Last Tuesday, Senator Elizabeth Warren (D-MA) urged the Federal Reserve to break up Wells Fargo. She said that the American multinational financial services company’s list of scandals is endangering clients.
Warren Writes Letter To Powell Urging Breakup of Wells Fargo
In a letter to Federal Reserve Chairman Jerome Powell, Warren called on the central bank’s board of governors. She asked them to use their authority to break up Wells Fargo’s banking division from its financial services business.
The Massachusetts Senator said that the Federal Reserve can do so by revoking the company’s license to operate as a financial holding company.
“The Fed has the power to put consumers first, and it must use it. By invoking its full authority to protect consumers and the financial system and requiring Wells Fargo to separate its consumer-facing banking arm from the rest of its financial activities, the Fed can ensure that Wells Fargo faces appropriate consequences for its longstanding ungovernable behavior,” Warren wrote.
Wells Fargo Responds Via Statement
The San Francisco-based bank did not directly reply to Warren’s missive. Instead, the financing giant released a press statement saying they’ve changed over the years. Wells Frago insisted that they “are a different bank today than we were five years ago because we’ve made significant progress.”
It also highlighted its previous efforts to change its practices in order to meet regulatory requirements. The company said it initiated moves to split its business into smaller units.
It also appointed new company officials to oversee its changes and created teams. These aim to provide better monitoring for its sales practices and evaluating risks.
Despite calls to break up Wells Fargo, he reacted positively to the stock. Shares slightly went up last Tuesday by less than a percent (0.63%) during trading hours but rose a little more (0.22%) after hours.
Wells Fargo’s History of Scandals
Five years after the company’s famous scandal, Wells Fargo is still reeling from the negative effects of its housing scandal. The banking giant admitted to creating millions of fictitious bank accounts under real people’s names.
The company did not inform these people, nor did they secure their consent to do so. Since the matter came to light, Wells Fargo paid more than $4 billion in penalties.
However, the problems didn’t end there. Last week, the Office of the Comptroller of the Currency fined Wells Fargo $250 million. The company reportedly violated a 2018 consent order.
The fine stems from the fact that the firm is taking too long to comply with the consent order. As a result, regulators fear that the bank is once again performing unsafe practices related to its home lending loss-mitigation program.
Deals With Government Regulators
In a related matter, Wells Fargo announced last week that the 2016 Consumer Financial Protection Bureau consent order tied to the fake account scandal expired.
They hope that the expiration of this agreement will lead to a more relaxed relationship with the government. This order led to the Federal Reserve placing an asset cap on the company in 2018.
However, Warren isn’t happy with the efforts of the company to redeem itself. Citing the fake account scandals, and additional scandals in its insurance and wealth management, Warren says the government should say enough.
She added that Wells Fargo is an “irredeemable repeat offender” and has an “inability to meet regulatory requirements and treat its consumers honestly and fairly.”
Watch the Yahoo Finance video reporting that Government regulators warned Wells Fargo of possible sanctions:
Do you deal with Wells Fargo? Do you agree with Senator Warren that the government should break up Wells Fargo? In addition, will breaking up the firm reform it?
Let us know what you think. Share your comments below.