Democratic Senator Elizabeth Warren is calling on the Federal Reserve to break up Wells Fargo following years of scandal at America's most troubled big bank.
The push from Warren marks an escalation in her long-running campaign to hold Wells Fargo accountable for ripping off customers.
"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," Warren wrote in a letter sent to Federal Reserve Chair Jerome Powell on Monday. The New York Times first reported the letter.
Warren urged the Fed to revoke Wells Fargo's status as a financial holding company and require the company to separate its traditional banking activities from nonbanking activities. In effect, that would break up one of the nation's largest lenders. Warren pointed out the Bank Holding Company Act requires financial holding companies to be both "well capitalized" and "well managed."
"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," Warren wrote. "The Fed has the power to put consumers first, and it must use it."
A Fed spokesperson said the central bank received the letter and plans to respond.
Without responding directly to Warren's letter, Wells Fargo issued a statement detailing the various regulatory hurdles it has cleared in recent years and milestones it achieved since it came under scrutiny for its various scandals.
"Meeting our own expectations for risk management and controls — as well as our regulators' — remains Wells Fargo's top priority," the company said in its statement. "We are a different bank today than we were five years ago because we've made significant progress."
'This is unacceptable'
Jaret Seiberg, policy analyst at Cowen Washington Research Group, doesn't expect the Fed will break up Wells Fargo.
"But this could get more interesting if the president fills the Federal Reserve this fall with more radical picks," Seiberg wrote in a note to clients.
Seiberg added that the pressure from Warren could put more pressure on Wells Fargo to get its act together: "We continue to be perplexed about why Wells Fargo has not made more progress fixing problems and making impacted consumers whole."
The push comes after regulators fined Wells Fargo $250 million due to "significant deficiencies" in the bank's mortgage lending practices and slow progress in refunding customers.
"Wells Fargo has not met the requirements of the OCC's 2018 action against the bank. This is unacceptable," Acting Comptroller of the Currency Michael Hsu said in a statement last week.
In her final act as Fed chair, the Janet Yellen-led Fed imposed an unprecedented asset cap on Wells Fargo in early 2018 citing the bank's "widespread abuses."
Warren fired off a separate letter to Wells Fargo's board of directors slamming CEO Charlie Scharf and calling for directors to hold executives accountable. Scharf joined Wells Fargo in late 2019. "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," Warren wrote.
Warren's call for tough sanctions against Wells Fargo is not the first time progressives have pushed regulators to break up the bank.
"I've come to the conclusion that Wells Fargo should be broken up," Democratic Congresswoman Maxine Waters said during a 2016 hearing over the fake-accounts scandal. "It's too big to manage and I'm moving forward to break up the bank."
While regulators have imposed penalties against Wells Fargo and senior management has turned over, the bank remains largely intact.
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