Wells Fargo’s asset cap lifted by the Fed: What this means

00:00 Speaker A

Dave, while we have you, some breaking news on your very beat, Wells Fargo, what’s the latest there?

00:08 Dave

Yeah, so uh a key growth restriction, probably the most onerous thing that can happen to a large uh federally uh chartered bank um was removed. This was a part of a 2018 consent order. Now, the consent order is still in place, but um this growth restriction, which basically held them from growing their assets above a 2017 level is now gone. So effectively, the bank is out of the out of the penalty box. And that’s a big deal because it goes back to this uh fake account scandal that happened um kind of through the mid 2010s and the fact that regulators their overseers are okay with what uh Wells Fargo is doing now and feels like they’ve moved past that is a huge sign for the bank and its CEO, Charlie Sharp.

00:58 Speaker A

So what is Wells Fargo now in theory allowed to do that it wasn’t allowed to do under some of these restrictions?

01:06 Dave

Right. So acquisitions, growing their loans, uh buying more securities, anything really that um that you can think of in terms of growing the business. So it’s pretty big. It also means that they can do a lot more with trading if they’re interested in that because that’s a capital heavy business. Banks obviously have to carry a lot of capital to reserves. So to do something like trading, they need a lot more assets.