From the moment Secretary Mnuchin laid out the White House's plan to use banks and credit unions as the intermediary to dole out the hundreds of billions of dollars in "emergency liquidity" approved as part of the virus bailout, we anticipated a wild ride ahead. And when the administration begged the biggest banks to keep the taps running at the expense of rooting out fraud, we knew that, too, was bound to end poorly.
The result? The PPP successfully doled out the funds, though whether the businesses that received them actually needed the money isn't really clear. And just hours after the DoJ filed the first fraud charges tied to the program against two middle-aged small business owners from Rhode Island, we suspected it was only a matter of time before the administration renegged on its promise and threw the bankers under the bus.
It was actually only a matter of hours, because as Wells Fargo revealed Tuesday afternoon, the Feds are already digging around for a Wall Street scapegoat, and where better to start than the bank that has become almost synonymous with "consumer banking fraud and abuse".
This is extremely because Wells Fargo is the easiest target - than bac or jp or usb https://t.co/qIR8Amtt41— stochastic Alphaholic (@Alphaholic1) May 5, 2020
In its 10-Q, Wells reported the following under "Legal Actions":
Plaintiffs have filed putative class actions in state and federal court in Texas, California, and Colorado against the Company. The actions seek damages and injunctive relief related to the Company’s offering of Paycheck Protection Program (PPP) loans under the Coronavirus Aid, Relief, and Economic Security Act. The Company has also received formal and informal inquiries from federal and state governmental agencies regarding its offering of PPP loans.
The more cynical among us couldn't help but laugh.
of course wells fargo already messed up PPP. clownshow. $WFC— FlattenTheCurve (@WillardOfOdds) May 5, 2020
*WELLS FARGO FACING GOVERNMENT INQUIRIES INTO PPP LOANS: FILING $WFC— CÆTUS (@caetuscap) May 5, 2020
of course they are.
Wow, Wells Fargo moved fast. I bet no one is surprised. https://t.co/5Z0skOQSQX— Ellen Chang (@EllenYChang) May 5, 2020
In the filing, the bank also referenced a lawsuit filed by a California-based small business alleges that Wells Fargo unfairly prioritized businesses seeking large loan amounts, while the government's small business agency has said that PPP loan applications would be processed on a first-come, first-served basis.
We wouldn't be surprised to learn that the government is looking into pursuing this angle as well.
$WFC took stumbled into the close as investors worried that the bank might have botched its best chance to redeem itself in the eyes of the public.