1
00:00:00,080 --> 00:00:04,000
Speaker 1: Wells Fargo's legal woes are only getting worse, a lot worse.

2
00:00:04,000 --> 00:00:06,840
Speaker 1: According to a regulatory filing the bank submitted last week

3
00:00:07,320 --> 00:00:10,240
Speaker 1: as part of a list of pending lawsuits and regulatory inquiries,

4
00:00:10,520 --> 00:00:12,680
Speaker 1: Well said it's legal costs might be as much as

5
00:00:12,720 --> 00:00:15,920
Speaker 1: three point three billion dollars, more than what the company

6
00:00:15,920 --> 00:00:18,639
Speaker 1: had already set aside. The bank has been in legal

7
00:00:18,680 --> 00:00:21,880
Speaker 1: turmoil since the revelation last year that employees created millions

8
00:00:21,880 --> 00:00:25,599
Speaker 1: of unauthorized accounts, and that's only the beginning. Late last month,

9
00:00:25,680 --> 00:00:28,800
Speaker 1: Wells disclosed that may have pushed thousands of car buyers

10
00:00:28,800 --> 00:00:32,480
Speaker 1: into loan defaults and repossessions by charging them for unwanted insurance,

11
00:00:32,920 --> 00:00:35,880
Speaker 1: and last week it agreed to pay eight million dollars

12
00:00:35,920 --> 00:00:38,760
Speaker 1: to settle federal claims that it overcharged veterans under our

13
00:00:38,800 --> 00:00:42,680
Speaker 1: mortgage refinancing program. With us to provide some perspective on

14
00:00:42,720 --> 00:00:45,639
Speaker 1: all this is Bloomberg News is banking reporter in New York,

15
00:00:45,720 --> 00:00:49,800
Speaker 1: Laura Keller, Laura, thanks for joining us. Um, let's just

16
00:00:49,800 --> 00:00:52,479
Speaker 1: start with the number. That three point three billion dollars.

17
00:00:52,600 --> 00:00:55,960
Speaker 1: How does that compare with the numbers the company has

18
00:00:57,160 --> 00:01:02,680
Speaker 1: released previously? Well, Greg, it's got a lot bigger. Simply said,

19
00:01:03,200 --> 00:01:07,160
Speaker 1: the previous estimate for what the bank would reasonably expect

20
00:01:07,200 --> 00:01:10,000
Speaker 1: that it would incur in legal costs beyond what it's

21
00:01:10,000 --> 00:01:13,840
Speaker 1: already put aside. That was two billion dollars in the

22
00:01:13,920 --> 00:01:17,720
Speaker 1: last quarter, in second first quarter. And then this last

23
00:01:17,760 --> 00:01:20,319
Speaker 1: disclosure that we got for the second quarter has shown,

24
00:01:20,360 --> 00:01:23,080
Speaker 1: as you said, three point three billion, so that is

25
00:01:23,160 --> 00:01:26,760
Speaker 1: six higher than what the bank had seen in the

26
00:01:26,840 --> 00:01:30,960
Speaker 1: prior quarter. And what is driving all this? What is

27
00:01:31,000 --> 00:01:34,360
Speaker 1: if if you're picking out one biggest legal headache for Wells,

28
00:01:34,440 --> 00:01:37,200
Speaker 1: what what would you say that is? Well, I think

29
00:01:37,240 --> 00:01:40,160
Speaker 1: the biggest legal headache actually has nothing to do with

30
00:01:40,240 --> 00:01:43,399
Speaker 1: the consumer side of things, but as actually more tied

31
00:01:43,480 --> 00:01:47,600
Speaker 1: to these rnbs mortgage backed securities. Well S Fargo is

32
00:01:47,680 --> 00:01:49,920
Speaker 1: one of the few banks that has not settled with

33
00:01:49,960 --> 00:01:53,120
Speaker 1: the government over these kinds of allegations, so that is

34
00:01:53,160 --> 00:01:56,080
Speaker 1: actually probably the biggest driver. I'm not sure that many

35
00:01:56,080 --> 00:01:59,400
Speaker 1: analysts really understand exactly how much well S Fargo might

36
00:01:59,440 --> 00:02:01,160
Speaker 1: be on the hook for. You know, you have a

37
00:02:01,160 --> 00:02:03,760
Speaker 1: lot of numbers out there from things like Deutsche Bank.

