Less than a week after California suspended doing some business with Wells Fargo & Co. over its fake accounts scandal, Illinois is following suit.
State Treasurer Michael Frerichs announced Monday that his office will not buy or sell securities through Wells Fargo, similar to sanctions made Wednesday by California Treasurer John Chiang.
Frerichs, who called the bank's behavior "downright shameful," estimated that his office made about $30 billion worth of trades through Wells Fargo last year, and that cutting off that business could cost the bank millions of dollars in fees.
Illinois is the second state to cut some ties to the giant San Francisco bank as officials look to sanction it over revelations that thousands of bank employees opened as many as 2 million accounts without customers' authorization.
"Wells Fargo is a big financial player in Illinois," Frerichs said. "I hope to send a message that their unscrupulous practices will not be tolerated."
Last week, Chiang said his office for the next year will not invest in Wells Fargo securities, use the bank to broker sales or purchases of stocks and bonds, or pick the bank as the underwriter of certain state bond sales.
Chiang's move was seen as largely symbolic, as it will likely deny Wells Fargo no more than a few million dollars in fees. Frerichs, too, said Wells Fargo will likely lose no more than a few million dollars in fees. That will barely dent the bottom line of the bank, which brought in $22 billion in revenue in the most recent quarter.
Still, if more states and public agencies pile on, the loss of public-sector business could add up to real money for the bank.
According to Bloomberg, which first reported Illinois' intentions, Wells Fargo so far this year has underwritten about 6 percent of all municipal bond debt, making it the nation's fifth-largest underwriter of public debt.
The scandal at Wells Fargo has riled lawmakers and made Wells Fargo a target for Republican and Democrat alike.
Twice last month, members of Congress castigated Wells Fargo CEO John Stumpf over the scandal, comparing him and other executives to common bank robbers, ridiculing him for blaming the creation of unauthorized accounts on low-level workers and calling for his resignation.
Republican members of the House Financial Services Committee said Stumpf had harmed the entire banking industry and made it more difficult to argue for an easing of financial regulation, which has tightened since the financial crisis.
Though Wells Fargo admitted no wrongdoing in a $185 million settlement Sept. 8 with federal regulators and the Los Angeles city attorney, regulators found that the bank created unrealistic sales goals and didn't do enough to oversee employees, pushing some workers to meet quotas by opening unauthorized accounts.
The bank is under investigation by state and federal prosecutors, and the U.S. Department of Labor, which is looking into claims by current and former Wells Fargo employees that they were forced to work unpaid overtime as they tried to meet sales goals.
The scandal could continue to grow and potentially engulf other banks, as regulators have said they are investigating sales practices elsewhere to see if problems with unauthorized accounts are more widespread.
Illinois, too, is looking into other potential problems at the bank.
Along with cutting off Wells Fargo as a broker-dealer for his office, Frerichs said he intends to audit Wells Fargo to determine whether the bank has been complying with Illinois' unclaimed property laws, which require banks to turn over money from some inactive accounts to the state. He said it's possible that unauthorized account activity from bank employees could have made inactive accounts look active.
