Wells Fargo to shut down Finance Division
After acquiring Wachovia Bank and taking heavy losses from subprime mortgages, Wells Fargo has announced that it will be shutting down its Finance Division. This move will chop about 3,800 jobs from the 14,000 person division. Wells Fargo will still offer line-of-credit loans and other financial products — just not through a separate division.
Wells Fargo Finance Division
In existence for the last 100 years, the Wells Fargo Finance Division has been separate from Wells Fargo banking services. The Finance Division has been responsible for providing small loans, large loans, auto financing and mortgages. The Finance Division currently holds about $24.7 billion in real estate loans, and all but $1.5 billion is considered subprime. The division lost about 4.62 percent of value in the first quarter, which is about on-level with other major lenders.
The Wells Fargo merger with Wachovia
In 2008, Wells Fargo started a merger with smaller lender Wachovia Bank. This added branches for the conglomerate bank but also brought on additional liabilities. There are about 6,600 branches of Wells Fargo/Wachovia banks and an additional 2,200 Wells Fargo Home Mortgage offices. The takeover of Wachovia was forced by government regulators, who wanted to ensure that Wachovia bank would not fail. Formally, Wachovia was dissolved on March 20, 2010.
Wells Fargo to continue lending
Though Wells Fargo is shutting down its Finance Division, it has announced that the bank will still provide services for customers who are borrowing money. Auto loans and fast personal loans will now be offered inside Wells Fargo branches. The company does still intend on offering mortgages, but rather than subprime offerings, FHA-backed loans will be the focus. These federally backed housing loans are less likely to default, in theory. The current $14.7 billion in auto loans and $7.6 billion in unsecured personal loans will continue to be serviced by the company. The move is intended to cut operating costs and “streamline operations.”