What the Wells Fargo Lawsuit Means for Investors

Wells Fargo was sued by the U.S. government earlier this week for not taking care in ensuring government-backed FHA loans for over a decade. As a U.S. attorney put it, Wells is accused of engaging "in a longstanding and reckless trifecta of deficient training, deficient underwriting, and deficient disclosure, all while relying on the convenient backstop of government insurance."
 
Wells isn't alone in garnering government attention. After similar charges, Citigroup and Michigan bank Flagstar (NYSE: FBC  ) settled for a total of $290 million. Meanwhile, Bank of America settled for $1 billion.
 
Anand notes that this settlement amount won't be crippling to Wells Fargo, although it adds to the litigation Wells and other big banks have been facing. It should also be noted that Wells disputes the claims and points to a better-than-average record on delinquencies.
 
Overall, Anand doesn't think the new litigation changes the Wells Fargo thesis. He's still bullish over the long term.

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Anand Chokkavelu owns shares and warrants in Citigroup, JPMorgan Chase, and Wells Fargo. He owns shares and LEAPs in Bank of America. The Motley Fool owns shares of Citigroup, Bank of America, JPMorgan Chase, and Wells Fargo and has created a covered strangle position in Wells Fargo. Motley Fool newsletter services recommend Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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