Wells Fargo CEO John Stumpf spoke out Thursday against broad-stroke attempts at principal reductions. Similar to comments made by Bank of America CEO Brian Moynihan earlier this week, Stumpf noted the moral hazard inherent in making principal writedowns a fixed offering to homeowners.
‘It makes no sense to [entice] people not to pay their debts,’ Stumpf said at a financial services conference, according to a Reuters report. He called writedowns ‘a tool in our toolbox,’ adding that it is ‘not always the answer.’
A draft settlement proposal sent by several state attorneys general to the nation's biggest banks last week outlined mandatory principal writedowns as a possible condition of any settlement between agencies, regulators and the servicing industry.