WASHINGTON–After yet-another scandal, Sen. Elizabeth Warren (D-MA) is calling for breaking up the nation’s fourth-largest bank.
In a letter to Federal Reserve Chairman Jerome H. Powell, Warren requested the Fed force the financial giant to break off its core banking activities, such as its retail checking and savings accounts and loans, from its other financial services.
Separating those offerings from its Wall Street-centric services, including investment funds and providing financial market sales and trading services, according to Warren’s letter, would ensure that Wells Fargo’s everyday customers did not continue to suffer.
The Fed could accomplish this separation, according to Warren, by revoking Wells Fargo’s financial holding company license — essentially making it impossible for the company to operate any nonbanking businesses.
The bank owns dozens of non-bank subsidiaries.
“Continuing to allow this giant bank with a broken culture to conduct business in its current form poses substantial risks to consumers and the financial system,” Warren’s letter states.
‘Inconceivable’ Proposal
Warren added the bank should be forced to give up its Wall Street pursuits “to ensure that its leaders focus all of their attention on fixing the bank’s numerous, chronic risk-management deficiencies.”
The New York Times noted that in her letter Warren pointed to a report from early 2018 revealing that Wells Fargo’s regulatory rating, normally kept secret, had fallen below the level at which the bank could be considered “well managed.”
She added that it was “inconceivable” that Wells Fargo could have recently improved its rating given its continuing problems, the Times noted.
Wells Fargo continues to operate under a rare growth cap put in place by the Federal Reserve following numerous scandals.
Latest Fine
Most recently, the Office of the Comptroller of the Currency found that Wells Fargo’s management of its mortgage accounts had been so sloppy that it might have improperly foreclosed on some borrowers’ homes. The OCC fined the bank $250 million and ordered it to halt some foreclosures in progress and gave it five months to get its management systems on track.
“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,” Ms. Warren said, though her letter to Mr. Powell did not mention Mr. Scharf by name.
Wells Fargo has been involved in numerous scandals, including its massive bogus account-opening scam in which more than two-million customer accounts were opened by employees scrambling to make aggressive account-opening goals.
Questions Over CEO’s Salary
According to the Times, Warren also sent a separate letter to the chairman of Wells Fargo’s board of directors asking how the board is overseeing the bank’s cleanup efforts and why it is paying its CEO more than $20 million annually.