Wells Fargo Plunges After Fed Growth Ban

called unprecedented by FETE officials. After markets closed on Friday, Janet, Yellen's final work day in office, the FED announced a harsh new punishment for Wells Fargo, which has been involved in scandal after scandal. The FED banned the bank from growing until it convinces authorities it's fixed. It's many problems. Yellen, speaking on CBS Sunday Morning yesterday, cautioned against rolling back

enforcement of banks. They are now much safer, much sounder, and much better at managing their rit and it would be a grief mistake to rules that back. My guess is Robert Hockett, professor at Cornell Law School, Bob, how harsh and how unusual is this action against Wells Fargo. Well, Hi, Jane, thanks for having me on it's actually not as harsh as one might have thought. It's definitely unprecedented, and that's

what's sort of interesting about this. It's unprecedented, I think precisely because the regulators were trying to decide whether there's some sort of potent form of enforcement that nevertheless falls short of the much more severe enforcement actions that the FED could have taken. Describe what the action actually is. So essentially it's a limitation placed on the right of

the institution to grow. And what that means is it's going to be limited as to the size of its asset portfolio until it convinces the ft that it has taken appropriate action directed by its internal governance and law compliance measures or programs. So essentially what they're saying is okay, well as a sort frozen at its current size. Um. Now that's a punishment in the sense that in two senses,

I guess. On the one hand, banks typically do like to grow their asset uh portfolio is because, of course, that means that they're standing to it to yield higher profits to their shareholders. In that sense, it hurts. But more importantly, I think it hurts because it gets a lot of attention precisely because it's an unusual form of sanction, and that means that the public is once again paying close attention to repeat offender and to the fact that

Wells is a repeat offender. Major US banks have bounced back from past crackdowns. Do you expect this to be any different? I'm sorry? Is what major US banks have bounced back from these crackdowns before, Morgan, Chase, City Group, etcetera. Do you expect it to be any different for Wells Cards? No? I actually don't. I mean, at least I don't expect it to be any different if they actually do correct what's been going on internally, and it looks as that

they're trying to do that. As you know, there's a major shuffle has been underway on the board and that is itself, that's to say, the Wales Board and that is itself and attempts to sort of get a wrap on or get a get a grip on its internal compliance problems and to sort of impose a discipline within the organization, which apparently has been rather difficult for the

board to do in the past. What else does it have to do, Bob in order to get to fix its problems Well one thing is to develop, typically with an outside consultant and effective form of internal compliance procedure. That can include hotlines or anonymous tip lines for employees to be able to report abuses that they see going on. It can include uh sort of heavier reporting requirements that higher ups might place on those lower down to ensure that they're all complying with the law, any number of

such things. And then the second thing is that it's typical to seek some kind of endorsement of the measures that have been adopted from some outside so called reputational intermediary, which could could be any number of intermediaries, including the

standard of PORES or fits or you name it. UM. And if the board, the FED board that is, finally becomes satisfied UH with the warrant of reputational intermediaries that the internal compliance procedures adopted by Wells are substantial and indeed likely to work, that could indeed see a relaxation than of the sanction looking forward as far as other banks are concerned to are looking at this harsh penalty.

President Donald Trump has repeatedly said he wants to loosen constraints on the financial industry, so does this harsh penalty signal a new reality or is it Yellin's final salvo. I think it signifies just the same reality as we had before. To tell you the truth, a couple of

couple of reasons for that. The first is, as I mentioned earlier, it is possible for the regulators to impose much more difficult, much more onerous sanctions, including monetary fines or even imprisonment or regulatory sanctions against individual human beings who make decisions in an organization. And I note that the FETE has not done anything quite like that in connection with Wales, so in that sense, it's not that unusual. It's also I mean, it's not that that's harsh, um uh,

And it doesn't really change. It's a significant move away from where we were in the previous two or three years. For another thing, is you know, Trump has suggested that while he wants to relax the various regulatory requirements and the like, he has also been claiming that he wants the penalties to be harsh for those who nevertheless violate what rules remain. Now, of course, we always have to say what Mr Trump says with a grain of salty

might say something different. Tomorrow. But there's no I think signal at this point that there's going to be some fun of it will change in the way that we deal with banks, the size of of wells. This was a consent degree, so perhaps they had to give a little to get a little, and that's why it wasn't as harsh as anticipated by you. Uh, it's that's possibly

the case, um, you know. So the idea here is that typically if you can get the regulated entity to agree with whatever penalty or rectificatory measure has been decided on by the regulator, that does make things easier for the regulator because of course it spares it the trouble having to engage in litigation. But of course it also spares the litigated, i mean the regulated entity from possible

litigation expenses as well. So while it is sort of a given take that arrives at a consent decree, it's probably worth keeping in mind that both signs gain if they can avoid litigation, which is to say that both sides gain if they can reach an agreement as to some sort of direct deficatory measure. About thirty seconds, you can have a quick answer here. You mentioned criminal penalties, which we never see. Do you expect to see them in the coming years. I fear not. I don't think them.

