Massachusetts Sen. Elizabeth Warren is urging the Federal Reserve to remove 12 Wells Fargo board members in place during the years when the bank’s fake-accounts scandal was happening.
In a letter Monday to Fed Chair Janet Yellen, the Democrat says the Fed should exercise its authority under federal law and oust the board members for failing to have adequate risk-management practices that would have alerted them to the scandal. That failure violated regulations and represented an unsafe and unsound practice by the board, whose members ignored several red flags about sales practices for years, Warren wrote.
“Simply put, the board cannot possibly have satisfied its risk-management obligations under Federal Reserve regulations and guidance while allowing more than 5,000 employees to create more than two million fake accounts over a four-year span,” the letter says.
A Federal Reserve spokesperson said the regulator has received the letter “and we plan to respond.”
Wells Fargo said in a statement that the company’s board and management team have taken many actions since the scandal, “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.”
A spokesperson for Wells Fargo’s independent directors declined to comment.
The letter is the latest heat from Warren on Wells Fargo, which maintains its largest employment hub in Charlotte.
During a Senate hearing in September on the scandal, Warren told then-CEO John Stumpf he should resign. A month later, she questioned Wells’ decision to name company insider Tim Sloan the bank’s new CEO.
In her letter Monday, Warren says the Fed should remove the dozen board members in place for some or part of the period from May 2011 to July 2015. Those directors are John Baker, John Chen, Lloyd Dean, Elizabeth Duke, Enrique Hernandez, Donald James, Cynthia Milligan, Federico Peña, James Quigley, Stephen Sanger, Susan Swenson and Suzanne Vautrinot. Three other members make up the 15-member board.
At the bank’s annual shareholders meeting in April, the first since the scandal, many directors up for re-election received low support, with some barely receiving the majority of votes cast needed to win.
Warren’s letter notes actions taken by two other federal regulators against Wells Fargo since the scandal to hold the bank accountable. The Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau fined the bank a combined $135 million. But in comparison, the Fed “has done nothing to date,” Warren wrote.
If the Fed removes board members at Wells, it wouldn’t be the first instance of such action from regulators. Charlotte-based Bank of America underwent a government-ordered shakeup of its board in 2009 amid the financial crisis and regulator scrutiny of its Merrill Lynch acquisition.
In a report Monday, Jaret Seiberg, an analyst with Cowen and Co., said he doesn’t expect the Fed to comply with Warren’s request, noting that Stumpf has already left and the board has already conducted its own investigation.
Seiberg also said Wells Fargo may emerge from the scandal faster than expected, thanks to Washington being consumed by the ongoing federal probe into Russia’s alleged influence on last year’s presidential election.
“We believe Warren’s letter is not going to reignite this scandal,” Seiberg wrote. “There is simply not enough oxygen in the political system.”