Wells Fargo’s Stumpf Dislikes Fed Bond Buys That Punish SaversDakin Campbell and Tom Keene
John Stumpf, chief executive officer at Wells Fargo & Co., said he dislikes Federal Reserve monthly bond purchases at this point in the economic cycle and that the policy has hurt savers.
“I’m not a big fan of QE this late in the recovery,” Stumpf said today at The Year Ahead: 2014, a two-day conference sponsored by Bloomberg LP in Chicago. He was referring to the Fed’s bond purchases, known as quantitative easing. “QE, while it’s helped borrowers, has really punished savers,” he said.
Central bank officials have been buying $85 billion in bonds each month to drive down interest rates and spur the economic recovery, swelling the Fed’s balance sheet to almost $4 trillion. Some market participants have said the tactic is losing effectiveness, and economists polled by Bloomberg have predicted the Fed will begin paring purchases in March.
Some of the U.S. policies work at cross purposes, according to Stumpf, 60. While the Fed has lowered rates to help the economy, Fannie Mae and Freddie Mac, the government-backed mortgage firms, are forcing lenders to repurchase loans with minor flaws, he said.
That’s leading banks to raise credit standards above government minimums to provide themselves with an extra buffer against claims, making it harder for borrowers with tarnished credit records to secure loans, he said.
“The reason we add something to it is because we are getting loans put back to us that we made five or 10 years ago for some, in many cases, esoteric or insignificant issues,” Stumpf said. “That’s not good for America. I’m in favor of good regulations, but some of it’s inconsistent.”
Stumpf’s San Francisco-based company is the nation’s largest mortgage lender. Wells Fargo originated $80 billion of home loans in the third quarter, according to a presentation, or about 18 percent of the total market.