Warren Slams Wells Fargo CEO, Calls on Fed to Revoke Bank’s Status as Financial Holding Company Amid Ongoing Failure to Meet Regulatory Requirements
In Two Letters, Warren Demands Bold Action to Hold Wells Fargo, Its Board, and Its Executives Accountable For Years of Mismanagement and Unlawful Behavior that Have Affected Millions of Consumers
Letters Follow Recent OCC Action Fining Wells Fargo $250 Million For Failure To Address “Significant Deficiencies” In Mortgage Business
Warren: “Wells Fargo is an irredeemable repeat offender. The Fed must act.”
WASHINGTON, D.C. — United States Senator Elizabeth Warren (D-Mass.), chair of the Senate Banking, Housing, and Urban Affairs Subcommittee on Economic Policy, sent a letter to Federal Reserve Chair Jerome Powell calling on the Fed to use its existing authority to revoke Wells Fargo’s status as a financial holding company (FHC) and require the company to separate its traditional banking activities from its nonbanking activities. Wells Fargo has a nearly two-decades-long record of swindling customers and the latest fine of $250 million imposed last week by the Office of the Comptroller of the Currency (OCC) for the bank’s lack of progress in addressing “significant deficiencies” in its mortgage lending practices indicates that the bank is incapable of correcting its culture of noncompliance and unlawful behavior.
“Every new report of scandal and ongoing noncompliance by Wells Fargo represents a giant financial institution squeezing consumers to pad profits for its executives. The Fed must revoke Wells Fargo’s FHC status and order the company to develop a plan to ensure that the 65 million customers that currently rely on Wells Fargo’s consumer banking and lending services are protected through the transition. Every single day that Wells Fargo continues to maintain these depository accounts is a day that millions of customers remain at risk of additional negligence and willful fraud. The only way these consumers and their bank accounts can be kept safe is through another institution—one whose business model is not dependent on swindling customers for every last penny they can get. The Fed has the power to put consumers first, and it must use it,” wrote Senator Warren.
Wells Fargo has a well known record of mismanagement and corruption: the bank created millions of fake bank and credit card accounts, falsified signatures, illegally transferred customers’ funds, and charged hundreds of thousands of customers fraudulent fees. Additionally, it was implicated in ripping off hundreds of thousands of customers who took out car loans from the bank, and for years the bank charged monthly fees to customers for dozens of products they didn’t understand or know how to use. In September 2020, as the COVID-19 pandemic raged, an investigation from Senator Warren revealed that Wells Fargo had placed as many as 1,600 customers into forbearance on their mortgages without their consent.
Under the Bank Holding Company Act, FHCs like Wells Fargo are required to be “well capitalized” and “well managed.” When an FHC or one of its depository subsidiaries fails to meet these requirements, the Fed is required to provide notice to the FHC and give the institution an opportunity to correct its deficiencies. If the holding company fails to correct its deficiencies within 180 days, the Fed may require the FHC to “divest control of any subsidiary depository institution,” or, if the FHC instead chooses, “to cease to engage in any activity” that is not permissible for a bank holding company. Therefore, the Fed has the authority to immediately act to protect consumers and the integrity of the banking and financial system and revoke Wells Fargo’s status as an FHC.
After years of scandals and billions of dollars of fines and penalties for Wells Fargo, Charles Scharf — who was named CEO of the bank in October 2019 — vowed to “operate the company to the highest standards of operational excellence,” describing improved governance as his “top priority.” But despite his failure to improve the bank’s governance, Scharf has collected tens of millions in salary and bonuses: most recently collecting $20.4 million in compensation in FY2020, including a $4.35 million “pay for performance” cash bonus, as new Wells Fargo scandals emerged.
In a separate letter to Wells Fargo Board of Directors, Senator Warren slammed Scharf for his failed leadership and urged the board to hold executives accountable for their continued inability to meet regulatory requirements in light of the latest penalty from the OCC. She asked the Board to explain Mr. Scharf’s compensation, and the Board’s plan for improving governance and regulatory compliance, by September 23, 2021.
“OCC [has] identified a myriad of ongoing compliance problems and governance failures at the bank, despite years of scrutiny, penalties, and promises of improved behavior,” wrote Senator Warren. “This massive fine represents another astonishing failure in a long chain of lawlessness and incompetence by Wells Fargo and its top executives. In recent years, Wells Fargo has paid over $5 billion in penalties, and the Federal Reserve Board of Governors (Fed) in February 2018 imposed an unprecedented asset cap on the company. But this new incident raises fresh questions about whether the company can meet the needs of its customers, whether it meets Bank Holding Company Act requirements that it be “well managed,” and whether the Board, and Charles Scharf, who was named CEO of Wells Fargo in September 2019, are capable of effectively managing the bank.”