To the Trump administration, we're likely to see anything um in the way from old cudalts. Is particularly given that we didn't see anything like that during the Obama years. So they force your you might stay of Obama was allowed to do this. I suspect the Trump, who seems to be more friendly to big bankers, won't do it either. Thanks so much, Bob. As always, that's Robert Hockett, professor

at Cornell Law School. The House Intelligence Committee is holding a closed door session at five PM to consider releasing the Democratic rebuttal memo to the Republican memo that alleges bias in the Russia investigation. President Donald Trump and some Republican allies are using the so called Newness Memo to allege bias in Special Counsel Robert Mueller's investigation. Several former intelligence officials have publicly criticized the memo, drafted by the

chair of the committee, Republican devon Newness. Here's former CIA director Leon Panetta speaking on Fox News Sunday. I think in this instance, very frankly, that the Newness charges against FISA, particularly without looking at the entire application, without talking to the judges who actually make these decisions. I think that's irresponsible. The Democratic counter memo was authored by California Representative Adam Shift The pan Top Democrat. Joining me is William Banks,

professor at Syracuse University Law School. Bill, you've read the memo. What's your analysis? Well, I agree with what Mr Panetta said just now, and I think it's a very unfortunate turn of events for the investigation to have. It may have the elements of the investigation by the Mueller team revealed in this way. It's a it's clearly partisan, it's an effort to protect President Trump, and it's you know, it compromises a valuable intelligence source that the Bureau had

been working with. And it of course is also very much a sort of a cherry picked gleaning of a few elements of a much larger FISE application. Tell us about the FIS accords and what it takes to get a surveillance on an American citizen. It's important to remember, June that the purpose of the FIZER process is to

collect foreign intelligence or counter intelligence. In this case, it was counter intelligence involved in Carter Page, this is not a criminal process, so we don't expect the same Fourth Amendment protections for citizens that we would if a criminal sanction or possible jail could be forthcoming. Still, the process does do more to protect Americans than it does persons

who are not from the United States. So the the predicate, if you will, is still the same probable cause to believe that the target is an agent of foreign power,

in this case Russia. The thing that's different about US persons in this regard is that none of the uh, none of the activities that are the base for an order of surveillance could be based on protected First Amendment activities, and the process requires that they seek remol of the authorization more frequently than they would have to if the

target were not a US person. So something I find difficult to understand is this memo is about Carter Page, who White House officials described as a peripheral member of a relatively peripheral advisory committee, and last December, White House attorney Don McGan wrote to Page to cease saying he's a Trump advisor and doesn't didn't the FBI have a

lot more on Page? He was interviewed by them as early as ten as part of an investigation into a Russian inspiring So shouldn't the FBI had had more information on him than the Steel dossier. They clearly did, and I think if the Democratic Memo is released, will learn

more about some of that other information. You know, the defies application is a lengthy process that involves internal vetting inside the Department of Justice by numerous officials, lawyers and policy officials, and the application itself, when it's carried to the FIES the court would have been lengthy, I don't know, fifty pages, maybe more so. The Steel dossier would have been a very small part of a larger package of materials.

As you say, they've been looking at at Steel or a page rather for up to three years prior to this application. And of course it's also important to remember this was actually stated at the bottom of the of the newest Memo that the investigation of the potential uh for collusion between the Trump campaign and the Russian interference was first investigated concerning Adopolis, not Card or Page. So

there was a prior application that had already been reviewed. No, we hardly on Panetta to say, you know, we shouldn't do this without talking to the judges. Judges don't normally explain their decisions to people unless there's some kind of criminal process, and you know, they have to look into what the judge found. And so is that likely to happen that one of the judges would come forward, Oh,

it's it's almost surely not going to happen. We don't even know which judges might have been involved in the Carter page application as the as the materials reveal the page request was renewed on two or three occasions. I forget the details. Now, it's likely that on the first occasion and then on the renewals, there might have been a different judge involved each time. The judge wouldn't have

been identified. The judge won't identify himself for herself now, and that's the way the process is supposed to work. So Bill, now, let's say the Democrats are allowed to come out with their memo. Is good to have to dueling memos out there and about the FBI's process. And is it dangerous to release the second memo? You I doubt that it's dangerous to release it at this point.

It's about achieving turbopartisan balance here. The best result is for no memos to have been released, because it was a real affront to the integrity and the Apartment of Justice in the whole five process, the entire intelligence community for that matter. So I think the better thing would have been for there to be no memo. I think once there's a heavily partisan memo out, it's fair to

have a rebuttal memo out. I think that Representative Shift and others would be very careful not to release sensitive information, uh in the chance that their memo does come out. Now, another part to this is that Senate Judiciary Chair Chuck Grassley is calling on the FBI to stop blocking the release of key portions of his memo that calls for a criminal investigation of Christopher Steele, which is who's the former British spy who compiled that dossier we know so

much about. In about a minute, can you tell me what grass Lee is trying to accomplish. Uh, It's very hard to know exactly what he's trying to accomplish. One of the things that we learned, unfortunately, is that in in releasing the newest memo, we now know that Steele was an FBI source prior to the so called dossier

and prior to the investigation, Carter page. So, in the context of the of the larger investigation, one of the things that happened is that the Bureau was lost the source that had been using for foreign intelligence gathering for years. So I think coming out with more now, I think that they've already lost Steel and whatever value that he might have provided to the process or law. Well, we'll see how this plays out, and there are certainly different

different parts of this. Now it seems as if there it's like a tree with the branches spreading. Thanks so much for being here. Bill. That's William Banks, professor at Syracuse University Law School. Thanks for listening to the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple podcast, SoundCloud, and on Bloomberg dot com slash podcast. I'm June Brosso. This is Bloomberg