After acquiring Wachovia Bank and taking heavy losses from subprime mortgages, Wells Fargo has announced that it could be shutting down its Finance Division. This move will chop about 3,800 jobs from the 14,000 person division. Wells Fargo will nevertheless offer line-of-credit loans and other financial products — just not through a separate division.
Article source: Wells Fargo to shut down Finance Division by Personal Money Store
Wells Fargo Finance Division
Open for over 100 years, Wells Fargo Finance has operated separately from Wells Fargo Banking. The Finance Division has been responsible for providing small loans, large loans, auto financing and mortgages. With $ 24.7 billion in real estate loans within the Wells Fargo Finance Division, only $ 1.5 billion of them are “prime”. The Finance Division lost almost 5 percent of its value, which is about the very same as other 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. On March 20, 2010, Wachovia was officially dissolved as a bank.
Wells Fargo plans on continuing to lend money
Though Wells Fargo is shutting down its Finance Division, it has announced the bank will still provide services for customers who are borrowing money. Auto loans and fast personel loans will now be offered inside Wells Fargo branches. Instead of offering subprime mortgages, Wells Fargo intends to focus on offering Federal Housing Administration loans. 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 short term loans will continue to be serviced by the business.
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