Wells Fargo set to pay $1 billion to settle shareholder lawsuit

The Yahoo Finance Live team discusses Wells Fargo paying $1 billion to settle its shareholder lawsuit, the company's previous controversies, and banking sector turmoil.

Video Transcript

DIANE KING HALL: As we continue to wind down the trading day and count down to the closing bell, let's take a look at some of the top trending stories of the day outside of some of the big ones we've been covering.

Banking-sector story that caught my eye is this. Wells Fargo announcing it has finally settled a shareholder lawsuit tied to that fake-account scandal from 2016. That feels like so long ago because we're looking at other banks now.

Now with Wells Fargo, this agreed-on price tag us $1 billion. Shareholders accused the bank, you'll recall, of misleading investors about how quickly Wells Fargo worked to address those problems and risk-management failures that led to that debacle.

For anyone who does not remember, this was the scandal where it was discovered that the company-- employees there were opening up fake accounts, including debit and credit accounts, in customer names to reach certain sales goal. And I don't know if you-- sales goals. I don't know if you all remember that there was this eight is great term about, you know, the number of accounts they wanted to open up.

JOSH SCHAFER: And one thing that's interesting with this too, Diane, is to think about the other industries or other companies, I guess, this can impact too, right? You go back a couple of months, and Hindenburg Research was essentially accusing the same thing of Block, right? They said that Block had too many accounts that weren't actually real and basically saying, how many of those accounts are real? Because when we talk about investor accounts and just overall accounts at a bank or at a company like Block or at a company like PayPal, that's what people are looking for is what's that revenue per customer?

So interesting to see this solved today, Akiko, though I don't think the market was overly interested in it. Not a large move from Wells Fargo today but certainly an interesting story.

AKIKO FUJITO: Yeah, Josh, you know, I mean, I saw this story, and you sort of go back to, OK, well, this is just the latest in a very long list of settlements Wells Fargo has had to move forward with--

DIANE KING HALL: Right.

AKIKO FUJITO: --in issues that date back all the way to 2002. Obviously we don't want to conflate all of them, but even within the last six months, we're looking at a settlement of $3.7 billion paid out. In December 2020, $3 billion settlement. That was about allegations of consumer abuse, but there have been a long list of settlements for Wells Fargo. It feels like they just can't get out of the shadows of what happened before. But certainly yet another step that allows them to move forward because their reputation was hit in a big way, and that's kind of putting it mildly.

DIANE KING HALL: Right, majorly. I mean, Akiko, you'll recall Senator Elizabeth Warren, who we just did an interview with, held then CEO John Stump's feet to the fire over that. And I remember him just stumbling through his testimony at the time. Banking executives have gotten better at handling this kind of thing, and obviously the banking executives that we saw today was a different-- is a different situation. We're dealing with a collapse. That was an out-and-out scandal, the Wells Fargo situation. So it's interesting just to see a different banking story today when we have some bank executives on Capitol Hill.

ALEXANDRA CANAL: Yeah, there just seems to be this turmoil overall in the banking sector. And, Akiko, like, to your point, this isn't the first time that Wells Fargo has been involved in these controversies. So you hope that you can move forward and that this doesn't happen again.