The Federal Reserve seems to be finally flexing its muscles to challenge the stranglehold Wall Street has over the national economy and lives of millions of Americans. On Friday, the Federal Reserve slapped an unprecedented punishment on Wells Fargo for what has been deemed its “widespread consumer abuses."
Under the new restrictions the reserve imposed, Wells Fargo will not be allowed to grow bigger than what it was valued at the end of last year, $2 trillion in assets. The cap on its assets will continue indefinitely until the Federal Reserve is satisfied with the actions the bank has taken to clean up its act. Moreover, the bank has agreed to remove three of its board members by the end of April and another by the end of this year. By Sept. 30, the bank will have to enlist a third party to assess its progress.
The “consumer abuses” for which Wells Fargo is being penalized constitute fraudulent and harmful behavior on part of the bank. The banking giant admitted that it set unrealistic sales goals on its employees, which led to them creating as many as 3.5 million fake accounts. Some of the fake accounts date back to 2009. Wells Fargo’s crimes do not end here. The organization also admitted to forcing auto insurance on as many as 570,000 borrowers who did not need it. About 20,000 of these customers had their cars wrongfully repossessed as a result.
Earlier allegations of criminal behavior seemed open the floodgates of accusations against the organization. In August, small business owners sued Well Fargo for duping mom-and-pop businesses into paying “massive early termination fees." In October, the infamous company made news for charging about 110,000 mortgage borrowers undue fees.
For months, I have repeatedly pressed Janet Yellen to hold Wells Fargo accountable for its fake accounts scam and push out responsible Board Members. Today she did it – in her last act as Fed Chair. pic.twitter.com/ebIkhu8R0a— Elizabeth Warren (@SenWarren) February 3, 2018
Chair Yellen’s decision today to freeze the growth of Wells Fargo until it shapes up also demonstrates that we have the tools to rein in Wall Street – if our regulators have the guts to use them. This one hits them where it hurts.— Elizabeth Warren (@SenWarren) February 3, 2018
The massive fraud at Wells Fargo showed the whole country that we need more accountability on Wall Street. But for more than a year, we've watched as @realDonaldTrump and his government have raced to turn the big banks loose again to once again threaten our whole economy.— Elizabeth Warren (@SenWarren) February 3, 2018
The punishment meted out on Friday was historic. It was the first time the Federal Reserve has restricted the growth of a financial institution, especially one that has a huge influence on the movement of money in the country; according to its data, the company controls more money than any bank in the country besides JP Morgan. Since the news of the scandal broke in September 2016, Sen. Elizabeth Warren pushed for action to be taken against the company. In June last year, a livid Warren demanded 12 members in the company's board be removed. When Janet Yellen, the Fed chair delivered the judgment on the last day of her job, Warren applauded her and expressed her faith in the justice system to take on the “big banks."
Wells Fargo seems confident at the moment that it will be able to meet the requirements of the Federal Reserve.
"We take this order seriously and are focused on addressing all of the Federal Reserve's concerns," said CEO Timothy Sloan.
Thumbnail/Banner Credits: Reuters