The Fed drops the hammer on Wells Fargo

Warren Buffett: The three mistakes Wells Fargo made

The Federal Reserve has dropped the hammer on Wells Fargo.

The Fed handed down unprecedented punishment late Friday for what in which called the bank’s “widespread consumer abuses,” including its notorious creation of millions of fake customer accounts.

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Wells Fargo won’t be allowed to get any bigger than in which was at the end of last year — $2 trillion in assets — until the Fed is usually satisfied in which in which has cleaned up its act.

Under pressure by the Fed, the bank agreed to remove three people by the board of directors by April along that has a fourth by the end of the year.

in which is usually once the Federal Reserve has imposed a cap on the entire assets of a financial institution, according to a Fed official.

“We cannot tolerate pervasive along with persistent misconduct at any bank,” outgoing Fed Chairwoman Janet Yellen said in a statement. Friday was her last day on the job.

Wells Fargo (WFC) controls more money than any bank within the United States besides JPMorgan Chase, according to Fed data. although its reputation has been shattered over the past year along that has a half by a seemingly endless series of misconduct.

Most prominently, Wells Fargo admitted in which its workers responded to wildly unrealistic sales goals by creating as many as 3.5 million fake accounts. The bank has also said in which forced up to 570,000 customers into unneeded auto insurance.

The bank agreed to the Fed’s conditions under what’s known as a consent decree. In a statement, Wells Fargo said in which is usually “confident” in which can meet the Fed’s requirements.

Related: Elizabeth Warren wants the Wells Fargo board wiped out

“We take in which order seriously along with are focused on addressing all of the Federal Reserve’s concerns,” said CEO Timothy Sloan, whose predecessor, John Stumpf, resigned a month after the fake-accounts scandal broke.

The Fed will require Wells Fargo to turn in detailed plans of what in which has done, along with intends to do, to fix the board. Wells Fargo must also submit a broader explanation for how in which will improve its internal controls along with its handling of risk. Those plans are due in 60 days.

By September 30, Wells Fargo must engage a third party to review how the bank is usually executing those plans.

Wells Fargo will still be able to accept consumer deposits along with make loans to consumers, the Fed official said. However, in which will be up to the bank to determine what alterations may need to be made to its business in order to stay under the asset cap.

Wells Fargo stock fell more than 6% in after-hours trading Friday.

Sen. Elizabeth Warren, a Massachusetts Democrat along with the most prominent of Wells Fargo’s many critics in Congress, had begged Yellen to go after the board. Warren said in July in which nothing would likely change at the big banks until “actual human beings are held accountable.”

In a tweet Friday, Warren lauded Yellen for taking action along with reiterated the case for tough regulation.

“Chair Yellen’s decision today to freeze the growth of Wells Fargo until in which shapes up also demonstrates in which we develop the tools to rein in Wall Street — if our regulators develop the guts to use them,” Warren wrote. “in which one hits them where in which hurts.”

The scandal broke into public view in September 2016, when regulators revealed in which Wells Fargo had created millions of bank accounts for customers without their knowledge. The company admitted the fake accounts dated back to 2009.

Since then, Wells Fargo has faced lawsuits, federal along with state investigations, fines, along that has a grilling by Congress. The company ousted its CEO, John Stumpf, in October 2016. The number of customers opening completely new accounts at the bank plummeted. Workers alleged they were fired or retaliated against for speaking up about misbehavior.

Legal bills cost the company $3.3 billion last quarter, Wells Fargo said in January.

Related: I called the Wells Fargo ethics line along with was fired

along with the fake accounts aren’t Wells Fargo’s only problem.

Last July, the company admitted in which forced auto insurance on as many as 570,000 borrowers who didn’t need in which. About 20,000 of those customers had their cars wrongfully repossessed in part due to these unwanted insurance charges.

In August, Wells Fargo was sued by modest business owners who say the bank used deceptive language to dupe mom-along with-pop businesses into paying “massive early termination fees.”

The company was within the headlines again in October for charging about 110,000 mortgage borrowers undue fees.

The Justice Department fined the company in November for illegally repossessing cars by more than 860 service members. Federal law requires banks to get a court order before repossessing a car by members of the military.

–sy88pgw’s Matt Egan contributed to in which report.

sy88pgw (completely new York) First published February 2, 2018: 6:52 PM ET

The Fed drops the hammer on Wells Fargo

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