John C. Williams, the president of the Federal Reserve Bank of San Francisco, is reportedly being tapped to replace the retiring president of the New York Fed, but at least one watchdog has problem with that.
Citing Better Markets, a nonprofit that tries to keep Wall Street honest, TheStreet.com reported the group said promoting Williams to head up the New York Fed would be problematic because he failed to prevent the fake account scandal at San Francisco-based Wells Fargo, which has had far-reaching implications and has hurt countless consumers.
The Federal Reserve in San Francisco is in charge of supervising the financial institution. It doesn’t help that the New York Fed branch is massive, accounting for around $2.5 trillion (or 56 percent) of the Federal Reserve System’s total assets as of the end of last year. The San Francisco Fed had only $568.7 billion in assets at the end of 2017.
“After being AWOL and failing to stop Wells Fargo’s decade-long illegal conduct, the president of the San Francisco Fed should not be promoted to be president of the most important regional office in the entire Federal Reserve System,” Better Markets President Dennis Kelleher said in a statement. “That would reward failure and send the wrong message to the biggest banks in the country that the Fed really does not take supervision seriously.” Spokespeople from both Fed offices declined to comment.
According to TheStreet.com, Williams has been the head of the Federal Reserve Bank of San Francisco since 2011, just as Wells Fargo was increasing pressure on employees to cross-sell products, resulting in unauthorized account openings. Wells Faro wasn’t hit with sanctions from to the scandal until 2016, when the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the city and county of Los Angeles fined the financial institution $185 million.
Last month, the Federal Reserve took an unprecedented step to prevent Wells Fargo from growing its assets until it improved its risk management. Better Markets noted the San Francisco Fed assigned hundreds of workers to supervise Wells Fargo on a daily basis, yet they missed the scandal.
“The San Francisco Fed either did not know this was happening under its nose or knew but did nothing to stop it,” Kelleher said. “That alone should be a disqualification for any promotion, but it is compounded by the fact that there has been no accountability for anyone at the San Francisco Fed or public disclosure of how such an egregious failure of supervision and regulation could happen or last for so long.”