The Department of Justice is investigating Wells Fargo & Co.'s alleged role in driving down the price of low-income housing tax credits, Bloomberg News reported, citing people close to the matter.
The department is reportedly looking into whether the bank conspired with developers to submit low-ball bids on the tax credits in exchange for providing them better loan terms or agreeing to finance bad deals. While the probe initially focuses on Wells Fargo, the DOJ is also looking into other banks as well, according to the report. Wells Fargo did not immediately respond to S&P Global Market Intelligence's request for comment.
Wells Fargo disclosed in early August that federal government agencies were probing how the bank purchased, or negotiated the purchase of, certain federal low-income housing tax credits in connection with the financing of low-income housing developments. The bank did not name the agencies then.
The Justice Department's action follows an investigation by Florida into potential fraud in the tax credit program in the state in the last few years. Florida has reportedly issued subpoenas to Wells Fargo and to other developers seeking details on deals done with the bank.
Wells Fargo is reportedly the largest purchaser of low-income housing tax credits and has invested $9 billion in the program in the last five years.