Sen. Elizabeth Warren, D-Mass., wants the Federal Reserve to break up Wells Fargo to stop "substantial risks to consumers and the financial system."
Warren sent a letter to Federal Reserve chair Jerome Powell on Monday asking that Wells Fargo be forced to break off its core banking activities, such as checking and savings accounts and loans, from its other financial services, The New York Times reported Tuesday.
Wells Fargo has run out of time to fix numerous internal problems that have harmed its customers, Warren said.
The senator added that separating Wall Street-centric work from core bank activities would be a good thing for Wells Fargo's everyday customers.
"Continuing to allow this giant bank with a broken culture to conduct business in its current form poses substantial risks to consumers and the financial system," Warren wrote.
Besides core banking offerings, Wells Fargo manages investment funds and provides financial market sales and trading services.
Warren suggested the Fed could revoke Wells Fargo’s financial holding company license, making it impossible for the company to operate any nonbanking businesses.
A Fed spokesman confirmed to the Times that the letter had been received.
Federal regulators last week announced another set of fines and restrictions on Wells Fargo for inappropriate handling of some of its home loan customers’ portfolios.
The Office of the Comptroller of the Currency discovered that Wells Fargo might have improperly foreclosed on some borrowers’ homes. The regulator fined the bank $250 million, ordered it to halt some in-progress foreclosures, and gave it five months to get its management systems on track, the Times reported.
Previously, Wells Fargo admitted opening accounts in customers' names without their knowledge, forcing customers to buy unnecessary insurance, and charging customers' unwarranted mortgage fees.
The Times said Wells Fargo has been operating under a Fed-imposed asset cap since early 2018 — a move intended to force the bank to overhaul its risk-management procedures and establish better protections for customers.
Warren, however, said the bank was distracted from that goal and focused on expanding activities such as putting together corporate mergers and other investment banking services.
The bank should be forced to give up those Wall Street pursuits "to ensure that its leaders focus all of their attention on fixing the bank's numerous, chronic risk-management deficiencies," Warren wrote, the Times reported.
Although Wells Fargo is the country's fourth-largest bank, its Wall Street presence is much smaller than that of its competitors.
CEO Charles W. Scharf, with a Wall Street background, has tried to steer Wells Fargo toward the financial district since taking over two years ago.
"I am concerned that Wells Fargo's senior executives are focused on expanding risky investment banking activities instead of remediating consumer harms and improving lax internal controls," Warren wrote Powell, the Times said.
Warren also sent a separate letter to the chairman of Wells Fargo's board of directors on Monday.
The senator asked for details about how the board is overseeing the bank's cleanup efforts, and why it's paying Scharf so well while the bank's problems continue.
The Times said Scharf earned more than $20 million in the 2020 fiscal year.
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