WASHINGTON: Outraged lawmakers pressed Federal Reserve Chairwoman Janet L. Yellen on Wednesday to punish Wells Fargo & Co. for creating as many as 2 millions fake accounts, but she declined to commit to any regulatory penalties.
“Two million phoney accounts. Break them up!” Rep. Brad Sherman (D-Porter Ranch) told Yellen during her appearance before the House Financial Services Committee on the Fed’s regulatory responsibilities.
The hearing signalled that Wells Fargo Chief Executive John Stumpf will face another verbal assault Thursday when he testifies before the committee about the bank’s fake accounts and aggressive sales tactics in his second trip to Capitol Hill to address the scandal.
Stumpf faced sharp, bipartisan criticism in a Senate Banking Committee hearing last week, including a call from Sen. Elizabeth Warren (D-Mass.) that he resign and be criminally investigated.
The anger Wednesday from House members also could mean trouble for two federal regulators with direct oversight of Wells Fargo’s retail banking operations — the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency — when their officials face questions at an upcoming hearing about why they didn’t stop the problems sooner.
Sherman said Wells Fargo’s widespread improper sales tactics indicated the giant San Francisco-based bank was too big to manage. He asked Yellen whether she would “at least seriously consider breaking up Wells Fargo” using the Fed’s authority to downsize banks that pose a risk to the financial system.
“We will hold the largest [financial] organisations to exceptionally high standards of risk management, internal controls and consumer protection,” she said.
After Sherman said that the Fed hasn’t been able to do that with Wells Fargo, Yellen responded, “We believe it is possible, even though it is extremely challenging.”
When violations do occur, Yellen said that bank executives should face consequences.
“I think it is very important that senior management be held accountable,” she said.
— Los Angeles Times
