Sen. Elizabeth Warren (D-Mass.) has called for federal banking regulators to break up Wells Fargo, saying “every new report of scandal and ongoing noncompliance” proves the bank is “ungovernable.”
In a letter sent Monday to Federal Reserve Chair Jerome Powell, Warren wrote the latest regulator action against Wells Fargo—a $250 million fine levied by the Office of the Comptroller of the Currency (OCC) for home lending loss mitigation program deficiencies and violations of a 2018 consent order regarding enterprise-wide compliance risk management—show “changes in governance at Wells Fargo have been unable to address the bank’s longstanding problems and its inability to meet regulatory requirements and treat its consumers honestly and fairly.”
Warren urged Powell and the Fed revoke Wells Fargo’s status as a financial holding company and separate its banking subsidiary from its other businesses whose practices have drawn the ire of regulators since 2008: home mortgages, auto loans, wholesale banking, and wealth management.
“In addition to these scandals and the over $5 billion in penalties the bank has been fined to date, Wells Fargo has had to fire two Chief Executive Officers and multiple other senior executives,” Warren wrote. Perhaps other companies would be able to operate those troubled divisions more efficiently and more fairly, she wrote.
A spokesperson for the Federal Reserve acknowledged receipt of Warren’s letter but declined further comment.
Wells Fargo has been beset by scandal since 2016, when a yearslong scheme to create fake customer bank accounts to meet sales goals was uncovered. The bank paid $3 billion in penalties last year to settle charges with the Department of Justice and the Securities and Exchange Commission. It also entered into a three-year deferred prosecution agreement with the DOJ—terms of which Wells Fargo must abide by in order to avoid being criminally charged.
While not directly addressing Warren’s letter, Wells Fargo pushed back Tuesday, saying “meeting our own expectations for risk management and controls — as well as our regulators’ — remains Wells Fargo’s top priority. We are a different bank today than we were five years ago because we’ve made significant progress.”
The bank laid out multiple steps it has taken to address risk management and control failures since 2019, which included:
- Splitting three business groups into five and creating four new enterprise functions to enable greater oversight and transparency;
- Shaking up the bank’s leadership by bringing on 10 new operating committee members (out of 17) and turning over more than 75 percent of the leadership team in its home lending division;
- Creating new teams designed to ensure better and more consistent customer focus, including a Sales Practices Oversight and Management Function, an Office of Consumer Practices, and a Control Management organization and program;
- Launching an enterprise-wide Risk and Control Self-Assessment program to assess operational risks and controls and ultimately to design additional mitigating controls as appropriate;
- Implementing a new incentive plan for bank branches governed by stronger oversight and controls and focused on customer relationships; and
- Making significant progress in reducing its total number of customer remediations and accelerating remediation payments to customers.
Although the bank did not go into detail about senior leadership, it has had three CEOs since 2016. One of them, John Stumpf, has been banned from the banking industry and was ordered to pay a $17.5 million fine to the OCC for his failures in oversight during the fake accounts scandal.