Senator Warren is urging Federal Reserve Board Chair Jerome Powell not to lift growth cap restrictions imposed on Wells Fargo until Tim Sloan is removed from his role as CEO.
Senator Elizabeth Warren (D-Mass) has renewed her calls to Federal Reserve Board Chair Jerome Powell to keep growth cap restrictions imposed upon Wells Fargo until CEO Tim Sloan is removed. In a letter, Warren urges Powell and the Fed to maintain Wells Fargo growth restriction until Sloan is dismissed, citing a new report of misconduct under Sloan’s watch. Warren’s letter states that the "latest report of misconduct appears to be a case first of failure, and then of fraud." The report in Capitol Forum alleges that, beginning in 2016, employees in the Wholesale Banking division of Wells Fargo "routinely falsified clients’ signatures and otherwise doctored paperwork" in order to comply with the company’s settlement with the Office of the Comptroller of the Currency related to violations of anti-money laundering laws.
Letter from Warren. The letter states that Wells Fargo CEO Timothy Sloan led the Wholesale Banking division during the initial illegal activity related to money laundering as well as during the period when the report alleges that Wells Fargo falsified documents to cover up non-compliance with the OCC consent order. Warren highlighted that the settlement requires Wells Fargo to "ensure senior management’s ongoing effectiveness in managing the Firm’s activities and related risks and promoting strong risk management across the Firm" as a condition for the Fed to lift the growth cap. She concludes in the letter that the newest report "provides more evidence that Wells Fargo is fundamentally broken, and there is no evidence whatsoever that these problems can be fixed under Mr. Sloan's watch. The Federal Reserve should take no action to remove the growth cap until Wells Fargo replaces Mr. Sloan as CEO."
Warren first called on the Fed to require that Sloan be fired in October 2018 (see Banking and Finance Law Daily, Oct. 19, 2018), arguing that Sloan’s long tenure in senior positions at Wells Fargo during a string of illegal activities made him unable to fulfill the terms of the settlement. According to Warren’s release, the new report show that Sloan not only presided over the Wholesale Bank while it got caught breaking money laundering laws, but also had its employees doctor paperwork to cheat on the terms of its settlement with the OCC.
Growth restriction in Fed settlement. The Fed imposed a growth restriction as part of a consent order that requires Wells Fargo to maintain total consolidated assets below the level it reported at the end of 2017. The consent order restricts the bank’s growth until it sufficiently improves its governance and controls, including its risk management processes. In a letter to the bank’s board of directors, the Fed stated that the board failed to oversee an adequate risk management framework, which led to various consumer abuses, including the opening of unauthorized accounts and charging customers for unneeded guaranteed auto protection or collateral protection insurance. The Fed’s order prevents Wells Fargo from growing any larger than its total asset size at the end of 2017, but does not prevent the bank from accepting consumer deposits or making consumer loans.
Companies: Wells Fargo & Company; Wholesale Bank
MainStory: TopStory BankingFinance BankSecrecyAct CrimesOffenses EnforcementActions FederalReserveSystem OversightInvestigations UDAAP
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