Wells Fargo

Current operations

Wells Fargo delineates three different business segments when reporting results: Community Banking, Wholesale Banking, and Wealth, Brokerage and Retirement.

Community banking

The Community Banking segment includes Regional Banking, Diversified Products, and the Consumer Deposits groups, as well as Wells Fargo Customer Connection (formerly Wells Fargo Phone Bank, Wachovia Direct Access, the National Business Banking Center, and Credit Card Customer Service). Wells Fargo also has around 2,000 stand-alone mortgage branches throughout the country. There are many mini-branches located inside of other buildings, which are almost exclusively grocery stores, that usually contain ATMs, basic teller services, and, space permitting, an office for private meetings with customers. In March 2017, Wells Fargo announced a plan to offer smartphone-based transactions with mobile wallets including Wells Fargo Wallet, Android Pay and Samsung Pay.

Consumer Lending

Wells Fargo Home Mortgage is the largest retail mortgage lender in the United States, as of Q3 2011, originating one out of every four home loans. Wells Fargo services $1.8 trillion in home mortgages, the 2nd largest servicing portfolio in the U.S. It was reported in 2012 Wells Fargo reached 30% market share for US mortgages, however, the then CEO John Stumpf had said the numbers were misleading because about half of that share represented the aggregation of smaller loans that were then sold on in the secondary market. Now, in 2013 its share is closer to 22%; of which eight percentage points is aggregation.

Wells Fargo private student loans

Wells Fargo private student loans are available to students to pay for eligible college expenses, such as; tuition, books, computers, or housing. Loans are available for undergraduate, career and community colleges, graduate school, law school and medical school. Wells Fargo also provides private student loan consolidation and student loans for parents.

Wholesale banking

Its wholesale banking segment contains products sold to large and middle market commercial companies, as well as to consumers on a wholesale basis. This includes lending, treasury management, mutual funds, asset-based lending, commercial real estate, corporate and institutional trust services, and capital markets and investment banking services through Wells Fargo Securities. One area that is very profitable to Wells Fargo, however, is asset-based lending: lending to large companies using accounts receivable and inventory as collateral, though less traditional assets are often included in the collateral package. Historically, this type of lending has been done when normal routes of raising funds, such as the Capital Markets or unsecured bank loans, have been exhausted. The main business unit associated with this activity is Wells Fargo Capital Finance. Wells Fargo also owns Eastdil Secured, which is described as a "real estate investment bank", but is essentially one of the largest commercial real estate brokers for very large transactions (such as the purchase and sale of large Class-A office buildings in central business districts throughout the United States).

Small business loans

Wells Fargo produced over 1,900 loans backed by the Small Business Administration (SBA) from late 2012 to early 2013.

Equipment lending

Wells Fargo has various divisions that finance and lease equipment to all manner of companies. One venture is Wells Fargo Rail, which in 2015 completed the purchase of GE Capital Rail Services and merged in with First Union Rail. Wells Fargo Equipment Finance is the country's largest equipment financer and nearly doubled in size after it purchased GE Capital's equipment finance division effective March 1, 2016.

Wealth and Investment Management

Wells Fargo offers investment products through its subsidiaries, Wells Fargo Investments, LLC and Wells Fargo Advisors, LLC, as well as through national broker/dealer firms. Mutual funds are offered under the Wells Fargo Advantage Funds brand name. The company also serves high-net-worth individuals through its private bank and family wealth group.

Wells Fargo Advisors is the brokerage subsidiary of Wells Fargo, located in St. Louis, Missouri. It is the third largest brokerage firm in the United States as of the third quarter of 2010 with $1.1 trillion retail client assets under management.

Wells Fargo Advisors was known as Wachovia Securities until May 1, 2009, when it legally changed names following the Wells Fargo's acquisition of Wachovia Corporation.

Wells Fargo Securities

Wells Fargo Securities ("WFS") is the investment banking division of Wells Fargo & Co. The size and financial performance of the group is not disclosed publicly, but analysts believe the investment banking group houses approximately 4,500 employees and generates between $3 and $4 billion per year in investment banking revenue. By comparison, two of Wells Fargo’s largest competitors, Bank of America and J.P. Morgan Chase generated approximately $5.5 billion and $6 billion respectively in 2011 (not including sales and trading revenue). WFS headquarters is based in Charlotte, North Carolina with other U.S. offices in New York, Minneapolis, Boston, Houston, San Francisco, and Los Angeles, and international offices in London and Hong Kong.

