Senator Elizabeth Warren wants regulators to keep Wells Fargo in the penalty box until the bank replaces CEO Tim Sloan.
In a letter to the Federal Reserve on Thursday, Warren argued that Sloan, a three-decade Wells Fargo veteran, is “deeply implicated in the bank’s repeated and egregious misconduct.”
Warren, a Massachusetts Democrat who’s said she’s considering a run for president in 2020, urged the Fed to keep the asset cap it placed on Wells Fargo intact until Sloan is removed. The sanctions prevent Wells Fargo from growing its balance sheet, a harsh restriction for a bank during a booming economy.
The Fed’s sanctions, handed down in February, require the bank to take a series of steps before the penalties are lifted. Warren argued that Wells Fargo can’t possibly satisfy those requirements with Sloan in charge because he was a senior executive when the trouble occurred.
“Mr. Sloan has served as CEO, CFO and COO as Wells Fargo has engaged in this persistent and widespread mistreatment of customers and employees,” Warren wrote.
“Either he was aware of this misconduct and did nothing to stop it,” Warren wrote, “or he was not aware of it despite his obligations as a senior manager of the company.”
The pressure from Congress comes after more than two years of scandals that have rocked Wells Fargo. The No. 3 US bank has admitted that its employees, under intense sales pressure, opened millions of fake accounts. Wells Fargo has also said it charged customers auto insurance they didn’t need and mortgage fees that weren’t warranted. Employees have accused Wells Fargo of retaliating after they blew the whistle.
More recently, Wells Fargo started refunding customers who were charged for pet insurance and other products they didn’t fully understand. Wells Fargo also set aside $285 million to refund foreign-exchange and wealth-management clients for incorrect pricing and fees. In August, Wells Fargo apologized for a computer glitch that caused hundreds of people to have their homes foreclosed on.
“Wells Fargo is fundamentally broken,” Warren wrote. “Reports of new misconduct seem to emerge on a monthly basis.”
A spokesman for the Federal Reserve said the central bank has received the letter and plans to respond.
In a statement, Wells Fargo said it “continues to have constructive dialogue” with the Fed to ensure that “we fully satisfy” requirements.
The bank added that it’s “confident” efforts to “make things right with our customers” will contribute to the resolution of operational and risk management issues cited by regulators.
Wells Fargo has made a series of changes over the past two years, including replacing longtime CEO John Stumpf, getting rid of its notorious sales goals and refunding customers for improper fees. The bank has also launched a marketing campaign aimed at repairing its tattered image.
Sloan told analysts last week that Wells Fargo is planning to operate under the Fed’s sanctions “through the first part of next year.”
The Fed’s asset cap is having a negative impact on Wells Fargo’s business. The bank said corporate deposits fell last quarter in part due to efforts taken to “manage to the asset cap.”
Despite the strong economy, Wells Fargo reported a $40 billion decline in overall deposits and a 1% dip in loans. Other big banks, including JPMorgan Chase, Citigroup and PNC, revealed increases in loans and deposits.
Jaret Seiberg, an analyst at Cowen Washington Research Group, doesn’t believe Warren, who has frequently criticized the bank, will convince the Fed to force Sloan out.
“That doesn’t mean the bank should keep its CEO,” Seiberg wrote to clients, “as he will be a lightning rod for criticism if the Democrats retake the House.”