Sen. Elizabeth Warren (D-MA) urged the Federal Reserve today to break up megabank Wells Fargo in order to protect investors from what she said was ongoing customer abuse.
In a letter to Fed Chair Jerome Powell, Warren asked that the central bank's board of governors separate Wells Fargo's banking unit from its other financial services businesses by revoking its license to operate as a financial holding company.
Warren cited the bank’s vast history of scandals, especially the creation of fake customer accounts in Wells Fargo's insurance and wealth management businesses in 2016, as the reason for the request. She asserted the megabank is an "irredeemable repeat offender" with an "inability to meet regulatory requirements and treat its consumers honestly and fairly."
Regulators have increased their policing of the bank since it was uncovered in 2016 that the bank was meeting profit projections in part through a calculated, systemic practice of creating millions of fraudulent bank, insurance and loan accounts in actual customers’ names without their knowledge or consent.
The Fed put an asset cap on Wells Fargo in 2018, but lifted it in April, 2020 in a move aimed at accelerating loans to small businesses in the midst of the Covid-19 shutdown.
Now “the Fed has the power to put consumers first, and it must use it," Warren wrote. "By invoking its full authority to protect consumers and the financial system and requiring Wells Fargo to separate its consumer-facing banking arm from the rest of its financial activities, the Fed can ensure that Wells Fargo faces appropriate consequences for its longstanding ungovernable behavior."
While the bank did not specifically address Warren’s request to the Fed on Tuesday, it did issue a press release detailing its efforts to reform its internal practices and meet regulators' demands. "[W]e are a different bank today than we were five years ago because we've made significant progress,” the company said.
Among its stated reforms, Wells Fargo pointed to personnel and management changes, initiatives to split business units into smaller operations, and the creation of teams it said would better monitor sales practices and reduce risks.
Wells Fargo has paid more than $4 billion in penalties since the scandal came to light, and the spigot of regulatory settlements doesn’t seem to be slowing.
Just this week, the bank was hit with a $250 million consent order from the Office of the Comptroller of Currency for failing to establish an effective home lending loss mitigation program, and it restricted the bank from buying third-party residential mortgage servicing until the matter is addressed.