Cross-selling

A key part of Wells Fargo's business strategy is cross-selling, the practice of encouraging existing customers to buy additional banking products. Customers inquiring about their checking account balance may be pitched mortgage deals and mortgage holders may be pitched credit card offers in an attempt to increase the customer's profitability to the bank, and to make it more difficult for the customer to switch to a different bank. Other banks have attempted to emulate Wells Fargo's cross-selling practices (described by The Wall Street Journal as a hard sell technique); Forbes magazine describes Wells Fargo as "better than anyone" at the practice.

International operations

Wells Fargo provides banking services throughout the world, with offices in Hong Kong, London, Dubai, Singapore, Tokyo, Toronto, and India.

Charter

Wells Fargo operates under Charter #1, the first national bank charter issued in the United States. This charter was issued to First National Bank of Philadelphia on June 20, 1863, by the Office of the Comptroller of the Currency. Traditionally, acquiring banks assume the earliest issued charter number. Thus, the first charter passed from First National Bank of Philadelphia to Wells Fargo through its 2008 acquisition of Wachovia, which had inherited it through one of its many acquisitions.

Wells Fargo History Museums

The company operates 11 museums, most known as a Wells Fargo History Museum, in its corporate buildings in Charlotte, North Carolina, Denver, Colorado, Los Angeles, California, Minneapolis, Minnesota, Philadelphia, Pennsylvania, Phoenix, Arizona, Portland, Oregon, Sacramento, California and San Francisco, California. Displays include original stagecoaches, photographs, gold nuggets and mining artifacts, the Pony Express, telegraph equipment and historic bank artifacts. The company also operates a museum about company history in the Pony Express Terminal in Old Sacramento State Historic Park in Sacramento, California, which was the company's second office, and the Wells Fargo History Museum in Old Town San Diego State Historic Park in San Diego, California.

Wells Fargo operates the Alaska Heritage Museum in Anchorage, Alaska, which features a large collection of Alaskan Native artifacts, ivory carvings and baskets, fine art by Alaskan artists, and displays about Wells Fargo history in the Alaskan Gold Rush era.

Key dates

Wachovia acquisition

On October 3, 2008, Wachovia agreed to be bought by Wells Fargo for about $14.8 billion in an all-stock transaction. This news came four days after the Federal Deposit Insurance Corporation (FDIC) made moves to have Citigroup buy Wachovia for $2.1 billion. Citigroup protested Wachovia's agreement to sell itself to Wells Fargo and threatened legal action over the matter. However, the deal with Wells Fargo overwhelmingly won shareholder approval since it valued Wachovia at about seven times what Citigroup offered. To further ensure shareholder approval, Wachovia issued Wells Fargo with preferred stock holding 39.9% of the voting power in the company.

On October 4, 2008, a New York state judge issued a temporary injunction blocking the transaction from going forward while the situation was sorted out. Citigroup alleged that they had an exclusivity agreement with Wachovia that barred Wachovia from negotiating with other potential buyers. The injunction was overturned late in the evening on October 5, 2008, by New York state appeals court. Citigroup and Wells Fargo then entered into negotiations brokered by the FDIC to reach an amicable solution to the impasse. Those negotiations failed. Sources say that Citigroup was unwilling to take on more risk than the $42 billion that would have been the cap under the previous FDIC-backed deal (with the FDIC incurring all losses over $42 billion). Citigroup did not block the merger, but indicated they would seek damages of $60 billion for breach of an alleged exclusivity agreement with Wachovia.

Investment by U.S. Treasury during 2008 financial crisis

On October 28, 2008, Wells Fargo was the recipient of $25 billion of Emergency Economic Stabilization Act funds in the form of a preferred stock purchase by the US Treasury. Tests by the Federal government revealed that Wells Fargo needed an additional $13.7 billion in order to remain well capitalized if the economy were to deteriorate further under stress test scenarios. On May 11, 2009 Wells Fargo announced an additional stock offering which was completed on May 13, 2009 raising $8.6 billion in capital. The remaining $4.9 billion in capital was planned to be raised through earnings. On Dec. 23, 2009, Wells Fargo redeemed the $25 billion of preferred stock issued to the US Treasury. As part of the redemption of the preferred stock, Wells Fargo also paid accrued dividends of $131.9 million, bringing the total dividends paid to $1.441 billion since the preferred stock was issued in October 2008.

