For years, Senator Elizabeth Warren has been threatening to break up America’s big banks. Now for the first time, she has a specific one in mind: Wells Fargo. On Monday, the Democrat from Massachusetts wrote a letter asking Federal Reserve chairman Jerome Powell to do it by revoking the bank’s financial holding company license. That would force Wells Fargo to split apart the banking and Wall Street sides of its business, making it nearly impossible for the bank to conduct any sort of non-banking business.
Warren argues that regulators have given Wells Fargo ample opportunities to fix its myriad problems, but the bank hasn’t really done jack. Consequences, therefore, should be serious. “Continuing to allow this giant bank with a broken culture to conduct business in its current form poses substantial risks to consumers and the financial system,” Warren wrote.
Warren’s inveighing against banks powered her rise from law professor to presidential candidate, but this letter actually marks the first time she’s suggested breaking up a bank. If the Fed listened to her, Wells Fargo would end up having to get rid of dozens of subsidiaries that handle non-banking activities—from securities dealing, to insurance underwriting, to brokerage services. In recent decades, these activities have proliferated industrywide, as the top banks (JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo) have tried to position themselves as one-stop shops for customers.
But Wells Fargo has left a trail of scandals in its wake—the subprime loans that targeted minorities, the mortgage payment fiasco at the start of the pandemic, the overdraft fees designed to prey on customers, the 1.5 million accounts and 500,000 credit cards it opened for customers without their consent, even smaller scandals like an online banking glitch that prevented customers from accessing their stimulus checks from the Internal Revenue Service. Last week, regulators dropped yet another $250 million fine on Wells Fargo, for mismanaging mortgage accounts so badly that some borrowers may have been wrongly foreclosed upon.
Reached for comment, a Wells Fargo spokesperson referred Fast Company to a lengthy statement posted Tuesday in which it affirmed its focus on building a “strong risk and control foundation.”
Back in 2018, the Fed imposed an asset cap on Wells Fargo in hopes of forcing it to beef up customer protections. Warren argues that the bank appears to have gotten distracted from this vital mission, noting that lately it’s busy occupying itself with activities like corporate mergers and various types of investment banking. Wells Fargo should be required to back away from Wall Street, Warren’s letter says, “to ensure that its leaders focus all of their attention on fixing the bank’s numerous, chronic risk-management deficiencies.”
This post has been updated with a statement from Wells Fargo.