Wells Fargo said it wants to help more with the federal government's programs to disburse $350 billion in loans via the Paycheck Protection Program (PPP). But to do that, the bank may have to have its asset cap, placed there by law after a fake accounts scandal in 2018, lifted so it can do more to help, according to the Financial Times.
The asset cap was imposed on the bank after the scandal, in which it was revealed that Wells Fargo employees had created millions of fake accounts under real users' names to help the bank look more productive.
Now, the bank said it can only lend $10 billion of the overall $350 billion the government wants to be sent out to mitigate damage to small- and medium-sized business (SMB) owners during the coronavirus pandemic. Wells Fargo boasts a $1.9 trillion balance sheet and has 9 percent of the U.S. loan market's shares. But under the restrictions, the bank will only be doing 3 percent of the total aid for the country's SMB owners.
CEO Charles Scharf said the bank is doing everything it could to create capital, but it is "limited" in all it can do to extend more credit, and thus is requesting that the cap be lifted for now.
Scharf said the bank had extended nearly $70 billion in new loan commitments last month to help clients during the pandemic. And the bank will be donating all fees from the program to nonprofits that support SMBs during the pandemic.
Sheila Bair, former chair of the Federal Deposit Insurance Corporation (FDIC) and DC-based advocacy group Better Markets, have been among the voices calling for the asset cap to be temporarily lifted during the pandemic so that Wells can help with the CARES Act and assist SMB owners.
The CARES Act, passed by Congress in March, entails $350 billion in loans to go toward covering expenses for SMBs. The funds will come from the banks and stay on their balance sheets until forgiven or repaid. They can be forgiven if used for things like payroll, rent or utilities.