Elizabeth Warren Urges Fed to Oust Wells Fargo Board MembersBy and
Senator says board ‘did nothing to stop rampant misconduct’
Warren seeking to protect ‘regulatory regime,’ analyst says
U.S. Senator Elizabeth Warren renewed her attack on Wells Fargo & Co., urging the Federal Reserve to remove the 12 directors who were on the board when bank employees set up legions of fake customer accounts.
Congress empowered the Fed to remove board members if they violate the law or engage in unsafe business practices that cause banks with federal deposit insurance to suffer losses, Warren, a Massachusetts Democrat, wrote in a letter Monday to Fed Chair Janet Yellen.
“I urge you to exercise your legal authority to remove the holdover Wells Fargo board members,” Warren wrote. “The board did nothing to stop rampant misconduct” that led to “more than 5,000 bank employees creating more than two million fake accounts over four years,” between 2011 and 2015, Warren added.
Eric Kollig, a Fed spokesman, said, “We have received the letter and plan to respond.”
Wells Fargo has faced a barrage of criticism from Warren and others since it was fined $185 million by regulators in September for opening retail bank accounts without customer approval. The scandal triggered public complaints and congressional hearings, prompting the San Francisco-based bank to name new leaders, claw back pay and find new ways to encourage sales. In April, shareholders voted narrowly to re-elect all 15 board members after some proxy advisers and large investors had urged that the majority be voted off.
Wells Fargo has “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,” spokeswoman Jennifer Dunn said in an emailed statement. “That work continues and remains a core part of our efforts.”
Warren’s real goal probably isn’t to oust the firm’s board, but to use the Wells Fargo scandal as a means of rebutting Republican calls for broad bank deregulation, said Isaac Boltansky, an analyst at Compass Point Research & Trading.
‘‘It’s about defending the regulatory regime," Boltansky said in a phone interview. “Senator Warren’s big fear is that the call for medium-size and smaller bank deregulation will be used as a Trojan horse” for easing rules against the biggest lenders.
Both parties have tried to leverage the scandal to further political goals. Republican Representative Jeb Hensarling, who chairs the House Financial Services Committee, has used it to criticize the Consumer Financial Protection Bureau, contending its regulators should have spotted the fraud before the bank flagged it. On the Democratic side, Warren said during hearings last year that former Chief Executive Officer John Stumpf should face criminal prosecution, while Representative Brad Sherman of California sponsored a bill in December that would prohibit banks from using arbitration agreements to limit consumers’ ability to pursue claims.
Yellen said in September congressional testimony that the central bank had initiated “a broad-based review” of compliance regimes and governance at the largest banks. “I think it is very important that senior management be held accountable,” she said at that time.
The Fed has the authority to remove bank board members, but only after presenting a case of how an individual’s actions have been unsafe for the organization as a whole. Using that process for nearly an entire board would represent a challenging legal undertaking by Fed staff.
Wells Fargo shares advanced 1 percent to $54.41 at 12:49 p.m. in New York, paring this year’s decline to 1.3 percent.