Hannah Levitt
Tue, September 14, 2021
(Bloomberg) -- U.S. Senator Elizabeth Warren urged the Federal Reserve to force Wells Fargo & Co. to separate its traditional banking and Wall Street businesses, after the lender was handed fresh regulatory action and a $250 million fine this month.
In a letter to Federal Reserve Chair Jerome Powell, Warren called on the Fed to revoke Wells Fargo’s status as a financial holding company in order to effect a separation. The Fed should order the company to develop a plan to ensure its customers are protected through the transition, the Massachusetts Democrat said.
“Every single day that Wells Fargo continues to maintain these depository accounts is a day that millions of customers remain at risk of additional negligence and willful fraud,” Warren wrote. “The only way these consumers and their bank accounts can be kept safe is through another institution—one whose business model is not dependent on swindling customers for every last penny they can get. The Fed has the power to put consumers first, and it must use it.”
The New York Times earlier reported the contents of the letter. A representative for the Fed confirmed it received the letter and said it planned to respond.
Wells Fargo was fined this month over its lack of progress addressing long-standing problems, the first such sanction under Chief Executive Officer Charlie Scharf. The penalty adds to the more than $5 billion in fines and legal settlements the bank paid over the last five years tied to a series of scandals that began with fake accounts in its branch network.
The latest order, from the Office of the Comptroller of the Currency, cited deficiencies in Wells Fargo’s home-lending loss mitigation practices -- the steps firms take to avoid foreclosure -- that have prevented the bank from being able to “fully and timely remediate harmed customers.”
“Meeting our own expectations for risk management and controls — as well as our regulators’ — remains Wells Fargo’s top priority,” the bank said Tuesday in a statement. “We are a different bank today than we were five years ago because we’ve made significant progress.”
Fresh Questions
Warren cited the Bank Holding Company Act, which requires that banks are well capitalized and well managed. If a financial holding company falls short of these, the Fed is required to give a notice for the institution to correct its deficiencies.
Should the bank fail to remedy those within 180 days, the Fed can ask the company to divest control of any subsidiary depository institution -- or the bank can choose to cease to engage in activity that isn’t permissible for a bank holding company.
The latest sanctioning raises fresh questions about whether the bank meets the Act’s requirements that it be well managed, and whether the board and Scharf are capable of effectively running the lender, Warren said.
Progress Signs
Despite the regulatory hit, Wells Fargo has made progress under Scharf. A Consumer Financial Protection Bureau order tied to the firm’s sales practices levied in 2016 expired this month while in January, the bank was freed from a 2015 regulatory order over violations of anti-money-laundering rules. The Fed also confidentially accepted a plan for overhauling risk management and governance at the bank, Bloomberg reported earlier this year.
More broadly, Warren has also been pushing for executives of companies that don’t follow the rules to face personal consequences, she said in an interview with Bloomberg News.
“I am pushing hard for more personal liability,” Warren said. “These executives want to drag in the big bucks for running these companies, then they should be responsible when they preside over big companies that are breaking the law and cheating American consumers.”
Ex-Wells Fargo execs square off with U.S. regulator in trial over phony account scandal
Jody Godoy and Chris Prentice
Mon, September 13, 2021,
FILE PHOTO: A Wells Fargo logo is seen in New York City
By Jody Godoy and Chris Prentice
WASHINGTON (Reuters) -The civil trial of three former Wells Fargo & Co employees over their alleged roles in a scandal involving phony accounts kicked off on Monday, a rare public confrontation between a top U.S. banking regulator and former high-level bank executives.
The Office of the Comptroller of the Currency (OCC) is squaring off against executives it says are partly culpable for the San Francisco lender's misconduct before an in-house OCC judge in Sioux Falls, South Dakota, in a hearing expected to last at least two weeks.
The long-running scandal over Wells Fargo's pressurized sales culture that led staff to open millions of unauthorized or fraudulent customer accounts has cost the bank billions of dollars in civil and criminal penalties and has badly damaged its reputation.
The OCC alleges that Wells Fargo's former risk officer, Claudia Russ Anderson, former chief auditor David Julian and former executive audit director Paul McLinko failed to adequately perform their duties and responsibilities, contributing to Wells Fargo's "systemic sales practices misconduct" from 2002 to 2016.
The proceedings mark a significant step for a regulator that has been criticized in the past for being too soft on the banks and executives it oversees, said regulatory experts.
"It's an attempt at personal accountability for big-bank executives we have not seen in a long time, including in the aftermath of the 2008 crisis," said Jeremy Kress, an assistant business professor at the University of Michigan.
