Wells Fargo Gets a Boost

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    Wells Fargo (NYSE: WFC) shares rose along with several other big U.S. banks, as President Trump signed an Executive Order on Friday instructing the Treasury secretary to review the 2010 Dodd-Frank Wall Street Reform Act. Although many other banks benefited from the EO, Wells Fargo was probably the most desperate in need of a boost after being plagued by a string of fraud scandals.

    The act in question contains a number of sweeping reforms that were enacted after the financial crisis that crippled the U.S. economy beginning in 2008. Trump had spoken of his disapproval of the act during his campaign, but his comments were not an indication that he intended to let banks have completely free rein again.

    Trump, like many well-respected economists, attributed the financial crisis to the repeal of the Glass-Steagall act in 1999. Glass-Steagall was created in 1932 to ensure that a financial crash such as occurred in 1929 would never happen again.

    Bringing it back to replace Dodd-Frank would mean that the big banks would have to break themselves up, in order to separate their investment operations from the regular checking, savings and loans that make up ordinary banking responsibilities. This is an idea that actually has bipartisan support, being approved by such conservatives as John McCain, as well as far-left progressives such as Bernie Sanders and Elizabeth Warren.

    While some, including Trump’s Treasury Secretary nominee Steven Mnuchin, don’t approve bringing back the old act word for word, there is a lot of support for a new version. The “21st Century Glass-Steagall Act” was sponsored by both Warren and McCain, along with Washington State Democrat, Senator Maria Cantwell. It adds to the original law by keeping derivatives trading and other shadow banking activities separate, as well.

    In the meantime, Wells Fargo shareholders are grateful to have any sign of a bump. Because although the market seems to have concluded that all of the fallout from illegal activities are in the past, the earnings report figures are not supporting that view. New checking accounts and credit card applications were down at least 40%, and there is no way the bank can prosper without turning those numbers around.

     

     

     

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