Sen. Elizabeth Warren wants Federal Reserve chairman Janet Yellen to remove most of the Wells Fargo board before more people get hurt.
Matt Egan of CNNMoney.com had the news:
Instead of simply slapping Wells Fargo with more fines, Warren implored Yellen to use her power as the Federal Reserve chief to send a resounding message to Wall Street.
“Time after time, big banks cheat their customers and no actual human beings are held accountable,” Warren, a Massachusetts Democrat, told Yellen during a Senate hearing on Thursday.
“Nothing’s going to change at these big banks if that doesn’t change,” Warren said.
Warren wrote to Yellen last month, urging the Fed to take the unprecedented step of removing the big bank’s directors. She pointed out that federal law empowers the Fed to remove directors if they engage in unsafe or unsound practices that cause a bank to lose money. Warren noted that bank boards are responsible for risk management — and that was a key failure at Wells Fargo.
Yellen on Thursday said she wasn’t prepared to discuss confidential regulatory matters in detail, but she did criticize Wells Fargo for “egregious and unacceptable behavior.”
Jeff Cox of CNBC.com reported that Yellen promised to act if warranted:
“How could removal of these board members not be warranted given the facts that we already know?” Warren said during Yellen’s semiannual testimony before the Senate Banking Committee.Wells Fargo already has paid millions in fines and is nearing a settlement in a class-action lawsuit over the scandal, in which employees created some 2 million fake accounts for customers without their knowledge. They did so to meet aggressive sales goals that called for employees to use cross-selling techniques to enroll customers in as many programs as possible.
More than 5,000 employees have been fired in connection with the scandal, but Warren said that’s not enough. She said the bank clearly has run afoul of Fed regulations calling for proper risk management, and people at the top should pay.
“Can you explain to me how the Wells board can possibly have satisfied its obligations under the Fed’s risk management regulations?” Warren said.
Yellen would not comment specifically on what actions the Fed will take, but she also was critical of the bank’s actions.
Martin Crutsinger of the Associated Press reported that Yellen called the bank’s actions “unacceptable”:
In response, Wells Fargo spokesman Erika Reynoso said in a statement that “Wells Fargo’s board and management team have taken many actions … 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.”
In other topics Thursday, Yellen said that she believed the risks concerning inflation are “two-sided,” stressing that price gains could both accelerate or slow down.
Testifying for the second day before Congress, Yellen sought to expand on remarks she had made Wednesday before the House Financial Services Committee in an apparent effort to adjust views in financial markets.
In her House comments, Yellen discussed the possibility that a recent slowdown in inflation could persist longer than the Fed expects. The comments helped trigger a big market rally, with the Dow Jones industrial average hitting a record high. Investors saw the remarks as a signal that the Fed, which has raised interest rates three times since December, might slow the pace of future interest rate increases.
