Biden tries to reassure US after latest bank collapse, as stocks fall
President Joe Biden tried to reassure depositors and encouraged more oversight after First Republic's collapse. Investors prepare for more failures.
LEARN MOREMay 16, 2023
Wells Fargo & Co. has agreed to pay $1 billion to settle a class action lawsuit brought by investors claiming they were misled about the bank's recovery progress following a slew of scandals.
The lawsuit alleged that the bank failed to take adequate corrective measures following a massive 2016 scandal involving the creation of fake accounts to meet unrealistic goals. Regulators found that the San Francisco-based bank had incentivized its employees to open millions of phony accounts using customers' names without their knowledge or consent.
Since 2018, Wells Fargo has been forced to operate under consent orders from the Federal Reserve and two other U.S. regulators to improve governance and oversight in the company.
Then in 2020, a year-long investigation by the House Financial Services Committee found that Wells Fargo was not in compliance with the consent orders and had not taken necessary steps to satisfy its obligations. As the public learned of the bank's fraud, Wells Fargo's stock price plummeted, resulting in substantial losses for investors.
Wells Fargo denied wrongdoing, but ultimately decided to settle the lawsuit to avoid further harming the bank's reputation.
"This settlement will help compensate hundreds of thousands of investors — state employees, nurses, teachers, police, firefighters and others — whose critical retirement savings were impacted by Wells Fargo's fraudulent business practices," Steven J. Toll, a representative of the investors said in a statement.
A Manhattan federal judge has scheduled a Sept. 8 hearing to consider final approval of the settlement.
