A Wells Fargo bank branch in San Francisco. Photo: Noah Berger/Bloomberg

After Wells Fargo & Co. put a limit on its financial help for small businesses hit by the coronavirus, the Federal Reserve Board on Wednesday agreed to loosen its leash on the bank so that it can loan more. The bank immediately expanded its participation in the Paycheck Protection Program.

Before Wednesday, the government counted any coronavirus-related loan against the bank's growth cap. The Fed imposed the cap on San Francisco-based Wells Fargo in 2018 as part of an enforcement action over numerous compliance failures and scandals, including opening millions of fake bank accounts.

Due to the cap, the bank set a $10 billion limit on the amount it would loan under the government's coronavirus programs. On April 5 Wells Fargo said that in only a few days it had received enough loan applications to exceed the $10 billion pool, and it cut off any more applicants.

The bank's cutoff was important because it made more small business loans last year than any other U.S. lender and was leaving many of those customers unaided.

So the Fed backed off, a little.

In an amendment to the 2018 consent order, the Fed said it "will temporarily and narrowly modify the growth restriction on Wells Fargo so that it can provide additional support to small businesses." Under the change, loans made as part of the government's coronavirus program will not count against Wells Fargo's growth cap.

The amendment referred communications about the order to Wells Fargo general counsel Ellen Patterson in New York; the board's deputy general counsel Richard Ashton and senior special counsel Jason Gonzalez in Washington, D.C.; and Summer Cole, vice president of the Federal Reserve Bank of San Francisco. Patterson did not immediately return a message seeking comment.

The Fed's announcement said, "The board's growth restriction was implemented because of widespread compliance and operational breakdowns that resulted in harm to consumers and because the company's activities were ineffectively overseen by its board of directors." The announcement said Wednesday's changes "do not otherwise modify the board's enforcement action. … The board continues to hold the company accountable for successfully addressing the widespread breakdowns that resulted in harm to consumers identified as part of that action and for completing the requirements of the agreement."

In a statement, Wells Fargo CEO Charles Scharf said, "While we are pleased to be able to help more small businesses through the Paycheck Protection Program, we note that the Federal Reserve's action does not—and should not—in any way relieve us of our obligations under the consent order. … Until our work is completed to the Federal Reserve's satisfaction, we will continue to actively make decisions on how to allocate our balance sheet to support the needs of our customers under the existing asset cap."

The Fed said the change will also apply to Wells Fargo's participation in its forthcoming Main Street Lending Program, which was announced March 23. The $454 billion program, expected to be unveiled this week, will support lending to midsize companies with up to 10,000 employees.