History of Wells Fargo Securities

Wells Fargo Securities was established in 2009 to house Wells Fargo's capital markets group which it obtained during the Wachovia acquisition. Prior to that point, Wells Fargo had little to no participation in investment banking activities, though Wachovia had a well established investment banking practice which it operated under the Wachovia Securities banner.

Wachovia's institutional capital markets and investment banking business arose from the merger of Wachovia and First Union. First Union had bought Bowles Hollowell Connor & Co. on April 30, 1998 adding to its merger and acquisition, high yield, leveraged finance, equity underwriting, private placement, loan syndication, risk management, and public finance capabilities.

Legacy components of Wells Fargo Securities include Wachovia Securities, Bowles Hollowell Connor & Co., Barrington Associates, Halsey, Stuart & Co., Leopold Cahn & Co., Bache & Co.. Prudential Securities, A.G. Edwards, Inc. and the investment banking arm of Citadel LLC.

Environmental record

In 2009, Wells Fargo ranked #1 among banks and insurance companies, and #13 overall, in Newsweek Magazine’s inaugural "Green Rankings" of the country’s 500 largest companies.

So far, Wells Fargo has provided more than $6 billion in financing for environmentally beneficial business opportunities, including supporting 185 commercial-scale solar photovoltaic projects and 27 utility-scale wind projects nationwide.

As a member of the U.S. Environmental Protection Agency's Climate Leaders program, Wells Fargo aims to reduce its absolute greenhouse gas emissions from its U.S. operations by 20% below 2008 levels by 2018.

Wells Fargo has launched what it believes to be the first blog among its industry peers to report on its environmental stewardship and to solicit feedback and ideas from its stakeholders.

"We want to be as open and clear as possible about our environmental efforts – both our accomplishments and challenges – and share our experiences, ideas and thoughts as we work to integrate environmental responsibility into everything we do," said Mary Wenzel, director of Environmental Affairs. "We also want to hear and learn from our customers. By working together, we can do even more to protect and preserve natural resources for future generations."

Higher costs charged to African-American and Latino borrowers

Illinois Attorney General Lisa Madigan filed suit against Wells Fargo on July 31, 2009, alleging that the bank steers African Americans and Latinos into high-cost subprime loans. A Wells Fargo spokesman responded that "The policies, systems, and controls we have in place – including in Illinois – ensure race is not a factor..." According to Beth Jacobson, a loan officer at Wells Fargo interviewed for a report in The New York Times, "We just went right after them. Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches, because it figured church leaders had a lot of influence and could convince congregants to take out subprime loans." The report goes on to present data from the city of Baltimore, where "more than half the properties subject to foreclosure on a Wells Fargo loan from 2005 to 2008 now stand vacant. And 71 percent of those are in predominantly black neighborhoods."

Failure to monitor suspected money laundering

In a March 2010 agreement with federal prosecutors, Wells Fargo acknowledged that between 2004 and 2007 Wachovia had failed to monitor and report suspected money laundering by narcotics traffickers, including the cash used to buy four planes that shipped a total of 22 tons of cocaine into Mexico.

Overdraft fees

In August 2010, Wells Fargo was fined by U.S. District Judge William Alsup for overdraft practices designed to "gouge" consumers and "profiteer" at their expense, and for misleading consumers about how the bank processed transactions and assessed overdraft fees.

Settlement and fines regarding mortgage servicing practices

On February 9, 2012, it was announced that the five largest mortgage servicers (Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo) agreed to a settlement with the federal government and 49 states. The settlement, known as the National Mortgage Settlement (NMS), required the servicers to provide about $26 billion in relief to distressed homeowners and in direct payments to the states and federal government. This settlement amount makes the NMS the second largest civil settlement in U.S. history, only trailing the Tobacco Master Settlement Agreement. The five banks were also required to comply with 305 new mortgage servicing standards. Oklahoma held out and agreed to settle with the banks separately.

