Is The GOP Tax Cut Finally Priced In? Here’s What Wall Street Thinks

Having passed the Senate, and – moments ago, for the second time – the House, the Republican Tax Cuts and Jobs Act, aka the Trump Tax Cuts is officially a done deal, just waiting for the President’s signature, at which point the longest “rumor” of 2017 will become the news. But does that mean that after “pricing it in” in some part virtually every day of the past year, the market can now sell the news? Or, as exasperated traders would put it, “is it finally fully priced in?”
Indeed, analysts, economics and investors are starting to look beyond the soon-to-be-completed tax overhaul, and judging by today’s reaction, the answer may well be yes as stocks, including tax-sensitive banks, are little-changed amid expectations tax cuts may not boost growth that much, and as likely benefits may already be priced-in to stock prices.
In fact, as Bloomberg adds, the S&P 500 and KBW bank indexes are both little changed, with top bank gainer PNC paring gains of as much as 1.1%; other rising banks include Huntington, Wells Fargo, Northern Trust, and BofA

This post was published at Zero Hedge on Dec 20, 2017.

Is it Tuesday? Time for another banking scandal

Another day, another major banking scandal. It’s getting to the point where you can practically set your watch to these things.
The latest involves our old friend Wells Fargo. The Wall Street Journal reported last night that Wells has been screwing its customers on foreign currency exchange rates.
According to the Journal, Wells Fargo conducted an internal review of its fee arrangements and found that they had massively overcharged 88% of the sampled customers.
For example, the bank might have signed a contract with a customer to charge 0.15% on foreign currency transactions, but instead charged as much as 4%… about 26x higher than agreed.

This post was published at Sovereign Man on November 28, 2017.

Here We Go Again: Wells Fargo Is Under Investigation For Gouging Clients

After reporting last month that Wells Fargo’s foreign-exchange unit was being investigated by regulators and that the bank had fired four employees – and demoted another – after discovering certain unspecified improprieties in its FX shop, more details about the exact nature of the bank’s latest scandal – which follows revelations that the bank’s retail division created millions of fake customer accounts, and its auto lending unit overcharged borrows – have finally been unearthed by the Wall Street Journal.
WSJ reports that the bank’s FX sales desk routinely gouged customers by charging them up to eight times as much as the industrywide standard. Furthermore, when confronted by clients about the high fees, traders and salespeople were encouraged to lie about the reasoning for them.
And once again, it appears Wells Fargo’s idiosyncratic incentives encouraged traders and salespeople on the bank’s foreign-exchange desk to take advantage of their clients’ ignorance and gouge them with exorbitant fees. Those who remember the cross-selling scandal that precipitated the resignation of CEO John Stumpf last year will recall that the 5,000 or so branch employees who were fired by the bank reportedly blamed management’s unrealistic quotas for their behavior.
Foreign-exchange employees got bonuses based solely on how much revenue they brought in, say more than a dozen current or former Wells Fargo employees. No other big bank in the U. S. calculated bonuses of currency traders in such a defined and individual way. Wells Fargo said Monday that it began making changes to those compensation plans earlier this year.
The bank also charged some of the highest trading fees around, according to current and former employees. For more than a decade, customers were sometimes charged anywhere from 1% to 4% on basic transactions such as converting euros to dollars and complicated trades like hedging.
Those percentages can be at least two to eight times higher than the industrywide average of 0.15% to 0.5%, depending on the trade, customer and volume, according to foreign-exchange bankers throughout the industry.

This post was published at Zero Hedge on Nov 27, 2017.

Record Surge in Riskiest Loans Fattens Wall Street Banks

Crackdown efforts by bank regulators are put on hold.
The volume of leveraged loans – the riskiest loans Wall Street banks provide – has surged 38% year-over-year and has already beaten the full-year record set in 2013, according to Dealogic. Total of leveraged loans outstanding has reached $1.25 trillion.
Nine of the 10 largest banks in the leveraged-loan business have already surpassed their respective 2016 full-year totals, according to Bloomberg data, cited by the Financial Times, including Bank of America (about $120 billion in leveraged loans so far this year); JP Morgan (about $110 billion), Goldman Sachs ($79 billion); and Barclays ($72 billion). Of the top ten, only Wells Fargo ($69 billion) is still lagging behind last year.
The fees that the banks are raking for putting these loans together are also record-breaking: $8.3 billion so far this year, just 6% below the full-year total of 2016.

