(Bloomberg) -- Wells Fargo & Co. is likely to remain under unprecedented growth restrictions imposed last month for a “significant period,” Federal Reserve Chairman Jerome Powell said Thursday.
“We will not lightly lift it,” Powell told lawmakers at a Senate Banking Committee hearing, responding to Senator Elizabeth Warren's call for the agency to stand firm in enforcing the sanctions put in place former Fed Chair Janet Yellen on her last day in office.
Powell said he would consider having the Fed board vote on the San Francisco-based bank's plan for addressing shortcomings outlined in the enforcement action after Warren said his intention to have staff do the assessment “is not good enough.” He also said he'd weigh making aspects of the plans public.
The Fed ordered Wells Fargo to fix oversight gaps that allowed repeated consumer abuses and compliance lapses, including employees opening millions of accounts without customers' permission. Until it does, the bank is barred from increasing its assets -- an unprecedented restriction for one of the largest U.S. financial institutions. The bank is also expected to remove some of the board members that were on the job during the scandals.
“Once we've approved the plans and they begin to implement them, we see them on track, the growth restriction could then be addressed,” Powell said.
That drew another critical volley from Warren, the Massachusetts Democrat who is among Wall Street's fiercest critics.
“Wells should fix its problems before it is permitted to grow any bigger,” Warren said.
While the Wells Fargo debate raged on Capitol Hill, yet another probe at the company was getting attention Thursday. The Wall Street Journal reported that the bank had hired a law firm to investigate claims of sales abuses in its wealth-management business. The New York Times also reported this week on complaints about the bank's handling of fraud allegations.
The bank declined to comment on the wealth-management issue, but Jim Seitz, a Wells Fargo spokesman, said its “reviewing the legal complaint” referenced on the handling of fraud.
To contact the reporter on this story: Jesse Hamilton in Washington at jhamilton33@bloomberg.net.
To contact the editors responsible for this story: Jesse Westbrook at jwestbrook1@bloomberg.net, Gregory Mott
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