Federal Reserve Chair Janet L. Yellen on Wednesday delivered a bruising assessment of Wells Fargo, calling “unacceptable” the megabank’s admissions that its employees had potentially set up as many as 3.2 million fake accounts that customers did not want so they could meet aggressive sales goals.
“Let me say that I consider the behavior of Wells Fargo toward its customers to have been egregious and unacceptable,” Yellen said during a news conference Wednesday.
The Federal Reserve has been reviewing the incident for several months, and Yellen declined to comment on the status of the investigation. “We take our supervision responsibilities of the company very seriously. And we are attempting to understand what the root causes of those problems are and to address them,” she said.
When asked about the company in July, Yellen told a congressional committee that the Fed is “certainly prepared to take enforcement actions if those prove to be appropriate.”
Wells Fargo declined to comment.
Yellen’s statements were made as she comes under increasing pressure from Sen. Elizabeth Warren (D-Mass.), a longtime Wall Street critic, to fire Wells Fargo’s entire board of directors in response to the controversy. “Between 2011 and 2015, Wells Fargo seems to have had an almost limitless capacity to cheat its customers and shirk its regulatory responsibilities. Yet a dozen Board members from that period continue to serve today,” Warren said in a letter to Yellen last month.
Wells Fargo has already paid a price for its misconduct. Its chief executive has stepped down and given up millions in bonuses and the chairman of its board will be replaced starting next year. Wells Fargo has also paid $185 million in fines to regulators and reached a preliminary settlement of a class-action lawsuit for more than $100 million.
“Wells Fargo’s board and management team have 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 our customers and other stakeholders,” the company said in a statement in response to Warren’s call that it fire board members. “That work continues and remains a core part of our efforts to build a better Wells Fargo for the future.”
The actions to date have not been enough for the bank’s critics, particularly Warren. “This is a company that from the very top has made it clear — there’s no accountability here. This is not about serving consumers. This is all about quarter by quarter by quarter how to juice the reported profits. That that’s what mattered at Wells Fargo,” Warren alleged during an interview Tuesday on CNBC.
Pressure on the bank began to build again last month after Wells Fargo announced that the creation of fake accounts had gone on for far longer than it initially acknowledged and that it had found more than 1 million new potential cases. That has sparked calls for new congressional hearings and more severe consequences for the bank, including another larger government fine.
“Our initial optimism that Wells Fargo could escape the spotlight may have been premature,” Jaret Seiberg, an analyst with Cowen and Co.’s Washington Research Group, said in a recent report. That pressure means “the distraction and risk to senior management is growing rather than shrinking.”
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