This post was published at Wolf Street on Oct 30, 2017.

Federal Prosecutors Are Investigating Wells Fargo’s FX Business

Last week, WSJ stoked fears that the Feds might be ramping up another probe into abuse and manipulation in the foreign exchange market when it reported that Wells Fargo had abruptly terminated four bankers from its FX business and transferred another. Now, Wall Street’s paper of record is reporting that Federal prosecutors are investigating Wells for abuses in its FX shop – but the scope of the investigated is limited to one disputed trade.
According to WSJ, prosecutors have subpoenaed information from Wells and from the recently fired bankers as they investigate a trade and ensuing dispute between Wells and one of its clients, Restaurant Brands International Inc.
RBI owns several fast-food franchises, including Burger King, Tim Hortons and Popeyes Louisiana Kitchen. In an amusing twist, both companies count Warren Buffett’s Berkshire Hathaway as one of their largest shareholders.

This post was published at Zero Hedge on Oct 27, 2017.

Wells Fargo Shares Dip As Bank Fires 4 FX Traders Following Investigations

Wells Fargo CEO Tim Sloan received the patented Elizabeth Warren treatment during testimony before the Senate Banking Committee last month when the Massachusetts Senator accused him of sharing in the blame for the bank’s fraudulent sales practices and opined that he ‘should be fired’, echoing comments she made about his predecessor, John Stumpf, a year earlier.
And just as the CEO has been making the media rounds to try to rehabilitate the bank’s battered public image, yet another scandal appears to be breaking – but this time it originated in the bank’s investment banking unit.
WSJ reported that the bank has fired four foreign-exchange bankers amid an investigation into that business by both the bank and regulators.
While the nature of the purported misconduct is unclear judging by the report, in an amusing coincidence, the news of the firings broke as former-HSBC FX trader Mark Johnson awaits the verdict on whether he defrauded a client when he was running part of HSBC’s FX sales business in London. WSJ reports the bankers were fired for cause.

This post was published at Zero Hedge on Oct 20, 2017.

Wells Fargo Gets Clocked in California

Why is Tim Sloan still CEO, asks California Treasurer. In a letter so brutally scathing it’s practically funny, California Treasurer John Chiang skewers Wells Fargo, its Board of Directors, and its new CEO Tim Sloan. And he extended the sanctions on Wells Fargo, first imposed in September last year, by ‘at least’ another year.
The Treasurer’s office oversees ‘nearly $2 trillion in annual banking transactions, manages a $75 billion investment pool, and is the nation’s largest issuer of municipal debt,’ Chiang pointed out last year when he imposed the sanctions on Wells Fargo’s ‘most highly profitable business relationships with the State of California.’ Those sanctions include:
Suspension of investments by the Treasurer’s Office in all Wells Fargo securities. Suspension of the use of Wells Fargo as a broker-dealer for purchasing of investments by his office. Suspension of Wells Fargo as a managing underwriter on negotiated sales of California state bonds where the Treasurer appoints the underwriter.

This post was published at Wolf Street on Oct 17, 2017.

California Treasurer Skewers Wells Fargo, Wonders Why Tim Sloan is Still CEO, Extends Sanctions

‘The cockroaches infiltrated’ the bank, as ‘systemic corruption and venal abuse of customers’ have become ‘part of Wells Fargo’s brand.’
In a letter so brutally scathing it’s practically funny, California Treasurer John Chiang skewers Wells Fargo, its Board of Directors, and its new CEO Tim Sloan. And he extended the sanctions on Wells Fargo, first imposed in September last year, by ‘at least’ another year.
The Treasurer’s office oversees ‘nearly $2 trillion in annual banking transactions, manages a $75 billion investment pool, and is the nation’s largest issuer of municipal debt,’ Chiang pointed out last year when he imposed the sanctions on Wells Fargo’s ‘most highly profitable business relationships with the State of California.’ Those sanctions include:
Suspension of investments by the Treasurer’s Office in all Wells Fargo securities. Suspension of the use of Wells Fargo as a broker-dealer for purchasing of investments by his office. Suspension of Wells Fargo as a managing underwriter on negotiated sales of California state bonds where the Treasurer appoints the underwriter. With these sanctions, Chiang sought ‘real accountability and lasting reforms.’ But it’s a long and complex relationship that dates back to the Gold Rush era:
Wells Fargo has evolved to become the nation’s second largest bank by total assets. California is set to become the world’s fifth largest economy. What we each do, therefore, matters and effects the public interest.

