LOS ANGELES _ California's state treasurer announced Wednesday that he has temporarily severed some business relationships with Wells Fargo & Co. over revelations that the bank created millions of accounts without customers' permission.
Treasurer John Chiang said his office will no longer invest in Wells Fargo securities, go through Wells Fargo to buy stocks or bonds, or appoint the bank to underwrite certain bond offerings. It's unclear how much the actions will cost the San Francisco banking giant.
In a letter sent Wednesday to Chief Executive John Stumpf and the bank's board announcing the sanctions, Chiang said its sales practices demonstrate "a culture which actively promotes wanton greed."
"In the case of Wells Fargo, how can I continue to entrust the public's money to an organization which has shown such little regard for the legions of Californians who have placed their financial well-being in its care?" Chiang asked in his letter.
Chiang said at a news conference in San Francisco that the sanctions will remain in place for a year and target Wells Fargo's "most highly profitable" relationships with his office. Still, the loss of the state's business in the three areas specified could prove to be immaterial to the giant bank, which recorded more than $22 billion in revenue in the second quarter alone.
For instance, Chiang's office said it will not use Wells Fargo as an underwriter on certain sales of state-issued bonds. A review of state data shows Wells Fargo acted as an underwriter on the sale of about $738 million worth of such bonds last year, which would have led to fees for the bank of about $4 million.
Chiang's office has not provided estimates of how much fee income it paid to Wells Fargo to broker purchases and sales of stocks and bonds last year.
Chiang also said he will work with the state's pension funds, which collectively own about $2.3 billion in Wells Fargo stock and bonds, to push for reforms to Wells Fargo's corporate governance. Chiang sits on the governing board of the nation's two largest public pension funds _ the California Public Employees' Retirement System and the California State Teachers' Retirement System.
He said he will push for the separation of the bank's chairman and chief executive roles, both of which are currently held by Stumpf, and for the bank to review its compensation policies and possibly rescind more pay from executives linked to the fake-accounts scandal.
On Tuesday, Wells Fargo said Stumpf will forfeit compensation worth about $45 million, while Carrie Tolstedt, the executive in charge of the division in which much of the activity took place, will give up about $19 million worth of stock. Chiang said those clawbacks don't seem like sufficient punishment, and that it would be appropriate for Stumpf to resign.
The sales practices at Wells Fargo were first detailed in a 2013 article by the Los Angeles Times, which found that employees under pressure from aggressive sales goals created approximately 2 million checking, savings and credit card accounts for customers without their permission.
The bank said it has fired about 5,300 employees in connection with the practices, and in a settlement released Sept. 8 agreed to pay $185 million to federal regulators and the Los Angeles city attorney's office.
However, the bank and Stumpf came under heavy criticism during a Senate Banking, Housing and Urban Affairs Committee hearing last week and in a House Financial Services Committee meeting Wednesday for a poorly supervised sales culture that allowed the abuses to happen.
Chiang, a Democrat who has served as treasurer since 2015, recently announced plans to run for governor in 2018 when Gov. Jerry Brown completes his term.