Senator Warren continued, “It is unfathomable that Mr. Scharf has been so well compensated while failing for the last two years to address the company’s “top priority,” and inconceivable that no member of the Wells Fargo Board or its top executives has been held sufficiently accountable. You owe your customers, your investors, and your regulators an explanation for Wells Fargo’s ongoing inability to meet legal and regulatory requirements.”
Senator Warren has led the charge to hold Wells Fargo senior management accountable since the fake-accounts scandal from 2011 to 2015 came to light, and has fought for stronger consumer protections:
- On September 20, 2016, Senator Warren called on former Wells Fargo CEO and Chairman John Stumpf to resign for his role in the fake accounts scandal. Mr. Stumpf resigned on October 12, 2016.
- On June 19, 2017, Senator Warren sent a letter to then-Fed Chair Janet Yellen urging the Federal Reserve to remove 12 Wells Fargo board members following the fake accounts scandal.
- At a Senate Banking Committee hearing on July 13, 2017, Senator Warren again called on Chair Yellen to remove implicated Wells Fargo board members.
- Later in July 2017, Senator Warren renewed her call for the Fed to remove Wells Fargo board members after it was reported that more than 800,000 Wells Fargo customers were charged for auto insurance they did not need.
- On August 16, 2017, Senator Warren again called for the removal of Wells Fargo board members amid new evidence that the bank failed to refund money owed to car loan customers, overcharged small businesses for credit card transactions, and billed certain mortgage customers for unexpected, optional services.
- On February 2, 2018, Chair Yellen announced in response to Senator Warren that the Federal Reserve would freeze the growth of Wells Fargo and push out four of the board members responsible.
- In March and April 2018, Senator Warren urged Federal Reserve Chair Jerome Powell to hold a public vote by the Federal Reserve Board on lifting growth restrictions for Wells Fargo instead of delegating it to staff. She also asked for the public release of the third-party review of how Wells Fargo is implementing reforms.
- In a response to Senator Warren on May 10, 2018, Chair Powell reconsidered and announced he would require a Federal Reserve Board vote on whether to lift Wells Fargo's growth restrictions and said he would consider releasing as much of the third-party review as possible.
- On January 17, 2019, Senator Warren questioned Wells Fargo CEO Tim Sloan on excessively high fees Wells Fargo charged college students.
- On April 4, 2019, Wells Fargo announced it had eliminated some of these fees associated with campus debit cards.
- On February 22, 2019, Senator Warren once again urged Chair Powell not to lift growth cap restrictions on Wells Fargo until Tim Sloan is removed from his role as CEO, citing a report revealing that, beginning in 2016, Wells Fargo employees "routinely falsified clients' signatures and otherwise doctored paperwork" in order to comply with a legal settlement with the Office of the Comptroller of the Currency (OCC) related to violations of anti-money laundering laws.
- On March 22, 2019, Senator Warren called on the OCC and the Consumer Financial Protection Bureau (CFPB) to fire Wells Fargo CEO Tim Sloan and renewed her call for action by the Federal Reserve.
- On March 28, 2019, Tim Sloan announced that he was stepping down as Wells Fargo CEO.
- On April 9, 2019, Senator Warren and Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) released new letters from the Fed, the OCC, and CFPB in response to inquiries that they sent the regulators in March 2019. The regulators told the senators that Wells Fargo has not satisfied its obligations under existing consent orders, which require the bank to remediate customers harmed by its wrongdoing and impose reforms to end Wells Fargo's unlawful activity.
- On April 17, 2019, Senator Warren wrote to Joseph Otting, Comptroller of the Currency, requesting information about the role that the OCC will play in the selection of a new CEO and President of Wells Fargo.
- In response to Senator Warren’s letter, Comptroller Otting confirmed that the OCC would exercise its statutory authority to review the selection of a new CEO of Wells Fargo.
- On August 19, 2019, Senator Warren sent a letter to Wells Fargo & Company requesting information about a new report that the bank kept accounts active for months after they had been closed by customers and charged customers hundreds or even thousands of dollars in overdraft fees for charges made against these “closed” accounts.
- In response to Senator Warren’s letter, interim Wells Fargo CEO Allen Parker confirmed that Wells Fargo was working with regulators to conduct a review of the activities described.
- On August 30, 2019, Senator Warren sent letters to CFPB Director Kathy Kraninger, Securities and Exchange Commission (SEC) Chairman Jay Clayton, and Comptroller of the Currency Joseph Otting, expressing concern that Wells Fargo executives may have once again intentionally misled investors, this time about the strength of their customer base.
- On September 30, 2020, Senator Warren wrote to Federal Reserve Chair Jerome Powell sharing new and previously unreleased information regarding recent reports that Wells Fargo placed non-delinquent mortgage borrowers into forbearance without their consent, potentially putting them at risk of greater financial hardship during the coronavirus disease 2019 (COVID-19) pandemic.
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