Sen. Elizabeth Warren (D-MA) has called on the Federal Reserve to split up Wells Fargo & Co., (NYSE: WFC) with the San Francisco-headquartered lender’s consumer banking activities separated from its other financial services offerings.
What Happened: The New York Times reports that Warren sent a letter to Federal Reserve Chairman Jerome Powell that insisted the central bank has the authority to revoke Wells Fargo’s financial holding company license, which would prevent the company from continuing its nonbank operations, including funds management and trading services.
“Continuing to allow this giant bank with a broken culture to conduct business in its current form poses substantial risks to consumers and the financial system,” Warren wrote.
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Why It Happened: Wells Fargo has been repeatedly criticized by Warren after news broke in 2016 that it created millions of fake customer accounts in order to meet its sales goals, made incorrect charges to customers for mortgage rate lock extension fees and was responsible for the improper referral of customers for enrollment in third-party renter and life insurance policies and the enrollment of customers in online banking services without their knowledge or consent.
In December 2018, Wells Fargo reached an agreement with the attorneys general of all 50 states and the District of Columbia to pay $575 million in settling charges of state consumer protection laws. The company reached a $3-billion settlement in February 2020 with the U.S. Department of Justice and the U.S. Securities and Exchange Commission.
In January 2020, during her ill-fated attempt to gain the Democratic Party’s presidential nomination, Warren insisted that Wells Fargo’s leadership be arrested.
“Giant banks like Wells Fargo will only clean up their act when their executives know they’ll face handcuffs when they preside over massive fraud,” Warren said, adding that former CEO John Stumpf “will wake up to his cushy retirement while the thousands of low-level branch employees who took the fall for him and the hundreds of thousands of consumers who were cheated on his watch continue to deal with the repercussions of his scams.”
In 2019, Warren introduced the Corporate Executive Accountability Act to enable the incarceration of financial services executives if they or their corporations either break the law or have enacted civil violations, but the legislation failed to attract any co-sponsors in the U.S. Senate and was never brought up for consideration.
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