38
00:02:03,840 --> 00:02:07,000
Speaker 1: Of course, Barclays was sued by the government. Um, I

39
00:02:07,040 --> 00:02:10,120
Speaker 1: think you probably covered that story. Uh So there are

40
00:02:10,160 --> 00:02:13,239
Speaker 1: you know, ways that some analysts can kind of try

41
00:02:13,240 --> 00:02:15,600
Speaker 1: to assess how much well Spargo might have to pay

42
00:02:15,639 --> 00:02:19,120
Speaker 1: over these mortgage backed securities. But that's out there. Then,

43
00:02:19,160 --> 00:02:21,480
Speaker 1: of course, there are all these problems and issues that

44
00:02:21,840 --> 00:02:24,280
Speaker 1: the bank you know, knows some about but may not

45
00:02:24,440 --> 00:02:27,639
Speaker 1: know everything. There are many many class action lawsuits that

46
00:02:27,919 --> 00:02:30,600
Speaker 1: you know have been filed um in the last couple

47
00:02:30,639 --> 00:02:33,880
Speaker 1: of months over these consumer issues. Some of them are

48
00:02:33,919 --> 00:02:35,840
Speaker 1: these you know, having to do with the fake accounts.

49
00:02:36,160 --> 00:02:39,440
Speaker 1: One that's settled, some are not. There are also ones

50
00:02:39,480 --> 00:02:43,239
Speaker 1: for overdraft fees, mortgage rate locks, and now these auto

51
00:02:43,280 --> 00:02:47,639
Speaker 1: insurance collateral protection insurance claims. It's hard to even keep

52
00:02:47,720 --> 00:02:50,720
Speaker 1: count of how many legal cases. Let's talk a little

53
00:02:50,760 --> 00:02:53,880
Speaker 1: bit about the auto insurance uh issues, since that's a

54
00:02:53,880 --> 00:02:56,160
Speaker 1: new one. Just give us a description of what's going

55
00:02:56,200 --> 00:02:58,919
Speaker 1: on there. Sure, so we learned I think it was

56
00:02:59,000 --> 00:03:01,680
Speaker 1: I can't even remember now last week, um was it

57
00:03:01,960 --> 00:03:05,240
Speaker 1: that you know, the bank had these issues with auto insurance.

58
00:03:05,520 --> 00:03:07,760
Speaker 1: And the way that it's kind of described is, you know,

59
00:03:07,840 --> 00:03:10,160
Speaker 1: you go to the bank, you get a loan for

60
00:03:10,440 --> 00:03:12,480
Speaker 1: an auto for some kind of car or some kind

61
00:03:12,480 --> 00:03:15,280
Speaker 1: of truck, and then there are certain insurances that you

62
00:03:15,320 --> 00:03:17,800
Speaker 1: need to have and prove that we've got. So the

63
00:03:17,840 --> 00:03:21,600
Speaker 1: one that came under scrutiny first was collateral protection insurance.

