Sen. Elizabeth Warren (D-Massachusetts) sent a letter to Federal Reserve Chair Jerome Powell this week asking the agency to break up Wells Fargo, which has been involved in several questionable and unethical dealings over the past years.
“I write to urge the Federal Reserve Board of Governors (the Fed) to take immediate action in response to the repeated, ongoing, and inexcusable failure of Wells Fargo & Company (Wells Fargo) to eliminate abusive and unlawful practices that have cost consumers hundreds of millions of dollars,” Warren wrote.
The lawmaker wants the Fed to revoke the bank’s financial holding company license, which would split the company’s banking services like loans and bank accounts from its other financial services, like managing investment funds.
By Warren’s count, the company has been embroiled in eight major scandals, starting in 2016 when it was exposed for making 1.5 million fake accounts and 500,000 fake credit cards in customers’ names without their permission in order to boost sales. The company agreed to pay out a paltry $142 million in a class action lawsuit over the wrongdoing.
Since then, Wells Fargo has been engulfed in a plethora of scandals large and small, including sending out erroneous messages in 2018 telling customers that they needed to purchase auto insurance. The bank has been ordered to pay over $5 billion in fines to make up for its missteps over the past years, according to Warren’s letter.
Last week, the bank was fined $250 million by the Treasury Department for not moving fast enough to compensate customers affected by their 2018 scandal, in which the bank was found to be mismanaging auto and home loans. As Warren pointed out in her letter, Wells Fargo failed to adequately protect consumers from foreclosure — and now, they have failed to compensate for that failure.
“Wells Fargo has been caught again cheating consumers — this time cheating them by not following through on promises they made and agreements they signed to be able to reimburse consumers for the last time they cheated them,” Warren said on MSNBC Wednesday. “So my question is, if you’re not going to break up Wells Fargo this time, tell me when you are.”
The Massachusetts senator also implied that there could be more misconduct that has yet to be uncovered.
All of the scandals “have all been about cheating the American public,” Warren said. “When you cheat the American public that much, it’s time for the regulators to step in, it’s time for the Fed to step in and say, ‘You no longer get to be a giant bank holding company that can not only cheat consumers but affect our economy overall. You gotta be taken back to your component parts where you don’t pose that kind of risk.’”
Wells Fargo has been subject to major federal regulation before. In 2018, the Fed implemented a harsh punishment on the bank: The agency, under then-Fed chair Janet Yellen, placed a cap on the bank’s overall finances, not allowing them to grow past that cap until it fixed its many questionable banking practices. The cap was lifted slightly this year to help Wells Fargo lend to small businesses that are struggling due to the pandemic.
Even with the cap implemented three years ago, the company has continually found itself mired in scandals. “It is clear that even with such a cap in place, Wells Fargo is simply ungovernable,” Warren wrote in her letter.
“I am concerned that Wells Fargo’s senior executives are focused on expanding risky investment banking activities instead of remediating consumer harms and improving lax internal controls,” she said, pointing out that executives are seeking to compete with other banks while still failing to uphold its accountability to consumers.