'The Federal Reserve has done nothing': Elizabeth Warren urges the Fed to clean house at Wells Fargo

Alex Morrell

Elizabeth Warren

(Elizabeth Warren says it's time for the Fed to take action.AP) Sen. Elizabeth Warren wants the Federal Reserve to clean house at Wells Fargo, asking for the removal of the 12 members of the board of directors who served while the fake accounts scandal was ongoing. 

In a letter sent to Fed Chair Janet Yellen Monday, Warren argued that the directors present from 2011 to 2015, when Wells Fargo employees opened as many as 2.1 million accounts for customers without their knowledge, need to go — and that the Fed has the authority to remove them under a Congressional statute regarding the governance of insured depository institutions like Wells Fargo. 

"I urge you to exercise your legal authority to remove the holdover Wells Fargo Board members. Federal Reserve regulations and guidance impose clear risk-management obligations on the Board — obligations that are quite demanding for a bank as large and complex as Wells Fargo," Warren wrote. "The Board did nothing to stop rampant misconduct in the Community Bank that resulted in more than 5000 bank employees creating more than two million fake accounts over four years."

Warren cited a statute that empowers the Fed to remove board members who "engaged or participated in any unsafe or unsound practice" that caused depository institution "financial loss or other damage" and that showed "continuing disregard ... for the safety or soundness" of the institution.

She argues in the letter that the directors failed in their risk-management obligations, resulting in "massive financial losses" and "long-lasting reputational damage to the bank that has eroded the bank's customer base."

So far, the accounts scandal has resulted in $185 million in fines, the ouster of CEO John Stumpf and other high-level executives, and a spate of ongoing government investigations. The company has set aside some $1.7 billion to pay for potential costs surrounding the scandal.

Warren criticized the Fed for having "done nothing" with its authority to hold Wells Fargo accountable.  

"While other federal regulators with jurisdiction over this scandal ... have taken steps to hold Wells Fargo accountable and promote the integrity of the banking system, the Federal Reserve has done nothing to date, despite its ample statutory authority," she wrote in the letter.

A Fed spokesman confirmed they had received the letter and plan to respond to Warren. 

Wells Fargo issued a statement Monday highlighting the company's efforts to make amends and changes in the wake of the scandal:

"Wells Fargo’s board and management team have taken many actions in response to its retail sales practices issues, including changes in senior leadership, executive accountability actions and numerous steps to ensure we make things right with any customer affected by unacceptable sales practices. That work continues and remains a core part of our efforts to build a better Wells Fargo for the future." 

Shareholders blasted the company at its annual meeting in April over the scandal. Some board members were reelected by only slim margins. 

The company came under fire last week over a new allegation: That in 2015 the bank was changing the terms of customers' mortgages without telling them, several lawsuits allege.

Culled from Business Insider