the third quarter when mortgage rates were likewise hugging multi-year lows, in Q4 Wells" mortgage applications plunged by $25bn from the prior quarter to $75bn, while the mortgage origination pipeline plunged by nearly half to just $30 billion, and just shy of all time lows recorded in late 2013 and 2014. Moynihan"s explanation was redundant: "the pipeline is weaker because of fewer refi loans." This should not come as a surprise: just one month ago, Freddie Mac warned that as mortgage rates continue to surge, "expect mortgage activity to be significantly subdued in 2017."

Wells Fargo did not even have to wait that long, and as shown in the chart below, the biggest US mortgage lender is already suffering.

Expect even greater declines in the coming quarters should rates continue to rise.