Wells Fargo & Co. will lay off 3,800 workers and close its 638 consumer financial stores over the next 12 months in a consolidation move brought on by the 2008 merger with Wachovia bank.
It also announced that it will get out of the nonprime mortgage business. Subprime loans -- those made to consumers with bad credit or high debt -- contributed to the global credit crisis when home prices tanked and housing foreclosures skyrocketed.
Of the 14,000 workers at Wells Fargo Financial, 2,800 jobs will be cut in the next two months and another 1,000 positions will be eliminated within a year. The rest of the workers will be reassigned to other parts of the company, Wells Fargo announced.
"Our network of U.S.-based consumer finance stores, which have historically operated as an independent sales channel from our bank operations, have served customers well for more than 100 years," said David Kvamme, president of Wells Fargo Financial, "but the economics of a separate Wells Fargo Financial channel are no longer viable, especially now that our customers have access to the largest banking and mortgage store network in the United States."
Kvamme told Bloomberg that the nonprime home loans business was dropped because it had "become so small that we decided we would no longer devote resources to maintaining it."
The restructuring of its Wells Fargo Financial division doesn't affect the company's 6,600 community banking stores. The company says in a statement that less than 2% of its real estate loan business came from the financial stores in the first quarter of 2010.
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