Fed chief says growth cap on Wells Fargo won’t be easily lifted

The new chief of the Federal Reserve said Thursday that a cap it placed on the growth of Wells Fargo & Co. after widespread consumer abuses would not be easily lifted — but the bank would not have to fully implement reform plans before it was removed.

Fed Chairman Jerome H. Powell sparred over the matter with Sen. Elizabeth Warren (D-Mass.), one of the leading critics of Wells Fargo after its creation of millions of unauthorized accounts and the disclosure of other questionable practices.

“Growth restriction is your really big stick here, and I hope that you won’t consider lifting it just because Wells makes some marginal progress,” Warren told Powell at his first appearance before the Senate Banking Committee since taking over as Fed chairman on Feb. 5.

“I want to be really clear on this — to lift the growth restriction, the Fed needs to see that the plans have been fully implemented, right?” Warren asked. “It’s not enough that Wells has taken some preliminary steps toward implementing the plans, is that right?”

"No, I don’t think that is right,” Powell said. “Once we’ve improved the plans and they begin to implement them, we see them on track, the growth restriction could then be addressed. No guarantee there, but we would then be prepared to look at it.”

Warren asked how much progress Wells needed to make. Powell said, “We’ll have to be assured that the company has made these really significant measures and suffered a significant period of a growth cap.”

“We will not lightly lift it,” Powell said.

Warren objected to lifting the restriction before Wells Fargo fully addressed its problems.

The clash between the new Fed chief and Warren came during a day when there were new disclosures about additional problems at the bank and an announcement that four longtime board members will retire in the coming weeks.

The bank said in its annual report released Thursday that its board was conducting a review of some wealth and investment management unit activities in response to “inquiries from federal government agencies.”

On top of that, there was a report that a former Wells Fargo fraud investigator had sued the bank and his supervisor for alleged whistleblower retaliation after telling his superiors about yet another bad practice that stuck customers with extra costs.