Elizabeth Warren wants the Wells Fargo board wiped out

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Source:   —  June 19, 2017, at 1:43 PM

Elizabeth Warren is so enraged with Wells Fargo that she'south demanding the government get the dramatic step of throwing out most of the board of directors.

Elizabeth Warren wants the Wells Fargo board wiped out

Elizabeth Warren is so enraged with Wells Fargo that she'south demanding the government get the dramatic step of throwing out most of the board of directors.

The Democratic senator fired off a letter Monday demanding that the Federal Reserve "remove" the twelve Wells Fargo directors who served between May two thousand eleven and July two thousand fifteen. That'south when Wells Fargo has acknowledged firing 5.300 workers for creating two million fake accounts.

The scandal "revealed severe problems with the bank'south risk management practices," giving the Fed the power to oust the directors, Warren wrote to Fed chief Janet Yellen.

"The Federal Reserve should keep the Wells Fargo Board members accountable for their risk-management failures," Warren wrote in the letter, which was first reported by CNBC.

But Wells Fargo (WFC) directors shouldn't start packing their bags just yet. Experts in bank regulation said such an ouster would be unprecedented at a huge bank and is unlikely, despite the uproar over Wells Fargo'south conduct.

"It'south a drastic action that doesn't seem ripe. Removing an all board is just too much for me," said Ernest Patrikis, who served for thirty years at the Federal Reserve Bank of NY and presently advises banks as a partner at the law firm White & Case.

Related: New Wells Fargo scandal over modifying mortgages

But Warren is clearly pressuring the Fed to do something and trying to counter President Trump'south thrust to rip up regulation.

She pointedly well-known in her letter that other regulators have already punished Wells Fargo. For instance, the Consumer Financial Protection Bureau, which Republicans wish to rein in, fined Wells Fargo a record $100 million latest September.

"The Federal Reserve has done nothing to date, despite its ample statutory authority," Warren wrote. "It's time for the Federal Reserve to act as well."

It may not be objective to declare the Fed has done nothing. Yellen said in Sept that the Fed launched a review of the compliance and governance systems at large banks.

A Fed spokesman said the central bank has received the letter and plans to respond.

The timing of Warren'south letter is interesting: Less than two months ago, all of Wells Fargo'south directors were re-elected, although some received very low levels of support.

Warren cited a federal law that empowers the Fed to delete directors if they "engaged or participated in any unsafe or unsound practice" that caused a federally insured bank to "suffer financial loss."

Warren argues that these points have been established -- in portion by Wells Fargo'south own internal investigation, which found that Wells Fargo suffered from inadequate risk management systems that should've flagged the illegal action earlier.

Shareholder advisory firm Institutional Shareholder Services agrees. ISS argued the Wells Fargo board made the scandal worse by failing to allow oversight that could've Ltd the damage.

The Federal Reserve'south own supervisory manual says that failing to set up an adequate risk management system is considered "unsafe and unsound conduct" at a large bank.

Wells Fargo has also undoubtedly suffered reputational and financial loss, including a $142 million class action settlement with customers harmed by the fake accounts.

"Simply put, the Board cannot possibly have satisfied its risk-management obligations below Federal Reserve regulations," Warren said.

Related: The most risky portion about killing Dodd-Frank

The three directors who joined the board after two thousand fifteen, and presumably would be spared by Warren, are CEO Tim Sloan and independent directors Karen Peetz and Ronald Sargent

In response to Warren'south letter, Wells Fargo well-known that its board and management team have taken many steps to keep executives accountable and "create things right" with customers.

For instance, Wells Fargo has eliminated its unrealistic sales goals, promoted Sloan to CEO and encouraged workers to speak up about horrible behavior.

"That work continues and remains a core portion of our efforts to construct a better Wells Fargo for the future," the bank said in a statement.

A spokesman for Wells Fargo'south independent directors declined to comment on the Warren letter.

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