Elizabeth Warren calls on Fed to maintain growth cap on Wells Fargo until it fires CEO Tim Sloan

  • Sen. Elizabeth Warren on Thursday sent a letter to Federal Reserve Chairman Jerome Powell calling on the Fed to maintain its growth cap on Wells Fargo until the bank replaces CEO Tim Sloan.
  • Calling Sloan "deeply implicated in the bank's repeated and egregious misconduct," Warren urged the central bank to continue to enforce a February order that bars Wells Fargo from growing any larger.
  • The Fed slapped the bank with the penalty in response to Wells Fargo's 2016 fake accounts scandal, in which employees opened millions of scam bank accounts. The bank pledged to replace a number of board members in response to the Fed's action.
Sen. Elizabeth Warren, a Democrat from Massachusetts, speaks during a Senate Banking, Housing and Urban Affairs Committee hearing with Tim Sloan, chief executive officer of Wells Fargo & Co., not pictured, in Washington, D.C., on Tuesday, Oct. 3, 2017.
Zach Gibson | Bloomberg | Getty Images
Sen. Elizabeth Warren, a Democrat from Massachusetts, speaks during a Senate Banking, Housing and Urban Affairs Committee hearing with Tim Sloan, chief executive officer of Wells Fargo & Co., not pictured, in Washington, D.C., on Tuesday, Oct. 3, 2017.

Sen. Elizabeth Warren on Thursday sent a letter to Federal Reserve Chairman Jerome Powell calling on the Fed to maintain its growth cap on Wells Fargo until the bank replaces CEO Tim Sloan.

Warren, a consumer advocate who sits on the Senate Banking Committee, has long been Wells Fargo's chief critic in Congress, repeatedly calling for top officials at the lender to be removed.

In her Thursday letter, Warren writes that Sloan is "deeply implicated in the bank's repeated and egregious misconduct," and urged the central bank to continue to enforce a February order that bars Wells Fargo from growing any larger until it improves its internal controls.

Read more: Here's the heated exchange between Elizabeth Warren and Wells Fargo CEO Tim Sloan

The Fed slapped the bank with the penalty in response to Wells Fargo's 2016 fake accounts scandal, in which employees opened millions of unauthorized bank accounts. The order limits Wells Fargo from growing its balance sheet until it takes actions that improve its governance and oversight, "including holding senior management accountable."

In a statement, a Wells Fargo spokesperson said the company "continues to have constructive dialogue with the Federal Reserve to ensure that we fully satisfy our consent order requirements."

"We are also confident that the transformation of the company over the last two years, including our efforts to make things right with our customers, will contribute to resolution of the issues cited within the consent order, especially in our operational and compliance risk management structure," the spokesperson said.

In response to the order, the bank pledged to replace a number of board members. John Stumpf, who was the CEO at the time of the 2016 scandal, resigned in October 2016, elevating then-COO Sloan to the position.

Sloan has spent more than 30 years at the bank, including stints as its chief financial officer and head of the wholesale banking division.

Sloan told analysts Friday on the bank's third-quarter earnings call that he expects the order to be enforced through the first part of 2019. The order has been of concern to shareholders, and Wells has seen its stock trail rivals like J.P. Morgan Chase and Bank of America.

For its part, the bank has said that the cap hurt its performance less than it originally anticipated. It's a sentiment shared by analysts, despite some sluggishness in the company's revenue growth.

"Realistically, we do not believe that the asset cap has had quantitative ramifications so much as qualitative ones. Nevertheless, we get enough questions about it to believe that investors will be relieved when it is gone," analysts at Sandler O'Neill and Partners wrote earlier this month.

Warren and Sloan have gone back and forth over the bank's response to that scandal, as well as a number of more recent charges of misconduct against the lender. In addition to the fake accounts scandal, last year it was reported that Wells Fargo charged more than 800,000 customers for auto insurance that they did not need. The bank has also landed in hot water for overcharging clients for a variety of other transactions.

Wells Fargo has apologized for the scandals and pledged to refund affected customers.

After Warren criticized Sloan's compensation package earlier this year, in which Sloan saw a 35 percent raise, Sloan told reporters that "most of her comments are both ill-informed and inappropriate."

"It's not surprising I disagree with almost everything Elizabeth Warren says," Sloan said of the Massachusetts senator in March.

The letter from Warren marks a return for the former Harvard Law School professor to her bread-and-butter issues.

The Democrat, widely considered to be a potential 2020 presidential contender, has been dogged by criticism this month after she released a DNA test defending her claim of Native American heritage. The move earned criticism from the left and right, and angered Native American groups.

Warren's gambit was in response to repeated goading from President Donald Trump, who derisively refers to Warren as "Pocahontas."

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