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In addition to the sanctions, which start immediately, the state treasurer is also calling on the bank's CEO to resign. He says John Stumpf's testimony on Capitol Hill was disheartening.
"Sometimes enough is enough," said Chiang.
He's is accusing Wells Fargo of "wanton greed" for opening more than 2 million fake bank accounts for customers. As punishment, for 1 year the state will no longer use Wells Fargo for buying investments or underwriting bonds and will not invest in the bank's securities.
"How can my office continue to entrust the public's money to an organization which has shown such little regard for legions of Californians who placed their financial wellbeing with it?" Chiang asked during a Wednesday news conference.
State officials say the impact could be $500 million or more. Chiang thinks it will also be a blow to the San Francisco-based bank's reputation.
"If they have to get down to their knees, maybe a little genuflection a little prayer, would help them,"
In a statement, Wells Fargo spokesperson Ruben Pulido wrote:
"Wells Fargo has diligently and professionally worked with the state for the past 17 years to support the government and people of California. Our highly experienced and proven government banking, securities and treasury management teams stand ready to continue delivering outstanding service to the state.
We certainly understand the concerns that have been raised. We are very sorry and take full responsibility for the incidents in our retail bank. We have already taken important steps, and will continue to do so, to address these issues and rebuild your trust.
As a California-based company since 1852, we are proud to have 44,000 team members across California who are committed to their communities. And we are also proud to have donated $53 million to support schools and nonprofits across the state last year alone."
Customers praised the state's actions.
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"Corporations need to be held accountable," said one San Francisco resident.
Another person added, "It's horrible they would do that to any of their customers."
If Wells Fargo doesn't clean up its act, Chiang says the state's break up with the bank could become permanent.