Elizabeth Warren calls on Fed to dismantle Wells Fargo, citing ‘broken culture’

Senator Elizabeth Warren, D-Mass., On Tuesday urged the Federal Reserve to dismantle Wells Fargo, arguing that widespread corruption and a host of scandals within the financial powerhouse posed “substantial risks” to consumers and the financial system in his outfit.

In a letter to Fed Chairman Jerome Powell, Warren asked the central bank to use its authority to separate Wells Fargo’s core banking unit – such as offering checks and savings accounts – of its other financial services. She argued that the Fed had the power to do so by revoking Wells Fargo’s status as a financial holding company under the Bank Holding Company Act.

“The Fed has the power to put consumers first, and it must use it,” wrote the Massachusetts Democrat. “By invoking its full authority to protect consumers and the financial system and requiring Wells Fargo to separate its consumer banking arm from the rest of its financial activities, the Fed can ensure that Wells Fargo faces the appropriate consequences of its ungovernable behavior. long-standing. “

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In a statement, Wells Fargo said that “it is a different bank today than we were five years ago because we have made significant progress,” including: improving supervision and transparency, the integration of new managers throughout the company, the launch of a risk assessment program to identify operational risks and controls, implement a new incentive plan for bank branches and reduce the total number of customer remedies to be carried out.

“Serving customers with the highest standards requires a solid foundation of risk and control. That’s why meeting our own risk management and control expectations – as well as those of our regulators – remains Wells Fargo’s top priority, “the bank said.

For nearly five years, Wells Fargo has been in Washington’s crosshairs after discovering that the company has made millions by setting up fake accounts for clients without their knowledge, sometimes charging unnecessary fees or damaging individuals’ credit ratings. .

The Fed, led by Janet Yellen, responded to the scandal by imposing an unprecedented asset cap on Wells Fargo in 2018, which it remains to this day.

The bank, the fourth in the United States, has also paid nearly $ 4 billion in fines and penalties since the scandal erupted in 2016.

But regulators at the Office of the Comptroller of the Currency (OCC) slapped Wells Fargo last week with an additional $ 250 million penalty, saying the bank had been too slow to compensate victims and address underlying weaknesses. business practices.

The OCC said the bank had engaged in “dangerous or unwise practices” and violated the terms of a 2018 consent order. The agency also said it would restrict Wells’ mortgage business. Fargo until the issues are resolved.

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“These new revelations have once again made it clear that continuing to allow this giant, culturally broken bank to conduct business in its current form poses substantial risks to consumers and the financial system,” Warren wrote.

In a separate letter to the chairman of the board of Wells Fargo, Warren asked if CEO Charlie Scharf and the board are capable of running the bank. She accused the bank of further “corruption” and “mind-boggling” mismanagement under Scharf, which made more than $ 20 million in fiscal 2020.

“It is inconceivable that Mr Scharf has been paid so well when he has failed over the past two years to meet the company’s ‘top priority’, and inconceivable that any member of the board of he administration of Wells Fargo or its senior management has not been held accountable enough. ” she wrote. “You owe your customers, investors and regulators an explanation for Wells Fargo’s continued inability to meet legal and regulatory requirements. “