Morning Business Outlook: John Stumpf, former CEO of Wells Fargo, has been banned from life in the banking industry and has to pay $ 17.5 million in fines.
Sen. Elizabeth Warren, D-Mass., On Tuesday urged the Federal Reserve to break Wells Fargo, arguing that widespread corruption and a series of scandals at the financial center posed “substantial risks” to consumers and the financial system in general. .
In a letter to Fed Chairman Jerome Powell, Warren asked the central bank to use its authority to separate Wells Fargo’s basic banking unit, such as offering checking and savings accounts, from its other financial services. He argued that the Fed had the power to do so by revoking Wells Fargo’s status as a financial holding company under the Banking Companies Act.
“The Fed has the power to put consumers first and must use it,” the Massachusetts Democrat wrote. “By invoking its full authority to protect consumers and the financial system and requiring Wells Fargo to separate its consumer-oriented banking bank from the rest of its financial activities, the Fed can ensure that Wells Fargo faces the appropriate consequences for its long-standing ungovernable behavior. “
THE LARGE BANKS OF THE NATION SUBSCRIBED ON THE MANAGEMENT OF PPP LOANS
In a statement, Wells Fargo said that “today is a different bank than we did five years ago because we have made significant progress,” including: improving oversight and transparency, incorporating new leaders into the entire business, launching a program of risk assessment to identify risks and operational controls, implementing a new incentive plan for bank branches and reducing the total number of customer solutions to be completed.
“Serving customers to the highest standards requires a strong control and risk base. That’s why meeting our own risk management and control expectations, as well as those of our regulators, remains Wells Fargo’s top priority.” , said the bank.
For nearly five years, Wells Fargo has been in Washington’s sights after it was revealed that the company was making millions by creating fake accounts for customers without their knowledge, sometimes charging unnecessary commissions or damaging people’s credit ratings. .
The Fed, under the leadership of Janet Yellen, responded to the scandal by imposing an unprecedented asset limit on Wells Fargo in 2018, which it still holds to this day.
The bank, the fourth-largest in the United States, has also paid close to $ 4 billion in fines and penalties since the scandal erupted in 2016.
But last week, regulators at the Office of the Currency Controller (OCC) struck Wells Fargo with an additional $ 250 million penalty, saying the bank has been too slow to compensate victims and address the underlying weaknesses of business practices.
The OCC said the bank was involved in “unsafe or unsafe practices” and that it violated the terms of a 2018 consent order. The agency also said it would restrict Wells Fargo’s mortgage business until it the problems are solved.
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“These new revelations have once again made it clear that continuing to allow this giant bank with a broken culture to do business in its current form poses substantial risks to consumers and the financial system,” Warren wrote.
In a separate letter to the chairman of Wells Fargo’s board of directors, Warren asked if CEO Charlie Scharf and the board were able to manage the bank. He accused the bank of additional “corruption” and “incredible” mismanagement under Scharf, which earned more than $ 20 million in fiscal year 2020.
“It is unattainable that Mr Scharf has been so well compensated for failing in the last two years to address the company’s‘ top priority ’, and it is inconceivable that no Wells Fargo board member or its top executives have had enough responsibilities “. she wrote. “You owe your customers, investors and regulators an explanation for Wells Fargo’s continued inability to comply with legal and regulatory requirements.”