Buffett: The three mistakes Wells Fargo made
Federal Reserve has dropped the hammer on Wells Fargo.
Fed handed down unprecedented punishment late Friday for what it
called the bank's "widespread consumer abuses," including its
notorious creation of millions of fake customer accounts.
Fargo won't be allowed to get any bigger than it was at the end
of last year -- $2 trillion in assets -- until the Fed is
satisfied that it has cleaned up its act.
pressure from the Fed, the bank agreed to remove three people
from the board of directors by April and a fourth by the end of
is the first time the Federal Reserve has imposed a cap on the
entire assets of a financial institution, according to a Fed
cannot tolerate pervasive and persistent misconduct at any
bank," outgoing Fed Chairwoman Janet Yellen said in a statement.
Friday was her last day on the job.
more money than any bank in the United States besides JPMorgan
Chase, according to Fed data. But its reputation has been
shattered over the past year and a half by a seemingly endless
series of misconduct.
prominently, Wells Fargo admitted that its workers responded to
wildly unrealistic sales goals by creating as many as 3.5
million fake accounts. The bank has also said it forced up to
570,000 customers into unneeded auto insurance.
bank agreed to the Fed's conditions under what's known as a
consent decree. In a statement, Wells Fargo said it is
"confident" it can meet the Fed's requirements.
take this order seriously and are focused on addressing all of
the Federal Reserve's concerns," said CEO Timothy Sloan, whose
predecessor, John Stumpf, resigned a month after the
fake-accounts scandal broke.
Fed will require Wells Fargo to turn in detailed plans of what
it has done, and intends to do, to fix the board. Wells Fargo
must also submit a broader explanation for how it will improve
its internal controls and its handling of risk. Those plans are
due in 60 days.
September 30, Wells Fargo must engage a third party to review
how the bank is executing those plans.
Fargo will still be able to accept consumer deposits and make
loans to consumers, the Fed official said. However, it will be
up to the bank to determine what changes may need to be made to
its business in order to stay under the asset cap.
Fargo stock fell more than 6% in after-hours trading Friday.
Elizabeth Warren, a Massachusetts Democrat and the most
prominent of Wells Fargo's many critics in Congress, had begged
Yellen to go after the board. Warren said in July that nothing
would change at the big banks until "actual human begins are
held accountable." Warren's office had no immediate comment on
a tweet Friday, Warren lauded Yellen for taking action and
reiterated the case for tough regulation.
Yellen's decision today to freeze the growth of Wells
Fargo until it shapes up also demonstrates that we have
the tools to rein in Wall Street -- if our regulators have
the guts to use them. This one hits them where it hurts.
— Elizabeth Warren (@SenWarren) February
Yellen's decision today to freeze the growth of Wells Fargo
until it shapes up also demonstrates that we have the tools to
rein in Wall Street -- if our regulators have the guts to use
them," Warren wrote. "This one hits them where it hurts."
scandal broke into public view in
when regulators revealed that Wells Fargo had created millions
of bank accounts for customers without their knowledge. The
fake accounts dated back to 2009.
then, Wells Fargo has faced lawsuits
federal and state investigations, fines
and a grilling from Congress. The company ousted its CEO, John
Stumpf, in October 2016. The number of customers opening new
accounts at the bank plummeted. Workers alleged they were fired
speaking up about misbehavior.
bills cost the company $3.3 billion last quarter, Wells Fargo said
the fake accounts aren't Wells Fargo's only problem.
July, the company admitted
forced auto insurance on as many as 570,000 borrowers who didn't
need it. About 20,000 of those customers had their cars
wrongfully repossessed in part due to these unwanted insurance
Department fined the company
November for illegally repossessing cars from more than 860
service members. Federal law requires banks to get a court order
before repossessing a car from members of the military.
Matt Egan contributed to this report.
published February 2, 2018: 6:52 PM ET