Elizabeth Warren Asks Fed To Split Wells Fargo

Senator Elizabeth Warren said Wells Fargo is running out of time to fix many of the internal issues that have plagued its customers.

In a letter to Federal Reserve chair Jerome H. Powell on Monday, Ms. Warren asked the Fed to force the financial giant to cut its core banking activities from its other financial services, such as offering checking and savings accounts and loans. .

Ms Warren wrote that the Wall Street-based work, which can include managing mutual funds from the bank and providing financial market sales and trading services, will ensure that Wells Fargo’s day-to-day clients do not continue to suffer. The Fed announced that it could achieve this by revoking Wells Fargo’s financial holding company license – making it impossible for the company to operate any non-banking business.

“Continuing to allow this giant bank with a broken culture to do business in its current form poses significant risks to consumers and the financial system,” he wrote.

This is the first time Ms Warren, a Massachusetts Democrat, has made such a request to a regulator. Had the Fed accepted this, Wells Fargo would have somehow had to leave dozens of non-bank subsidiaries.

A Fed spokesperson confirmed receipt of the letter.

Wells Fargo has spent years trying to straighten its stance with regulators and lawmakers after the bank disclosed a series of misconduct against its customers. He admitted that they opened accounts in their name without their knowledge, forcing them to take out unnecessary insurance and charging unfair mortgage fees.

Last week, federal regulators announced a further set of penalties and restrictions resulting from the bank’s improper handling of the portfolios of some home loan customers. The Office of the Currency Supervisor found that the management of Wells Fargo’s mortgage accounts was so sloppy that some borrowers may have improperly placed a lien on their home. Regulator $250 million penalty to the bankordered it to halt some ongoing foreclosures and gave it five months to get its management systems back on track.

Wells Fargo operates under a Fed-imposed asset limit It’s a move since the beginning of 2018 that aims to force the bank to take broad steps to overhaul its risk management procedures and provide better protection for its customers. Ms Warren, however, said the bank’s attention had strayed from that goal, citing the following reports: Wells Fargo was trying to expand operations such as bringing together corporate mergers and other investment banking services.

The bank should be forced to abandon its Wall Street pursuits “to ensure that its leaders focus all their attention on correcting the bank’s numerous, chronic risk management shortcomings”.

Wells Fargo is the country’s fourth-largest bank, although its Wall Street presence, including investment banking and wealth management services, is much smaller than rivals such as JPMorgan Chase and Bank of America. Its CEO, Charles W. Scharf, has a Wall Street background and has sought to make Wells Fargo more profitable by diverting it further to Wall Street since he took over two years ago.

Although Mr Scharf was not named in his letter to Mr. Powell, Ms Warren said: “I am concerned that Wells Fargo’s senior executives are focusing on expanding their risky investment banking activities rather than fixing consumer losses and improving lax internal controls.”

Ms. Warren sent a separate letter to Wells Fargo’s chairman of the board on Monday. He wants detailed information on how the board oversaw the bank’s cleanup efforts and why it paid Mr.