In testimony on Monday, OCC official Greg Coleman laid out the OCC's view that the three former Wells Fargo executives were responsible for the misconduct because they were the bank's key "lines of defense" against bad behavior and other risks.
Wells Fargo's "incentive sales program was implemented without risk-management controls, without proactive monitoring and it essentially incented the bank employees to open fraudulent accounts, to provide misleading information to customers, resulting in significant harm," said Coleman, OCC's senior deputy comptroller for large bank supervision and the first witness to testify.
The regulator brought https://www.reuters.com/article/us-wells-fargo-regulator-charges/u-s-bank-regulator-charges-ex-wells-fargo-executives-for-role-in-sales-scandal-idUSKBN1ZM2M2 civil charges last year against the trio, as well as other former Wells Fargo executives, and has demanded they pay nearly $19 million combined to settle the matter. The OCC is also seeking to bar Russ Anderson from the banking industry over the allegations.
Attorneys for the trio did not respond to requests for comment.
Matthew Martens, an attorney representing Julian, said during the hearing that the trio's attorneys had been blocked from gathering background information on OCC examiners and from calling OCC witnesses.
"We were stopped from calling four OCC examiners who would have provided testimony that we believe would be evidence of bias, incompetence" and credibility issues, he said.
A spokesperson for Wells Fargo declined to comment beyond a January 2020 statement in which CEO and President Charlie Scharf said the OCC's actions were consistent with holding the firm and individuals accountable for "inexcusable" sales practices issues.
Jody Godoy and Chris Prentice
Mon, September 13, 2021,
FILE PHOTO: A Wells Fargo logo is seen in New York City
By Jody Godoy and Chris Prentice
WASHINGTON (Reuters) -The civil trial of three former Wells Fargo & Co employees over their alleged roles in a scandal involving phony accounts kicked off on Monday, a rare public confrontation between a top U.S. banking regulator and former high-level bank executives.
The Office of the Comptroller of the Currency (OCC) is squaring off against executives it says are partly culpable for the San Francisco lender's misconduct before an in-house OCC judge in Sioux Falls, South Dakota, in a hearing expected to last at least two weeks.
The long-running scandal over Wells Fargo's pressurized sales culture that led staff to open millions of unauthorized or fraudulent customer accounts has cost the bank billions of dollars in civil and criminal penalties and has badly damaged its reputation.
The OCC alleges that Wells Fargo's former risk officer, Claudia Russ Anderson, former chief auditor David Julian and former executive audit director Paul McLinko failed to adequately perform their duties and responsibilities, contributing to Wells Fargo's "systemic sales practices misconduct" from 2002 to 2016.
The proceedings mark a significant step for a regulator that has been criticized in the past for being too soft on the banks and executives it oversees, said regulatory experts.
"It's an attempt at personal accountability for big-bank executives we have not seen in a long time, including in the aftermath of the 2008 crisis," said Jeremy Kress, an assistant business professor at the University of Michigan.
In testimony on Monday, OCC official Greg Coleman laid out the OCC's view that the three former Wells Fargo executives were responsible for the misconduct because they were the bank's key "lines of defense" against bad behavior and other risks.
Wells Fargo's "incentive sales program was implemented without risk-management controls, without proactive monitoring and it essentially incented the bank employees to open fraudulent accounts, to provide misleading information to customers, resulting in significant harm," said Coleman, OCC's senior deputy comptroller for large bank supervision and the first witness to testify.
The regulator brought https://www.reuters.com/article/us-wells-fargo-regulator-charges/u-s-bank-regulator-charges-ex-wells-fargo-executives-for-role-in-sales-scandal-idUSKBN1ZM2M2 civil charges last year against the trio, as well as other former Wells Fargo executives, and has demanded they pay nearly $19 million combined to settle the matter. The OCC is also seeking to bar Russ Anderson from the banking industry over the allegations.
Attorneys for the trio did not respond to requests for comment.
Matthew Martens, an attorney representing Julian, said during the hearing that the trio's attorneys had been blocked from gathering background information on OCC examiners and from calling OCC witnesses.
"We were stopped from calling four OCC examiners who would have provided testimony that we believe would be evidence of bias, incompetence" and credibility issues, he said.
A spokesperson for Wells Fargo declined to comment beyond a January 2020 statement in which CEO and President Charlie Scharf said the OCC's actions were consistent with holding the firm and individuals accountable for "inexcusable" sales practices issues.
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