Warren calls for removal of most of Wells' board

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Sen. Elizabeth Warren, D-Mass., is calling on the Federal Reserve Board to remove 12 of Wells Fargo's 15 board members over the bank's phony-accounts scandal.

In a a letter to Fed Chair Janet Yellen, Warren said the 12 engaged in "unsafe and unsound practices" and failed to establish an adequate risk management structure.

"I urge you to exercise your legal authority to remove the holdover Wells Fargo Board members," Warren wrote in an eight-page letter that included 46 footnotes. "Federal Reserve regulations and guidance impose clear risk-management obligations on the board — obligations that are quite demanding for a bank as large and complex as Wells Fargo."

A Fed spokesman said the central bank had received the letter and would respond.

The Wells scandal has been political fodder for lawmakers since September, when the bank paid $190 million in fines and restitution after firing 3,500 employees for opening roughly 2 million unauthorized bank and credit card accounts.

In April, Wells' shareholders voted to re-elect all 12 holdover directors and three new ones to one-year terms, though four members won by slim majorities.

Warren has been a harsh critic of Wells, but the timing of the letter is notable, coming as Republicans are trying to gut the Consumer Financial Protection Bureau and as President Trump is on the verge of appointing three new Fed governors.

In addition, CFPB Director Richard Cordray has been under attack for allegedly dropping the ball on Wells and piggybacking on the Los Angeles city attorney's investigation into illegal sales practices.

On Friday, Cordray sent a letter to House Financial Services Committee Chairman Jeb Hensarling, R-Texas, trying to rebut a Republican majority staff report that called for possible contempt charges against the CFPB head for failing to comply with the committee's investigation into Wells.

In the letter, Warren sought to lay a legal foundation for Yellen to act against Wells' board.

She said the Fed has the statutory authority to "remove [a] party from office or to prohibit any further participation by such party, in any manner, in the conduct of the affairs of any insured depository institution."

Warren then cited the failure of Wells' 12 "holdover" board members to create adequate risk management practices, a violation of Fed regulations that also constitutes "unsafe and unsound practices."

In addition, Warren said Wells suffered significant financial losses and "long-lasting reputational damage" that has eroded the bank's customer base.

She alleged that the board's failure to uncover the improper sales practices demonstrated "continuing disregard" for the bank's safety and soundness.

Jennifer Dunn, a Wells spokeswoman, said the bank's board and management "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."

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Policymaking Enforcement actions Richard Cordray Elizabeth Warren Jeb Hensarling Janet Yellen CFPB Federal Reserve Wells Fargo