Warren Pushes Fed to Reject Wells Fargo’s Effort to Lift Growth Restriction

Warren Pushes Fed to Reject Wells Fargo's Effort to Lift Growth Restriction

Asset cap was levied by Fed in 2018 following years-long pattern of lawbreaking, scandals at bank

"The bank has not made meaningful reforms to correct its history of mismanagement, brazen and egregious consumer abuses, and money laundering violations."

Text of Letter (PDF)

Washington, D.C. - U.S. Senator Elizabeth Warren (D-Mass.) wrote to Federal Reserve Chair Jerome Powell and Vice Chair Michael Barr, demanding that the Fed reject Wells Fargo's petition to lift its asset cap. Wells Fargo's recent appeal came days after an enforcement action from the Office of the Comptroller of the Currency (OCC), and two months after a federal judge allowed a class action lawsuit to proceed against the bank for defrauding investors.

"The bank has not made meaningful reforms to correct its history of mismanagement, brazen and egregious consumer abuses, and money laundering violations," wrote Senator Warren. "The Fed should not lift the bank's asset cap."

The Fed first imposed a growth restriction on Wells Fargo in 2018 following hundreds of enforcement actions levied by bank regulators in response to the bank's years of mismanagement. Chair Powell has reiterated that the Fed will not remove the cap until the bank comprehensively fixes its problems.

In the letter, Senator Warren details Wells Fargo's numerous scandals in the nearly seven years since the asset cap was instated, including overcharging customers on mortgages, falsifying documents, charging excessive overdraft fees, and forcing consumers to go through wrongful foreclosure and wrongful vehicle repossession.

"Removing Wells Fargo's asset cap based on the recommendation of a third-party analysis that Wells Fargo purchased for itself and was provided days after a fellow regulator slapped the bank with a 40-part enforcement action would harm consumers, threaten our financial stability, and reward a bad bank for continuing a long history of abusive and reckless practices," wrote Senator Warren.

Senator Warren highlighted Chair Powell's previous commitment that any decision about Wells Fargo's asset cap would be made by a vote by the Federal Reserve Board of Governors. Powell also noted that Wells Fargo must "make significant progress in remedying its oversight and compliance and operational risk management deficiencies" before the restriction is lifted.

"The most recent OCC action shows that Wells Fargo has not made 'significant progress' in remedying its compliance program overhaul," wrote Senator Warren. "The Fed must reject Wells Fargo's appeal and maintain the asset cap until the bank can show that it can properly manage the risks associated with running a large bank."

Senator Warren has long led the charge to hold Wells Fargo accountable for its nearly two-decade-long record of swindling its customers. In particular, an investigation by Senator Warren's office found that the bank placed as many as 1,600 customers into forbearance on their mortgages without their consent. Senator Warren sent dozens of oversight letters highlighting these harmful practices and urging the Fed to take action, including by removing members of the bank's Board of Directors. In 2018, in conjunction with implementing the asset cap, the Fed announced that four Wells Fargo board members would have to step down.

Senator Warren has also held Wells Fargo's top executives accountable for consumer harm. During a 2016 Senate Banking hearing, Senator Warren questioned John Stumpf, then-CEO of Wells Fargo, about his failure to take accountability for Wells Fargo's fake accounts scandal. Shortly thereafter, the bank announced that Stumpf would give back $41 million in compensation - and Stumpf later resigned. Three years later, after Wells Fargo was discovered to have charged college students excessive fees, Senator Warren called on then-CEO Tim Sloan to resign. Within a month, Sloan resigned and Wells Fargo announced that it would roll back excessive campus debit card fees altogether.

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