Warren Urges Federal Reserve to Maintain Wells Fargo Growth Restriction Until CEO Tim Sloan is Replaced
Letter is Latest Push by Senator Warren to Hold Wells Fargo Senior Management Accountable for the Bank's Repeated Mistreatment of Customers and Employees
Washington, DC - United States Senator Elizabeth Warren (D-Mass.) today sent a letter to Federal Reserve Board Chairman Jerome Powell urging him to maintain the Federal Reserve's growth restriction on Wells Fargo until the bank replaces CEO Tim Sloan with someone who is not deeply implicated in the bank's misconduct. The letter states that the Wells Fargo Board of Directors cannot comply with the Federal Reserve's requirements for rescinding the growth restriction if it continues to employ a CEO who served in senior management roles as the bank repeatedly mistreated its customers and employees.
In February of this year, the Fed entered into a Cease and Desist Order with Wells Fargo. The Order prohibited Wells Fargo from growing larger until its Board of Directors submitted, adopted, and implemented two specific plans for improving firm-wide risk management and for maintaining effective corporate governance and oversight. Among other things, the plans must identify "actions that the Board will take to further improve its oversight of senior management, including holding senior management accountable for implementing and maintaining the Firm's strategy in accordance with Board direction and the Firm's risk tolerance and capacity," and identify "actions the Board will take to ensure senior management's ongoing effectiveness in managing the Firm's activities and related risks and promoting strong risk management across the Firm." In response to a subsequent letter from Senator Warren, Chairman Powell agreed to require an affirmative vote of the Federal Reserve's Board of Governors to sign off on Wells Fargo's implementation of the plans and to remove the growth restriction.
The letter notes that Mr. Sloan served in senior management positions at Wells Fargo from 2011 onwards, including as Chief Financial Officer, head of Wholesale Banking, and Chief Operating Officer before being elevated to CEO in the wake of the fake-accounts scandal in 2016. During that time period, Mr. Sloan was involved with the fake-accounts scam - and defended Wells Fargo's high-pressure sales goals despite knowing they had led thousands of employees to open millions of fake accounts - and helped oversee the bank as it engaged in nearly a dozen other significant consumer frauds. In just the eight months since the Federal Reserve imposed the growth restriction, there have been several new reports of misconduct at Wells Fargo during times when Mr. Sloan served in senior management.
"Mr. Sloan's long track record at the bank demonstrates little ability to 'effectively manage the Firm's activities' - and should give the Federal Reserve little confidence that he can help transform the bank's culture and operations as the Cease and Desist Order requires," wrote Senator Warren. "To effectively enforce the requirements in the February 2, 2018 Cease and Desist order, the Federal Reserve should not remove the growth cap on WFC until the Board replaces Mr. Sloan with a new CEO who has not contributed to the very problems the Federal Reserve is seeking to fix."
Senator Warren has been pushing for accountability for Wells Fargo senior management since the fake-accounts scandal came to light:
- 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 her to remove twelve 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 urged for the removal of Wells Fargo board members amid new evidence that the bank failed to refund money owed to car loan customers, that it overcharged small businesses for credit card transactions, and that it billed certain mortgage customers for unexpected, optional services.
- On February 2, 2018, Chair Yellen announced in response to Senator Warren that the Fed would freeze the growth of Wells Fargo and push out four of the board members responsible.
- During a March 1, 2018 Senate Banking Committee hearing, Senator Warren urged Fed 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. Senator Warren followed up in April and again pressed Chair Powell to change course.
- In a response to Senator Warren on May 10, 2018, Chair Powell reconsidered and announced he would require a Fed Board vote on whether to lift Wells Fargo's growth restrictions. He also said he would consider releasing as much of the third-party review as possible.
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