The Federal Reserve Friday ordered Wells Fargo not to grow until it improves its governance and to replace four board members, citing “widespread consumer abuses.”
In an order announced late Friday, the Fed said that the bank could not grow its assets beyond levels reported at the end of 2017 until it gets prior regulatory approval. The bank, America’s second largest by asset size, was also told to replace three members of its board of directors by April and to replace one more by the end of the year.
“We cannot tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again,” Fed chair Janet Yellen said in a statement.
The penalties imposed on Wells Fargo are unusually harsh, perhaps unprecedented. They would appear to reflect the frustration of regulators with the bank’s reluctance to take more serious measures to address years of misconduct.
Wells Fargo was once the golden child of America’s big banks, considered free from the scandals that tainted many big banks following the financial crisis. Initially, the bank downplayed the seriousness of the revelations that it had manipulated its customers and opened unwanted accounts in their names.
President Donald Trump has been harshly critical of Wells Fargo.
Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!
— Donald J. Trump (@realDonaldTrump) December 8, 2017
Wells Fargo has been expanding their “cheaper, foreign labor workforce in the Philippines, taking it initially from 100 workers to 4,000 workers and now announcing that the bank will build another facility in the foreign country to add potentially an additional 7,000 workers,” according to a 2017 report in the Charlotte Observer.
It is not clear which Wells directors will be forced out. The board’s current chair, Elizabeth Duke, too the position last month. The board’s former chairman, Stephen Sanger, retired last year, as did two other longtime directors. Current board members include Celeste Clark, formerly a top executive at Kellogg Company, former Transportation Secretary Federico Pena, and former Staples chief executive Ronald Sargent.