Last year, Wells Fargo got caught creating 2.1 million fake bank accounts and credit card accounts using their customers’ names and credit information without permission.
Last month, Wells Fargo got caught charging 800,000 people for auto insurance they did not want or need.
And just yesterday, we’ve learned that the fake accounts scandal was even worse than we thought. Wells Fargo just “discovered” an additional 1.4 million fake accounts that they had created since 2009. Unbelievable.
The Department of Justice and SEC should conduct a thorough criminal and civil investigation of Wells Fargo’s practices during this scandal, and any senior executive who broke the law should be held responsible. I’ve also asked Senate Republicans to hold a September hearing with Wells Fargo CEO Timothy Sloan and current Board of Directors Chair Stephen Sanger.
But the Federal Reserve has its own authority to hold Wells Fargo’s board accountable right now – it just needs the courage to do it.
Oversight – including adequate safeguards to prevent fraud – is the job of the Board of Directors of a bank. But Wells Fargo’s Board of Directors did almost nothing as the bank’s employees opened 3.5 million fake accounts to meet their impossible sales quotas. Either the Board knew or the Board fumbled their job so badly that they didn’t know – but either way, they bear responsibility.
More than 5,000 lower-level employees got fired, but not one of those board members lost their jobs. That’s our screwed up corporate accountability system in a nutshell.
The Federal Reserve has the power to remove a bank’s board members if they “engaged or participated in any unsafe or unsound practice” that caused the bank to “suffer financial loss” and demonstrated “continuing disregard… for the safety or soundness” of that institution.
This is a clear-cut case for the Federal Reserve to use its authority to remove the Wells Fargo Board of Directors. The board failed to monitor the conduct of management and ignored many red flags about the fake accounts scandal. The result was a massive fraud that hurt Wells Fargo customers and damaged the bank’s reputation.