On April 5, 2012, a federal judge ordered Wells Fargo to pay $3.1 million in punitive damages over a single loan, one of the largest fines for a bank ever for mortgaging service misconduct. Elizabeth Magner, a federal bankruptcy judge in the Eastern District of Louisiana, cited the bank's behavior as "highly reprehensible", stating that Wells Fargo has taken advantage of borrowers who rely on the bank's accurate calculations. She went on to add, "perhaps more disturbing is Wells Fargo's refusal to voluntarily correct its errors. It prefers to rely on the ignorance of borrowers or their inability to fund a challenge to its demands, rather than voluntarily relinquish gains obtained through improper accounting methods."

Alleged racial discrimination during foreclosures

In 2011, the Department of Housing and Urban Development (HUD) launched an investigation of Wells Fargo for racial discrimination practices, the second federal probe in 2012 of alleged violations of misconduct with regard to race. The other, began in 2011 by the National Fair Housing Alliance has found "overwhelming" and "troubling" evidence that six of the nation's major banks handle foreclosures in neighborhoods populated primarily by minorities differently than in white communities.

On July 13, 2012, Wells Fargo entered a settlement agreement with the U.S. Department of Justice for allegedly discriminating against African-American and Hispanic borrowers from 2004 to 2009. Wells Fargo agreed to pay $125 million to subprime borrowers and $50 million in direct down payment assistance in certain areas, for a total of $175 million. Wells Fargo spokespersons denied all claims and are settling only to avoid contested litigation.

SEC fine due to inadequate risk disclosures

On August 14, 2012, Wells Fargo agreed to pay around $6.5 million to settle SEC charges that in 2007 it sold risky mortgage-backed securities without fully realizing their dangers.

Lawsuit by FHA over loan underwriting

On October 9, 2012, the U.S. federal government sued the bank under the False Claims Act at the federal court in Manhattan, New York. The suit alleges that Wells Fargo defrauded the Federal Housing Administration (FHA) over the past ten years, underwriting over 100,000 FHA backed loans when over half did not qualify for the program. This suit is the third allegation levied against Wells Fargo in 2012.

In October 2012, Wells Fargo was sued by U.S. federal attorney Preet Bharara over questionable mortgage deals.

Lawsuit due to premium inflation on forced place insurance

In April 2013, Wells Fargo settled a suit with 24,000 Florida homeowners alongside insurer QBE, in which Wells Fargo was accused of inflating premiums on forced-place insurance.

Lawsuit regarding excessive overdraft fees

In May 2013, Wells Fargo paid $203 million to settle class-action litigation accusing the bank of imposing excessive overdraft fees on checking-account customers. Also in May, the New York attorney-general, Eric Schneiderman, announced a lawsuit against Wells Fargo over alleged violations of the national mortgage settlement, a $25 billion deal struck between 49 state attorneys and the five-largest mortgage servicers in the US. Schneidermann claimed Wells Fargo had violated rules over giving fair and timely serving.

2015 Violation of New York credit card laws

In February 2015, Wells Fargo agreed to pay $4 million for violations where an affiliate took interest in the homes of borrowers in exchange for opening credit card accounts for the homeowners. This is illegal according to New York credit card laws. There was a $2 million penalty with the other $2 million going towards restitution to customers.

Executive compensation

With CEO John Stumpf being paid 473 times more than the median employee, Wells Fargo ranks number 33 among the S&P 500 companies for CEO–employee pay inequality. In October 2014, a Wells Fargo employee earning $15 per hour emailed the CEO – copying 200,000 other employees – asking that all employees be given a $10,000 per year raise taken from a portion of annual corporate profits to address wage stagnation and income inequality. After being contacted by the media, Wells Fargo responded that all employees receive "market competitive" pay and benefits significantly above federal minimums.

Tax avoidance and lobbying

In December 2011, the non-partisan organization Public Campaign criticized Wells Fargo for spending $11 million on lobbying and not paying any taxes during 2008–2010, instead getting $681 million in tax rebates, despite making a profit of $49 billion, laying off 6,385 workers since 2008, and increasing executive pay by 180% to $49.8 million in 2010 for its top five executives. As of 2014 however, at an effective tax rate of 31.2% of its income, Wells Fargo is the fourth-largest payer of corporation tax in the U.S.

