Will the Fed Remove Wells Fargo's Asset Cap?
Political pressure is mounting on the Federal Reserve to remove the asset cap it placed on Wells Fargo (NYSE: WFC) as punishment for opening millions of fraudulent bank accounts. A few months ago, bank executives did not have a timeline for when the cap might be removed. But with the U.S. Small Business Administration (SBA) trying to disburse $350 billion in government-backed loans to struggling small businesses, pressure is building to remove the $1.95 trillion asset cap because Wells Fargo is one of the top SBA lenders in the country.
Recently, the banking giant said it would need to limit its participation in the SBA's payment protection program to $10 billion because of the asset cap. The bank reported having $1.93 trillion in assets at the end of 2019, pushing it right up against the limit.
With the new SBA program getting off to a rough start and banks inundated with applications, it is tough to have one of the best SBA lenders on the bench right now. As the economy enters a recession, I expect that the Fed will, at the very least, allow a temporary removal of the asset cap, which should give the bank a short-term boost -- and potentially a good long-term outlook as well.
Source Fool.com
