By Jeff Bater
Federal Reserve Chair Janet Yellen, pushed by Sen. Elizabeth Warren (D-Mass.) to crack down on Wells Fargo, acknowledged the regulator has the power to remove board directors and is prepared to take enforcement actions.
Without giving a specific commitment on any action, Yellen used the words “egregious and unacceptable” to describe the behavior of the bank in the phony account scandal.
“We do have the power, if it proves appropriate, to remove directors,” she said during a Senate Banking Committee hearing July 13. “A number of actions have already been taken, and we need to conduct a thorough investigation, to look at the full record to understand the root causes of the problems. And we are certainly prepared to take enforcement actions if those prove to be appropriate.”
The megabank settled with regulators last year for $185 million in penalties over allegations its employees secretly opened unauthorized accounts to hit sales targets — tactics that left customers with overdraft charges and late fees.
The bank’s CEO, John Stumpf, resigned amid a large public outcry, with Warren being a prominent critical voice. The senator has maintained a drumbeat, sending a letter to Yellen in June urging the Fed to remove the 12 directors who were on the board when bank employees set up legions of fake customer accounts.
After Yellen’s remarks at the hearing, Warren pressed further, pointing out the Fed fined Wells Fargo in 2011 over bad compensation practices.
“And what did Wells do?” the senator said. “For the next four years immediately after that fine, the board signed off on incentive compensation practices that led to the creation of two million fake accounts.
“Fines are not working with these giant financial institutions,” Warren added. “If bank directors who preside over the firing of thousands of employees for creating millions of fake accounts can keep their jobs, then I think every bank director in this country knows that they are bulletproof.”
Warren told Yellen she has the power to change the culture on Wall Street. “I know you care about this issue. I hope you will use that power,” the senator said.
To contact the reporter on this story: Jeff Bater in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com
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