This post was published at Wolf Street on Oct 17, 2017.

More Bad News For Autos: Wells Fargo Car Loan Originations Crash To All Time Low

Joining the Q3 roster of banks that beat yet which all surprised investors with a cautionary red flag (for the other banks this involved a drop in FICC trading revenue and a sharp increase in loan loss reserves), moments ago Wells Fargo also reported better than expected Q3 EPS of $1.04 (exp. $1.03) which however was the result of a material 20 cent litigation accrual addback to a GAAP EPS of $0.84, indicating that management is expecting significant lawsuits in the coming months. Worse, the bank missed badly on the top line (revenue of $21.9bn vs exp. $22.4bn), but the reason why the stock has tanked by over 3% pre market is the unexpected miss in the company’s Net Interest Margin, which slumped from 2.90% to 2.87%, well below the 2.92% expected, and resulting in a lower sequential Net Interest Income number of $12.476 billion.
Not helping matters is that the company’s mortgage loan pipeline once again took a sharp leg lower.

This post was published at Zero Hedge on Oct 13, 2017.

Wells Fargo’s Artificial Intelligence Defies Analysts, Slaps ‘Sell’ on Google and Facebook

Oh the irony!
Google, which makes almost all of its money on ads and internet user data, is undertaking herculean efforts to get a grip on artificial intelligence (AI). It’s trying to develop software that allows machines to think and learn like humans. It’s spending enormous resources on it. This includes the $525 million acquisition in 2014 of DeepMind, which is said to have lost an additional $162 million in 2016. Google is trying to load smartphones with AI and come up with AI smart speakers and other gadgets, and ultimately AI systems that control self-driving cars.
Facebook, which also makes most of its money on ads and user data, is on a similar trajectory, but spreading into other directions, including a ‘creepy’ run-in with two of its bots that were supposed to negotiate with each other but ended up drifting off human language and invented their own languagethat humans couldn’t understand.
And here comes an AI bot developed by stock analysts at Wells Fargo Securities. The human analysts have an ‘outperform’ rating on Google’s parent Alphabet and on Facebook. They worked with a data scientist at Amazon’s Alexa project to create the AI bot. And after six months of work, the AI bot was allowed to do its job. According to their note to clients on Friday, reported by Bloomberg, the AI bot promptly slapped a ‘sell’ rating on Google and Facebook.

This post was published at Wolf Street by Wolf Richter ‘ Oct 7, 2017.

New Robot Equity Analyst Hits Facebook And Google With A Sell Rating

It should come as a surprise to precisely no one reading this post that wall street equity analysts have a ‘slight’ bias toward “Buy” ratings. After all, equity analysts aren’t really in the business of helping clients make buy/sell decisions, their only real value comes from acting as an intermediary to setup the coveted 1×1’s at lavish conferences in Miami between the hedge funds who pay them and the management teams of the companies they cover. And, of course, it’s much harder to get those management teams to attend your conference if you spread too much truth about their future potential.
But, for those who still aren’t convinced, the Economist took a look at wall street equity research ratings for the S&P 500 last year and found that just 6% of all ratings were “sell/underperform” ratings.
In December 2016, the Economist conducted a study off all the equity analyst ratings for the 500 or so stocks in the Standard and Poor’s 500 index. The study found that 49 percent of the total ratings on those stocks were “buy/outperform” ratings, 45 percent were “hold/neutral ratings” and only 6 percent of total ratings were “sell/underperform” ratings.
Roughly half of S&P 500 stocks underperformed the overall index in 2016, and about 30 percent of the stocks generated negative overall returns on the year.
All that said, a new A. I. equity analyst created by Wells Fargo doesn’t seem to care one bit about the politics of the equity research business and slapped both Google and Facebook, two cornerstones of Jim Cramer’s beloved FANG stocks, with ‘sell’ ratings. Per Bloomberg:
Late last month, Wells Fargo analyst Ken Sena introduced AIERA, short for artificially intelligent equity research analyst, a bot that does massive automated grunt work to support human analysts as they track stocks and make trade recommendations. And while analysts are known to skew toward buy ratings, the new bot doesn’t seem to share the bias.

This post was published at Zero Hedge on Oct 6, 2017.

