Why Secretary Yellen May Push to Lift President Yellen’s Wells Fargo Ban

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Wells Fargo WFC, -0.41% was slapped with an unprecedented ban on asset growth in 2018 by then-Federal Reserve chair Janet Yellen after a series of scandals at the San Francisco bank. Could Yellen, assuming she is confirmed as Treasury Secretary, help remove the ban she imposed?

That’s a theory advanced by Zoltan Pozsar, who writes on bank financing for Credit Suisse. According to their calculations, JPMorgan Chase JPM, + 0.09%, Citigroup C, + 0.28% and Bank of America BAC, -0.59% have helped absorb three-quarters of the reserves injected into the banking system by the Federal Reserve last year. “The ban was imposed on President Yellen’s watch, and Secretary Yellen could be involved in lifting that ban soon. Financing the war involves a great deal of central planning and releasing the balance to fight the pandemic is good central planning, ”Pozsar said in a note to clients. If Wells Fargo’s asset growth ban is lifted, Pozsar says the Big Four US banks can absorb another $ 900 billion of reserves, but only $ 500 billion if not. Wells Fargo has shaken up its executive ranks and this week established a new division to oversee the bank’s interactions with consumers. Wells Fargo illegally opened accounts on behalf of customers without their consent, among the many charges against the bank. The decision to lift Wells Fargo’s asset growth ban will rest with the Federal Reserve board of governors, according to Yellen’s successor, Jerome Powell, in a letter to Sen. Elizabeth Warren, a Democrat from Massachusetts. Powell has met regularly with Treasury Secretary Steven Mnuchin and is likely to continue to do so when Yellen leads the department. The head of the Treasury oversees the Financial Stability Supervisory Board, which brings together all financial regulators under one umbrella.