As some states are reconsidering their relationships with Wells Fargo after the revelation that it opened millions of unauthorized accounts for its customers, the issue of whether Maryland can do the same — and whether it will — has yet to be determined.
Maryland treasury officials said Monday that the state agency has evaluated its relationship with Wells Fargo and found that the state Treasurer has no underwriting contracts or investment accounts with the bank. All of the Treasurer’s dealings with Wells Fargo are on the banking side. A determination whether to suspend doing business with Wells Fargo is under the Attorney General’s purview based on standards set in state law.
California and Illinois have suspended their investment relationships with Wells Fargo following the reports, and other states are evaluating their relationship with the bank. However, those relationships are primarily on the investment side and deal with municipal bond underwriting.
“After doing an inventory of dealings that the state of Maryland has with Wells Fargo, we have determined that Maryland has no underwriting contracts with Wells Fargo,” said Susanne Brogan, deputy director of public policy in the Maryland State Treasurer’s Office.
However, several state agencies in Maryland have banking contracts with Wells Fargo, and it is up to Attorney General Brian Frosh to determine if the state can suspend those relationships.
Treasurer Nancy Kopp is asking Frosh whether the state’s suspension and debarment laws apply to Wells Fargo, said Brogan.
Should the attorney general’s office find the law applies to Wells Fargo’s conduct, the Board of Public Works would have the final say as to whether the state will sever that banking relationship. As of last week, the attorney general’s office said it could neither confirm nor deny whether it is looking into any wrongdoing by Wells Fargo.
Maryland has underwriting contracts with nearly a dozen banks, including Bank of America Merrill Lynch, Citigroup, J.P. Morgan Securities LLC, Morgan Stanley and M&T Municipal Capital Markets Group.
A review of Wells Fargo credit card and deposit accounts found more than 15,000 accounts in Maryland might be unauthorized. Of those unauthorized accounts, about 500 incurred fees. Wells Fargo is in the process of reimbursing customers and reviewing accounts to make sure customers have the products they want. Wells Fargo has 1.36 million deposit account and credit card holders in Maryland.
Even though the bank’s presence in Maryland pales in comparison to its dealings in other parts of the country, Wells Fargo is the fifth-largest bank in Maryland, with a 7.5 percent market share and $10.5 billion in deposits. The bank has 86 retail stores and more than 4,000 employees in the state.
Wells Fargo agreed to pay a $185 million fine in a settlement earlier this month, which included a record $100 million payment to the Consumer Finance Protection Bureau. Bank executives have also been interrogated by House and Senate committees in the past few weeks. Wells Fargo CEO John Stumpf will also give up $41 million in unvested equity awards while the former head of community banking, Carrie Tolstedt, who oversaw the offending banking practices, will forfeit $19 million.
Based on the magnitude of Wells Fargo’s wrongdoing, the CFPB believes the questionable sales practices might be symptomatic of a larger problem in the banking industry.