Watch Live: Wells Fargo CEO To Apologize (Again) To Congress For Massive Fraud

“One Year Later” is the title of the hearing that Wells Fargo CEO Tim Sloan faces this morning with the Committee on Banking, Housing, & Urban Affairs.
A year after former CEO John Stumpf was grilled by lawmakers over the bank’s massive scandal over fake accounts, Sloan will tell the panel he is ‘deeply sorry’ for the scandal but also that Wells ‘is a better bank today than it was a year ago,’ according to prepared remarks.
‘I apologize for the damage done to all the people who work and bank at this important American institution,’ Mr. Sloan is expected to tell the Senate Banking Committee.
As WSJ reports, regulators last year fined Wells Fargo $185 million for ‘widespread illegal’ sales practices that included opening as many as two million deposit and credit-card accounts without customers’ knowledge.

This post was published at Zero Hedge on Oct 3, 2017.

Georgetown Bank Teller Steals $185,000 From Homeless Customer With Garbage Bag Full Of Cash

Where did all this money come from?
That’s probably the first question that Phelon Davis of District Heights, Maryland, asked himself when a homeless man shuffled into the Wells Fargo branch in Georgetown where Davis worked as a teller three years ago and tried to deposit a garbage bag full of cash.
His next question was probably “do you think he’d notice if some of it went missing?”
Instead of helping the customer deposit the money into his account, Davis instead decided to take advantage of the situation, setting up a fraudulent second account under the customers’ name and eventually stealing more than $185,000 from the man, according to the Washington Post.
The 29-year-old bank teller stole more than $185,000 from a homeless customer who tried to deposit a garbage bag full of cash at a Wells Fargo branch in Georgetown.

This post was published at Zero Hedge on Sep 30, 2017.

Debt-Slave Industry Frets over Impact of Mass Credit Freezes

Their doom-and-gloom scenario: Consumers suddenly becoming prudent. ‘Let’s face it, 143 million frauds won’t be perpetrated right away; it will take some time to filter through,’ Steve Bowman, chief credit and risk officer at GM Financial, the auto-lending subsidiary of General Motors, told Reuters.
He was talking about the consequences of the Equifax hack during which the most crucial personal data, including Social Security numbers, of 143 million American consumers along with equivalent data of Canadian and British consumers, had been stolen. These consumers have all at once become very vulnerable to all kinds of fraud, including identity theft – where a fraudster borrows money in their name.
The day Equifax disclosed the hack, I urged affected consumers to put a credit freeze on their credit data at the three major credit bureaus – Equifax, TransUnion, and Experian – to protect themselves against these frauds. Soon, the largest media outlets and state attorneys general urged consumers to do the same thing. Financial advisors are recommending it. Even Wells Fargo jumped on the credit freeze bandwagon.
As a result, consumers have flooded the websites of the three credit bureaus to request credit freezes in such numbers that the sites slowed down, timed out, or went down entirely for periods of time. This credit freeze frenzy is scaring the credit industry – not just the credit bureaus, but also lenders and companies that rely on easy credit to sell their wares, such as automakers and department stores with instant credit cards.

This post was published at Wolf Street on Sep 30, 2017.

Who Gets Hit by Mortgage Losses in Harvey and Irma Areas?

‘We need to ask for a policy change because the burden with these losses is too big.’ Somebody is going to pay for losses on mortgages of homes that were destroyed by Hurricanes Harvey and Irma. It’s a just a question of who.
The taxpayer is on the hook, along with some investors. But then there are the servicers of mortgages guaranteed by the Government National Mortgage Association, for short Ginnie Mae. The largest of them is Wells Fargo, but they mostly include smaller non-banks such as PennyMac and Quicken Loans. The amounts could be large. And now they’re asking for a bailout of sorts.
In total, 4.3 million properties with nearly $700 billion in outstanding mortgage balances are located in FEMA-designated disaster areas in Texas and Florida, according to a preliminary estimate by Black Knight Financial Services:
Disaster areas of Hurricane Harvey: 1.18 million mortgaged properties with $179 billion in unpaid mortgages. Disaster areas of Hurricane Irma: 3.14 million mortgaged properties with $517 billion in unpaid mortgages. Many of these homes survived mostly unscathed. So the mortgage balances of homes that have been severely damaged or destroyed remain uncertain but are significant.

This post was published at Wolf Street on Sep 19, 2017.