Editor’s note: This interview first appeared in Human Capital, a newsletter by Washington Bureau Chief Melanie Waddell about the people who shape the financial regulatory space. Melanie writes in the latest installment:
The big Dodd-Frank rollback bill intended to deregulate the banking industry, S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act, is set to be voted on this week by the Senate.
New Federal Reserve Board Chairman Jerome Powell offered support of the bill in his Senate testimony last week, stating that he didn’t see it imposing risks to the financial system. But the bill is not without its detractors.
But Sen. Elizabeth Warren, D-Mass., took Powell to task on how steadfast he’d be in following through on the Fed’s recent sanctioning of troubled Wells Fargo.
Warren Grills Powell on Wells Fargo Crackdown
Former Federal Reserve Board Chair Janet Yellen, on her last day in January, put the chokehold on the beleaguered Wells Fargo by stating that it could not grow until the bank cleaned up its appalling customer service track record and compliance snafus. In what Yellen dubbed an “enforcement action,” she said the Fed measure “will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers.” The Fed, Yellen said, can’t allow “pervasive and persistent misconduct at any bank.”
Jerome Powell, Yellen’s successor, who was sworn in in early February and is a former Fed governor, is seen as supporting the Trump administration’s deregulatory agenda.
Wells Fargo’s wealth management division has become the latest division to come under fire for customer service infractions, with concerns being raised about overcharges and incorrect fees charged for some fiduciary and custody accounts.
In their back and forth during Powell’s Senate testimony Thursday, Warren sought assurance from Powell that he would follow through on Yellen’s multi-pronged plan: to ensure that four additional Wells Fargo board members are replaced by year-end; that Wells submit two plans by early April—one on improving the effectiveness of the board and one on improving the board’s risk management practices; and that an independent third party review Wells’ implementation of the plans by the end of September.
With the Wells action, the Fed “sent a really powerful message to big banks that there could be real consequences, including consequences for senior officials if they break the law,” said Warren. “But that message will be lost if the Fed does not enforce the order strictly and show the public and the banking industry that they mean business.”
Warren queried Powell as to whether the Fed board would “vote on the two plans” to be submitted by Wells in April.
Powell’s response: “We have delegated that to the head of supervision.”