The asset cap on Wells Fargo makes no sense and has got to go

Print Friendly, PDF & Email

BOUND: This is, alas, turning into something of an evergreen headline.

Which reminds me. Wells Fargo’s fake-accounts scandal happened eight years and three CEOs ago. The $1.95 trillion asset cap regulators imposed on the company has now been in place for six years. Over that time, the assets at the other three mega-banks have risen by anywhere from 25% to 50%, which implies that, since 2018, Wells has had to forgo something like $700 billion in new assets that could have been used to fuel substantial credit creation—that is, the funding of loans, leases, and other financial whatnot that help fuel economic growth. Even if you figure that other banks captured a meaningful chunk of Wells’s lost asset growth, without the cap Wells would still likely have plenty of extra money it could put to work. How consumers and the economy broadly have benefited from this situation is beyond me.

BLAZING AHEAD: On the other hand, I do fear that Charlie Scharf might be coming down with a serious case of Investment Banking Envy.

That can be expensive, is all I’ll say.