Warren to Fed: Keep growth cap on Wells Fargo until CEO is replaced

Sen. Elizabeth Warren (D-Mass.) is pushing the Federal Reserve to maintain severe penalties on Wells Fargo until president and CEO Timothy Sloan is replaced.

Warren asked the Fed in a Thursday letter not to lift the growth restriction placed in February while Sloan, a 31-year veteran of the bank, is still in charge. The senator argued that Wells Fargo is “fundamentally broken” and should not be unleashed without new leadership.

{mosads}“The Federal Reserve should not remove the growth cap on WFC until the Board replaces Mr. Sloan with a new CEO who has not contributed to the very problems the Federal Reserve is seeking to fix,” Warren wrote to Fed Chairman Jerome Powell.

Wells Fargo has been mired in several serious scandals since 2011, prompting a slew of federal and state investigations. The bank opened as many as 3.5 million accounts for customers without their authorization while charging fees for the unwanted services, drawing a $100 million fine from the Consumer Financial Protection Bureau (CFPB) in 2016.

The Fed imposed its own unprecedented penalties on Wells Fargo in February, capping its growth until the bank proved it had taken the necessary steps to prevent such abuse from happening again. The Fed Board of Governors, led by Powell, can lift the penalties on Wells Fargo with a majority vote.

Sloan replaced former Wells Fargo CEO John Stumpf in 2016 in the midst of the backlash over the fake accounts scandal. A Wells employee since 1987, Sloan has pledged to overhaul the bank to be more accountable and trustworthy.

But Warren, who’s been fiercely critical of Sloan, wrote Thursday that Wells Fargo could not possibly meet the Fed’s requirements while he is in charge of the bank.

Warren said that as Wells Fargo CFO and COO, Sloan was partly responsible for creating the high-pressure sales culture that spawned the fake accounts scandal, and publicly defended practices he knew were abusive. The senator also cited more than a dozen reports and lawsuits alleging misconduct at Wells Fargo between 2012 and 2016 while Sloan was a top executive.

Warren wrote that Sloan was either “aware of this misconduct and did nothing to stop it, or he was not aware of it despite his obligations as a senior manager of the company.”

“Either way, the Wells Fargo Board of Directors cannot plausibly claim that it is ‘ensur[ing] senior management’s ongoing effectiveness in managing the Firm’s activities’ while retaining a CEO that helped oversee this much misconduct,” Warren wrote, quoting the Fed’s consent order against Wells.

Wells Fargo said in a statement that it “continues to have constructive dialogue with the Federal Reserve to ensure that we fully satisfy our consent order requirements.”

“We are also confident that the transformation of the company over the last two years, including our efforts to make things right with our customers, will contribute to resolution of the issues cited within the consent order, especially in our operational and compliance risk management structure,” the bank said.

Warren and Sloan have sparred for years as Wells Fargo faced growing scrutiny in Washington. The bank in April paid a $1 billion fine to two federal regulators to settle charges the bank charged mortgage borrowers inappropriate fees and forced loan customers to purchase unnecessary auto insurance.

“While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency,” Sloan said in April.

“Our customers deserve only the best from Wells Fargo, and we are committed to delivering that.”

Updated at 3:24 p.m.