Prison industry investment

The GEO Group, Inc., a multi-national provider of for-profit private prisons, received investments made by Wells Fargo mutual funds on behalf of clients, not investments made by Wells Fargo and Company, according to company statements. By March 2012, its stake had grown to more than 4.4 million shares worth $86.7 million. As of November, 2012, the latest SEC filings reveal that Wells Fargo has divested 33% of its dispositive holdings of GEO's stock, which reduces Wells Fargo's holdings to 4.98% of Geo Group's common stock. By reducing its holdings to less than 5%, Wells Fargo will no longer be required to disclose some financial dealings with GEO.

While a coalition of organizations, National People's Action Campaign, have seen some success in pressuring Wells Fargo to divest from private prison companies like GEO Group, the company continues to make such investments.

Consumer Financial Protection Bureau fines

In September 2016, Wells Fargo was issued a combined total of $185 million in fines for creating over 1.5 million checking and savings accounts and 500,000 credit cards that its customers never authorized. The Consumer Financial Protection Bureau issued $100 million in fines, the largest in the agency's five-year history, along with $50 million in fines from the City and County of Los Angeles, and $35 million in fines from the Office of Comptroller of the Currency. The scandal was caused by an incentive-compensation program for employees to create new accounts. It led to the firing of nearly 5,300 employees and $5 million being set aside for customer refunds on fees for accounts the customers never wanted. Carrie Tolstedt, who headed the department, retired in July 2016 and received $124.6 million in stock, options, and restricted Wells Fargo shares as a retirement package. On October 12, 2016, John Stumpf, the then Chairman and CEO, announced that he would be retiring amidst the controversies involving his company. It was announced by Wells Fargo that President and Chief Operating Officer Timothy J. Sloan would succeed, effective immediately. Following the scandal, applications for credit cards and checking accounts at the bank plummeted dramatically. In response to the event, the Better Business Bureau dropped accreditation of the bank, Standard & Poor's lowered its outlook to negative from stable, and Massachusetts suspended the bank as a bond underwriter for a year.

Racketeering Lawsuit for Mortgage Appraisal Overcharges

In November 2016, Wells Fargo agreed to pay $50 million to settle a racketeering lawsuit in which the bank was accused of overcharging hundreds of thousands of homeowners for appraisals ordered after they defaulted on their mortgage loans. While banks are allowed to charge homeowners for such appraisals , Wells Fargo frequently charged homeowners $95 to $125 on appraisals for which the bank had been charged $50 or less. The plaintiffs had sought triple damages under the U.S. Racketeer Influenced and Corrupt Organizations Act on grounds that sending invoices and statements with fraudulently concealed fees constituted mail and wire fraud sufficient to allege racketeering.

Dakota Access Pipeline Investment

Wells Fargo is a top investor in the Dakota Access Pipeline project in North Dakota, a 1,172-mile-long (1,886 km) underground oil pipeline project in the United States. The pipeline has been controversial regarding its necessity, and potential impact on the environment.

In February 2017, Seattle, Washington's city council unanimously voted to not renew its contract with Wells Fargo "in a move that cites the bank's role as a lender to the Dakota Access Pipeline project as well as its "creation of millions of bogus accounts." and saying the bidding process for its next banking partner will involve "social responsibility." The City Council in Davis, California, took a similar action voting unanimously to find a new bank to handle its accounts by the end of 2017.

Failure to Comply with Document Security Requirements

In December 2016, the Financial Industry Regulatory Authority fined Wells Fargo $5.5 million for failing to store electronic documents in a "write once, read many" format, which makes it impossible to alter or destroy records after they are written.

SEC settlement for insider trading case

In 2015, an analyst at Wells Fargo settled an insider trading case with the SEC. The former employee was charged with insider trading alongside an ex-Wells Fargo trader. Sadis & Goldberg obtained a settlement that permitted the client to continue in securities industry, while neither admitting nor denying one charge of negligence-based § 17(a)(3) claim, and paying a $75,000 civil penalty

Notable buildings