Shares of Wells Fargo (NYSE:WFC) were trading nearly 4% higher as of 10:45 a.m. ET today for no obvious reason, although I suspect it is likely because of President Joe Biden's decision to reappoint Jerome Powell as the chairman of the Federal Reserve.
Holders of bank stocks in general appear to be pleased with the Powell news, as the KBW Nasdaq Bank Index, which tracks the largest bank stocks in the country, traded more than 2% higher this morning as well.
Wells Fargo is likely trading higher than the group as a whole because the bank is more captive to the Federal Reserve right now. It remains under a Federal Reserve-imposed asset cap limiting the bank from growing its balance sheet. The asset cap is a result of the bank's infamous phony-accounts scandal and has caused the loss of billions of dollars in profits.
Now, I don't think this means that Powell will make it easy to get the asset cap removed, as he has made public statements suggesting that Wells still has a good deal of work to do. But he is likely a far better pick for the bank than the other top candidate, Dr. Lael Brainard, who Biden announced will become vice chairwoman of the Federal Reserve Board of Governors.
Brainard is favored by Democrats who would prefer stricter banking regulation, including Massachusetts Sen. Elizabeth Warren, who earlier this year called for Wells Fargo to be broken up.
While I am not sure that this necessarily speeds up the removal of Wells Fargo's asset cap, I would agree that the process certainly could have been more difficult under Brainard's regime, so this is a victory for the bank.