WASHINGTON/NEW YORK (Reuters) – U.S. Senator Elizabeth Warren said on Thursday the Federal Reserve should not allow Wells Fargo & Co (WFC.N) to grow in size until the bank replaces Chief Executive Officer Tim Sloan.
FILE PHOTO: Wells Fargo & Company CEO and President Tim Sloan testifies before the Senate Banking Committee on Capitol Hill in Washington, U.S., October 3, 2017. REUTERS/Aaron P. Bernstein/File Photo
In a letter to Fed Chairman Jerome Powell, Warren said Sloan, a 30-year veteran of Wells, was “deeply implicated” in prior bank misconduct and it was untenable for him to remain at the bank as the Fed sought a drastic overhaul of its operations.
“The Wells Fargo Board of Directors cannot plausibly claim that it is ‘ensuring senior management’s ongoing effectiveness in managing the firm’s activities’ while retaining a CEO that helped oversee this much misconduct,” she wrote.
The Fed took the unprecedented step of ordering the bank to keep its assets below $1.95 trillion in February, saying Wells Fargo had prioritized growth at the expense of proper compliance and risk management. The bank now must convince the Fed it has sufficiently overhauled its policies before it is permitted to grow.
Warren has called for Sloan’s removal in the past, but she cannot compel the U.S. central bank to take such a step. Still, her letter indicated she was ramping up her efforts to oust Sloan, and it marks the latest challenge for the bank in Washington, where Wells Fargo has been working to move past its scandals and rebuild its reputation.
Wells Fargo is confident in the steps it has taken so far to satisfy the consent order and is engaged in constructive dialogue with the Fed, spokeswoman Erika Reynoso said in response to questions about the letter.
A Fed spokesman said the agency had received the letter and would respond.
Sloan told analysts during a conference call on Friday that the bank continues to expect the asset cap to be lifted in the first half of next year.
Wells Fargo has been coping with a series of scandals since 2016, when it was reported that employees had opened potentially millions of phony accounts in customers’ names without their permission. The bank has disclosed other problems since then, including enrolling hundreds of thousands of customers in costly products, such as auto insurance, that they did not need or want.
Since Sloan took over as CEO in 2016, analysts and investors have repeatedly questioned whether he was the right person to turn around the bank. Wells’s board has defended its pick, saying Sloan’s deep knowledge of the bank was an asset.
Most recently, the bank’s chair, Betsy Duke, shot down rumors that the board was seeking to replace Sloan with former Goldman Sachs Group (GS.N) executive and Trump adviser Gary Cohn.
“CEO Tim Sloan has the unanimous support of the board, and this support has never wavered,” she said in a statement at the time.
Financial analysts do not expect Warren’s letter to carry much weight with the Fed or with Wells Fargo’s board, but the Fed has given in to Warren’s pressure once before. In May, the Fed said it would hold a public vote on whether to lift growth restrictions on Wells Fargo, after being urged to do so by the Democratic senator.
“I don’t think that political pressure is going to sway the Fed either way,” said Edward Jones analyst Kyle Sanders, noting that President Donald Trump’s criticism of rising interest rates have not deterred the regulator from implementing more hikes.
Reporting by Pete Schroeder; Editing by Alistair Bell, Bernadette Baum and Jonathan Oatis