Sen. Elizabeth Warren says Wells Fargo has run out of time to fix the many internal problems that have harmed its customers.
In a letter Monday to Federal Reserve Chairman Jerome Powell, Warren asked the Fed to force the financial giant to break off its core banking activities, like offering checking and savings accounts and loans, from its other financial services.
Divorcing Wall Street-centric work -- which can include managing investment funds and providing financial market sales and trading services -- from the bank would ensure that Wells Fargo's everyday customers did not continue to suffer, Warren wrote. The Fed could accomplish this, she explained, by revoking Wells Fargo's financial holding company license -- essentially making it impossible for the company to operate any nonbanking businesses.
"Continuing to allow this giant bank with a broken culture to conduct business in its current form poses substantial risks to consumers and the financial system," she wrote.
It is the first time that Warren, D-Mass., has made such a request to a regulator. If the Fed granted it, Wells Fargo would somehow have to shed dozens of nonbank subsidiaries.
A Fed spokesman confirmed that the letter had been received.
Wells Fargo has spent years trying to right its standing with regulators and lawmakers after a cascade of disclosures of misconduct by the bank against its customers. It admitted to opening accounts in their names without their knowledge, forcing them to buy unnecessary insurance and charging them unwarranted mortgage fees.
Last week, federal regulators announced another set of fines and restrictions on the bank, stemming from its inappropriate handling of some of its home loan customers' portfolios. The Office of the Comptroller of the Currency found that Wells Fargo's management of its mortgage accounts had been so sloppy that it might have improperly foreclosed on some borrowers' homes. The regulator fined the bank $250 million, ordered it to halt some foreclosures in progress and gave it five months to get its management systems on track.
Wells Fargo has been operating under a Fed-imposed asset cap since early 2018, a move intended to force the bank to take broad steps to overhaul its risk-management procedures and establish better protections for its customers. But Warren said the bank was distracted from that goal, citing reports that Wells Fargo was trying to expand activities like putting together corporate mergers and other investment banking services.