Sen. Elizabeth Warren on Tuesday called for the Federal Reserve to break up Wells Fargo & Co., saying the bank continues to harm consumers.
In a letter to Fed Chairman Jerome Powell, the Massachusetts Democrat urged that the scandal-plagued bank be forced to separate its traditional consumer-facing banking business from its investment banking business.
Warren said Wells Fargo is working to expand its investment bank, despite the asset cap imposed on it by regulators, and is conducting “risky activities” such as lending to hedge funds, which could hurt its customers.
“Wells Fargo is simply ungovernable,” she wrote, citing a litany of scandals. “I am therefore once again asking the Fed to further limit Wells Fargo’s ability to continue harming its consumers and undermining the safety and integrity of our banking system.”
““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 also called for a change in Wells Fargo’s leadership and the creation of teams to monitor its sales practices and risks.
“The Fed has the power to put consumers first, and it must use it,” Warren said. “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.”
“We are a different bank today than we were five years ago because we’ve made significant progress,” the bank said.
Wells Fargo has been fined more than $5 billion in recent years over a string of scandals that harmed customers.
But just last week, Wells Fargo was fined another $250 million for not correcting years-old practices that it agreed to fix under a 2018 consent order from regulators — though Wall Street largely shrugged it off.
“Every single day that Wells Fargo continues to maintain these depository accounts is a day that millions of customers remain at risk of additional negligence and willful fraud,” she said. “The only way these consumers and their bank accounts can be kept safe is through another institution — one whose business model is not dependent on swindling customers for every last penny they can get.”
The prospect of the Fed actually breaking up Wells Fargo is slim, but the bank is likely to face more pressure by the Biden administration, especially if Biden picks more liberal-leaning nominees to the Federal Reserve board in the coming year.
Wells Fargo shares rose slightly Tuesday, and are up 53% year to date, compared to the S&P 500’s
18% gain this year.