(Bloomberg) – U.S. Sen. Elizabeth Warren urged the Federal Reserve to force Wells Fargo & Co. to separate its traditional banking and Wall Street companies, after the lender received a new regulatory action and a $ 250 million fine this month.
In a letter to Federal Reserve Chairman Jerome Powell, Warren called on the Fed to revoke the state of Wells Fargo as a financial holding company in order to produce a separation. The Fed should order the company to develop a plan to ensure the protection of its customers during the transition, the Massachusetts Democrat said.
“Every day that Wells Fargo continues to maintain these deposit accounts is a day when millions of customers remain at risk of additional negligence and intentional fraud,” Warren wrote. “The only way these consumers and their bank accounts can be kept safe is through another institution, one of which the business model does not depend on the trap of customers for every last penny they can get. The Fed has the power to put consumers first and must use it. ”
The New York Times previously reported the contents of the letter. A Fed representative confirmed that he received the letter and said he planned to respond.
Wells Fargo was fined this month for his lack of progress in solving long-standing problems, the first such sanction under CEO Charlie Scharf. The penalty adds to the more than $ 5 billion in fines and legal settlements the bank paid over the past five years related to a series of scandals that began with fake accounts in its branch network.
The latest order, from the Office of the Comptroller of the Currency, mentioned shortcomings in Wells Fargo’s home loan loss mitigation practices (the steps companies take to avoid foreclosure) that have prevented them from the bank can “completely remedy and in time harmed customers.”
“Meeting our own risk management and control expectations, as well as those of our regulators, remains Wells Fargo’s top priority,” the bank said in a statement on Tuesday. “Today we are a different bank than we did five years ago because we have made significant progress.”
Warren cited the Bank Holding Company Act, which requires banks to be well-capitalized and well-managed. If a financial holding company does not meet these conditions, the Fed must warn the institution to correct its shortcomings. In the event that the bank does not resolve the issues within 180 days, the Fed may ask the company to relinquish control of any subsidiary deposit institution or the bank may choose to cease engaging in an activity that is not eligible for a bank holding company.
“This new incident raises new questions about whether the company can meet the needs of its customers,” Warren said.
(Updates to Wells Fargo’s statement in the seventh paragraph.)
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