“How could the removal of [the Wells Fargo] board members not be warranted given the facts we already know?” Warren asked Fed Chair Janet Yellen during Yellen’s semi-annual testimony before the Senate’s Committee on Banking, Housing, and Urban Affairs on Thursday.
The scandal, which saw the bank acknowledge that 2 million checking and credit card accounts were opened on behalf of existing customers without their authorization, resulted in then-CEO John Stumpf leaving the company and about $180 million in executive compensation getting clawed back.
No changes were made to the company’s board of directors by shareholders at its latest annual meeting, though the chairman and CEO roles were split by the company this year.
Warren outlined that Fed regulations require a bank’s board of directors to ensure there are adequate risk management systems and ways to address emerging risks at the bank, among other things.
“Now, Wells Fargo didn’t come close to meeting those requirements,” Warren said. “They established impossible cross-selling goals and set up a compensation structure that put enormous pressure on employees to open new accounts for existing customers.”
She want on, “And despite a mountain of evidence that these incentives were leading to the creation of fake accounts, the board did nothing for years. The result was thousands of employees opening more than two million fake accounts. Can you explain to me how the Wells Fargo board can possibly have satisfied its obligations under the Fed’s risk management regulations?”
Yellen told Warren she was “not prepared” to discuss what she called a “confidential supervisory matter.”
Yellen did say that the behavior seen at Wells Fargo was “egregious and unacceptable.”
Warren also revealed that Yellen this week responded to a letter written to the Fed by the senator confirming that the Fed does have legal authority to remove the board of directors at a financial institution it oversees if warranted.
“Here’s what worries me,” Warren added, “that time after time, big banks cheat their customers and no actual human beings are held accountable. Instead there’s a fine … and nothing’s going to change at these big banks if that doesn’t change.”
In a statement on Thursday following Warren’s comments, Wells Fargo said, “Wells Fargo’s board and management team have taken many actions in response to its retail sales practices issues, including changes in senior leadership, executive accountability actions and numerous steps to ensure we make things right with any customer affected by unacceptable sales practices.”
Year to date, shares of Wells Fargo are up about 0.5%, while financials are up nearly 8% and the S&P 500 is up over 9%.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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