Maxine Waters, the top Democrat on the House Financial Services Committee, issued a report last week suggesting that regulators might want to consider shutting down the scandal-ridden Wells Fargo.
According to CNN Money, the 38-page report also slammed regulators for failing to punish the bank more severely for its recent scandals, which include opening as many as 3.5 million potentially fake accounts, forcing up to 570,000 borrowers into unneeded auto insurance and allegedly discriminating in mortgage lending.
“When a megabank has engaged in a pattern of extensive violations of law that harms millions of consumers, like Wells Fargo has,” the report said, “it should not be allowed to continue to operate within our nation’s banking system.”
While it’s unlikely that Wells Fargo will lose its banking charter, the report’s suggestion is proof of the political pressure the bank is under as it prepares for a Senate hearing on Tuesday.
Wells Fargo, which has 70 million customers and 271,000 employees, was fined $185 million by regulators last year as part of a settlement over the fake accounts.
But Waters says fines are ineffective with big banks like Wells Fargo because they are ultimately paid by shareholders. Instead, regulators should hand down tougher penalties, such as shutting down problem areas of Wells Fargo, removing executives and directors, banning personnel from working in the industry, revoking the bank’s national charter, or even closing the bank down entirely.
“These underutilized authorities should be, but have not been in the case of Wells Fargo, exercised in order to adequately combat rampant, illicit activity by a bank,” the report said. It added that Congress should consider passing laws that would require regulators to use these aggressive punishments.
Jaret Seiberg, senior policy analyst at Cowen Washington Research Group, said the Waters report will keep pressure on the Fed to crack down on Wells Fargo management and the board.
“We do not see any risk to the ability of Wells Fargo to be a bank,” Seiberg wrote in a report. “This is really just about whether management can survive.”
Wells Fargo CEO Tim Sloan, who took over a year ago during the scandal, plans to emphasize the progress the bank has made to fix its broken sales culture during his upcoming Senate hearing.
“The past year has been humbling and challenging,” the Wells Fargo CEO said in prepared remarks provided by the bank on Monday. “We are resolving past problems even as we make changes to ensure nothing like this happens again at Wells Fargo.”