Ouster of Wells’ directors sought
Senator asks the Fed to remove board members over fake accounts scandal.
Sen. Elizabeth Warren asks the Fed to remove board members over fake accounts scandal.
Sen. Elizabeth Warren is calling on the Federal Reserve to remove Wells Fargo & Co. board members who presided over the bank when it opened millions of consumer accounts without customers’ authorization.
The scandal “revealed severe problems with the bank’s risk management practices — problems that justify the Federal Reserve’s removal of all responsible board members,” the Massachusetts Democrat wrote in a Monday letter to Federal Reserve Chairwoman Janet L. Yellen.
The letter primarily cites a report by New York law firm Sherman & Sterling, which was hired by the board to conduct an independent investigation into the scandal, which erupted last year.
The report, released in April, found that the board did not take an active enough role in monitoring the bank’s practices, which in turn allowed problems to persist for years.
Federal banking regulators have the authority to remove bank directors, although it’s something of a last resort.
Warren’s letter requests the removal of 12 current board members who served between May 2011 and July 2015 — the period during which the bank admitted opening as many as 2.1 million sham accounts in a $185million settlement with regulators. Those members do not include current director and Chief Executive Timothy Sloan.
Wells Fargo said Monday morning that it had not yet received a copy of Warren’s letter, but defended the board’s response to the scandal.
“Wells Fargo’s board and management team have taken many actions in response to its retail sales practices issues, including changes in senior leadership, executive accountability actions and numerous steps to ensure we make things right with any customer affected by unacceptable sales practices,” the statement said.
In April, the company’s shareholders reelected all the bank’s board members, but with markedly less support than they’ve been accustomed to in previous years.
The letter by Warren is just the latest fallout from the scandal, which the bank has sought to put behind it.
Last week, the bank, seeking to settle related class-action lawsuits, made an open-ended commitment to fully compensate customers who paid fees or suffered damage to their credit due to any unauthorized account.
At a congressional hearing in September, Fed chief Yellen was pressed on regulatory action against Wells Fargo and said, “I think it is very important that senior management be held accountable.”
Since then, however, Wells Fargo Chief Executive John Stumpf resigned, and the bank has clawed back tens of millions of dollars’ worth of compensation from Stumpf and former community banking executive Carrie Tolstedt.
The bank also revised its incentive system to reward employees for new accounts that are actually used instead of just opened.
Jaret Seiberg, an analyst for Cowen Washington Research Group, wrote in a note that he doesn’t expect action from the Fed.
“We find it as unlikely that the Federal Reserve would remove the existing directors,” Seiberg wrote. “The CEO already has left and the board has conducted its own investigation.”