"This is a little more extreme than I thought that [the Fed] might do, demanding that the board change. More importantly, this limit of assets. This stock has been red-hot," Cramer noted. "I don't think you could get a worse piece of news for the incredible ETF that had been the financials."
Shares of Wells Fargo briefly dipped by 6 percent in after-hours trading. A cross-selling scandal at the bank made headlines for much of 2017, culminating in a series of fines, downgrades and subsequent unfavorable findings by independent investigators.
"It's actually been one of the leaders in the bank group," Cramer said about Wells Fargo's stock. "It's up 5 percent for the year. And when you cap assets, obviously, you lose one of the best narratives that was occurring at the bank, which is 'We're in recovery mode.'"
Yellen, who ends her term at the Fed this week and starts a position at the Brookings Institution on Monday, said in a statement:
"We cannot tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again."
"The enforcement action we are taking today 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," she said.