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Fed makes temporary change to Wells Fargo restrictions
The Federal Reserve Board announced Wednesday that it will temporarily and narrowly modify the growth restriction on Wells Fargo & Company so that it can provide additional support to small businesses. The change will only allow the firm to make additional small business loans as part of the Paycheck Protection Program, or PPP, and the Federal Reserve's forthcoming Main Street Lending Program.
The Board will require benefits from the PPP and the Main Street Lending Program to be transferred to the U.S. Treasury or to non-profit organizations approved by the Federal Reserve that support small businesses. The change will be in place as long as those facilities are active.
The Board's growth restriction was implemented in February 2018 because of widespread compliance and operational breakdowns at Wells Fargo that resulted in harm to consumers and because the company's activities were ineffectively overseen by its board of directors. The growth restriction provides an overall cap on the size of the firm's balance sheet. The change announced Wednesday provides additional support to small businesses hurt by the economic effects of the coronavirus by allowing activities from the PPP and the Main Street Lending Program to not count against the cap.