WASHINGTON (Reuters) – U.S. Senator Elizabeth Warren said on Thursday the Federal Reserve should not allow Wells Fargo & Co (WFC.N) to grow in size until the bank replaces Chief Executive Officer Tim Sloan.
FILE PHOTO: Wells Fargo & Company CEO and President Tim Sloan testifies before the Senate Banking Committee on Capitol Hill in Washington, U.S., October 3, 2017. REUTERS/Aaron P. Bernstein/File Photo
In a letter to Fed Chairman Jerome Powell, Warren said Sloan, a 30-year veteran of Wells, was “deeply implicated” in prior bank misconduct, and it was untenable for him to remain at the bank as the Fed sought a drastic overhaul of its operations.
“The Wells Fargo Board of Directors cannot plausibly claim that it is ‘ensuring senior management’s ongoing effectiveness in managing the firm’s activities’ while retaining a CEO that helped oversee this much misconduct,” she wrote.
The Fed took the unprecedented step of ordering the bank to keep its assets below $1.95 trillion in February, saying it had prioritized growth at the expense of proper compliance and risk management. The bank now must convince the Fed it has sufficiently overhauled its policies before it is permitted to grow in size.
Warren has called for Sloan’s removal in the past, but she cannot compel the Fed to take such a step. Still, her letter indicated she was ramping up her efforts to oust Sloan, and marks the latest challenge for the bank in Washington, where Wells Fargo has been working to move past its scandals and rebuild its reputation.
Since Sloan took over as CEO in 2016, analysts and investors have repeatedly questioned whether he was the right person to turn around the bank, but Wells’s board has defended its pick, saying Sloan’s deep knowledge of the bank was an asset.
Most recently, the bank’s Chair Betsy Duke shot down rumors that the board was seeking to replace Sloan with former Goldman Sachs Group (GS.N) executive and Trump adviser Gary Cohn.
“CEO Tim Sloan has the unanimous support of the board, and this support has never wavered,” she said in a statement at the time.
Financial analysts don’t expect Warren’s letter to carry much weight with the Fed or with Wells Fargo’s board, but the Fed has already given in to Warren’s pressure once before. In May, the Fed said it would hold a public vote on whether to lift growth restrictions on Wells Fargo, after being urged to do so by the Democratic senator.
“I don’t think that political pressure is going to sway the Fed either way,” said Edward Jones analyst Kyle Sanders, noting that President Donald Trump’s criticism of rising interest rates haven’t deterred the regulator from implementing more hikes.
A Fed spokesman said the agency had received the letter and would respond. Wells Fargo did not immediately respond to a request for comment.
Reporting by Pete Schroeder; Editing by Alistair Bell and Bernadette Baum