(Bloomberg) – U.S. Senator Elizabeth Warren called on the Federal Reserve to force Wells Fargo & Co. to separate its traditional banking and Wall Street businesses after the lender received new regulatory measures and a US $ 250 million fine this month Dollars were presented.
In a letter to Federal Reserve Chairman Jerome Powell, Warren urged the Fed to revoke Wells Fargo’s financial holding status in order to carry out a split. The Fed should instruct the company to develop a plan to ensure its customers are protected during the transition, the Massachusetts Democrat said.
“Every day Wells Fargo has these custody accounts is a day that millions of customers are at risk of additional negligence and willful fraud,” Warren wrote. “The only way to protect these consumers and their bank accounts is through another institution whose business model doesn’t depend on cheating customers out of every penny they can get. The Fed has the power to put consumers first, and it must use it. “
The New York Times had previously reported on the contents of the letter. A Fed representative confirmed that he had received the letter and said he would be responding to it.
Wells Fargo was fined this month for lack of progress in resolving longstanding problems, the first such sanction under Chief Executive Officer Charlie Scharf. The fine is on top of the more than $ 5 billion in fines and court settlements the bank has paid over the past five years in connection with a series of scandals that began with fake accounts on its branch network.
The most recent order from the Office of the Comptroller of the Currency identified deficiencies in Wells Fargo’s home finance harm reduction practices – the steps companies are taking to avoid foreclosure – that have prevented the bank from “closing in full and in a timely manner.” remedy”. Damaged customers. “
“Meeting our own expectations of risk management and controls – as well as those of our regulators – remains Wells Fargo’s top priority,” the bank said in a statement on Tuesday. “We are a different bank today than we were five years ago because we have made great progress.”
Warren cited the Bank Holding Company Act, which requires banks to be well capitalized and well run. If a financial holding company falls below this, the Fed is obliged to request the institution to remedy the deficiencies.
If the bank does not resolve this within 180 days, the Fed can ask the company to divest control of a subsidiary – or the bank can choose to stop activities that are not permitted for a bank holding company.
The recent sanctioning raises new questions about whether the bank meets the law’s requirements for good administration and whether the board and Scharf are able to run the lender effectively, Warren said.
Despite the regulatory hit, Wells Fargo has made progress under Scharf. An order from the Consumer Financial Protection Bureau tied to the company’s 2016 sales practices expired this month, while the bank was exempted from a 2015 government order for anti-money laundering violations in January. The Fed has also confidentially accepted a plan to revise the bank’s risk management and governance, Bloomberg reported earlier this year.
In a broader sense, Warren has also urged that corporate executives who don’t obey the rules face personal consequences, she said in an interview with Bloomberg News.
“I am strongly pushing for more personal liability,” said Warren. “These executives want the big bucks to run these companies, then they should be accountable for running big companies that break the law and defraud American consumers.”
(Updates with comments from Warren from paragraph 10.)
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