64
00:03:21,919 --> 00:03:24,640
Speaker 1: Kind of a mouthful, but essentially, you know, it's the

65
00:03:24,680 --> 00:03:28,480
Speaker 1: bank ensuring that it's collateral against your loan. You know,

66
00:03:28,600 --> 00:03:31,799
Speaker 1: there's something there to protect that asset. The bank was essentially,

67
00:03:32,280 --> 00:03:35,240
Speaker 1: you know, not taking into account that you might already

68
00:03:35,240 --> 00:03:38,640
Speaker 1: have this insurance when some clients showed that they did,

69
00:03:38,960 --> 00:03:41,120
Speaker 1: you know, they didn't take off for this. And what

70
00:03:41,160 --> 00:03:43,720
Speaker 1: it essentially did was they had a third party provider,

71
00:03:44,040 --> 00:03:46,560
Speaker 1: National General as the name of the insurance firm, and

72
00:03:46,600 --> 00:03:50,920
Speaker 1: that though they put this insurance onto you and and

73
00:03:50,960 --> 00:03:54,160
Speaker 1: therefore your payments for this auto loan would increase every month,

74
00:03:54,200 --> 00:03:56,360
Speaker 1: they just added it on there. In some cases they've

75
00:03:56,360 --> 00:03:58,560
Speaker 1: been alleged, you know, they haven't. They didn't tell customers

76
00:03:58,560 --> 00:04:01,000
Speaker 1: about this. They just charged them. So people, you know,

77
00:04:01,000 --> 00:04:03,000
Speaker 1: we're having overdrafts in their account because they didn't have

78
00:04:03,120 --> 00:04:06,120
Speaker 1: enough money and and actually led to what the bank said,

79
00:04:06,400 --> 00:04:10,000
Speaker 1: you know, they admitted some repossessions of perhaps twenty thousand,

80
00:04:10,120 --> 00:04:14,200
Speaker 1: maybe even twenty five thousand people's cars. Laura, what are

81
00:04:14,200 --> 00:04:19,160
Speaker 1: you hearing from analysts investors about how Wells Fargo management

82
00:04:19,440 --> 00:04:21,880
Speaker 1: has handled the past what is it now, ten months

83
00:04:21,960 --> 00:04:26,560
Speaker 1: or so, eleven months since the the the thake account

84
00:04:26,560 --> 00:04:30,760
Speaker 1: scandal broke well. I think investors and analysts alike would

85
00:04:30,839 --> 00:04:33,159
Speaker 1: would love to say that they've kind of learned their lesson,

86
00:04:33,200 --> 00:04:36,200
Speaker 1: that management is turning turning a corner. But with all

87
00:04:36,200 --> 00:04:38,960
Speaker 1: of these new recent allegations and revelations in the last

88
00:04:38,960 --> 00:04:42,160
Speaker 1: couple of weeks, I think that most analysts and investors

89
00:04:42,200 --> 00:04:45,120
Speaker 1: just feel rather inundated with this sort of drip drip

90
00:04:45,160 --> 00:04:48,520
Speaker 1: drip of more more scandals, more things coming to light,

91
00:04:49,040 --> 00:04:52,400
Speaker 1: and Wells Fargo did, it, seems, try to alleviate some

92
00:04:52,440 --> 00:04:57,320
Speaker 1: of those concerns with this regular quarterly filing, the ten

93
00:04:57,440 --> 00:04:59,880
Speaker 1: que that they've put out, you know, as every company

94
00:05:00,040 --> 00:05:04,800
Speaker 1: as every quarter, trying to you know, cast all of

95
00:05:04,800 --> 00:05:09,400
Speaker 1: these different issues to light really and let investors know

96
00:05:09,480 --> 00:05:11,800
Speaker 1: what was going on. But even there are so many

97
00:05:11,800 --> 00:05:13,400
Speaker 1: of the analysts when you you know, you read the

98
00:05:13,440 --> 00:05:15,920
Speaker 1: note a couple of days later, they're just complaining that

99
00:05:15,920 --> 00:05:19,280
Speaker 1: they really don't understand the full complexity of what's out

100
00:05:19,320 --> 00:05:22,360
Speaker 1: there because at this point there's just so much, all right,

101
00:05:22,400 --> 00:05:25,160
Speaker 1: I want to thank Laura Keller, Bloomberg News banker reporter

102
00:05:25,279 --> 00:05:27,839
Speaker 1: for talking with us with us about Wells Fargo