Federal Reserve temporarily lifts asset cap on Wells Fargo, allows for more emergency lending

Yahoo Finance’s Brian Cheung breaks down why the Federal Reserve temporarily lifted the asset cap on Wells Fargo.

Video transcript

ADAM SHAPIRO: But we want to go to Brian Cheung right now for some news. Brian, what's the latest that you've got for us?

BRIAN CHEUNG: Hi, Adam. Some breaking news from the Federal Reserve, so they did announce that they would be temporarily lifting the asset cap on Wells Fargo to allow them to do more emergency lending under that Paycheck Protection Program. As you'll recall, Wells Fargo did abruptly close their application portal over the weekend because they could not take any more than $10 billion in small business loans because the Federal Reserve had capped them on the amount of growth that they could have on their balance sheet.

If we rewind to February 2018, the Federal Reserve imposed that asset cap on Wells Fargo because of the number of scandals that it had had in the years prior, regarding the unauthorized opening of millions of customer checking and credit card accounts. The Federal Reserve now saying it will temporarily allow Wells Fargo to go above the asset cap as long as it's making sure that those PPP loans are part of the reason for why it's spilling over that asset cap.

One other thing to mention from the release from the Federal Reserve, which, again, just across the wires, is that the Federal Reserve will apply the same treatment to any loans done under the Main Street lending program, which the Federal Reserve has not fully announced yet. They announced that they were creating some sort of direct lending facility but haven't provided details on that. But they did announce with the Wells Fargo announcement today that any loans provided under that program also will not count towards the asset cap.

And this is pretty notable because Wells Fargo is one of the largest lenders the United States. In addition to being one of the four largest banks in the country, it does also claim that to be one of the largest small business lenders with over three million business clients. So this is a pretty big deal that the Federal Reserve, again, lifting that asset cap on Wells Fargo.

ADAM SHAPIRO: Brian Cheung, that is important news.