Janet Yellen: Wells Fargo Investigation Could Spur Fed to Take Action

Federal Reserve Chair Janet Yellen said on Thursday the central bank was prepared to act against directors of Wells Fargo if an investigation deems it appropriate.

Under questioning by Democratic Senator Elizabeth Warren of Massachusetts about the bank's creation of millions of fake accounts, Yellen said she would not comment on details of the Fed's supervision of Wells Fargo.

But "we do have the power to remove directors," she said. "We need to conduct a thorough investigation to look at the full record ... We are certainly prepared to take enforcement actions."

The company in response noted steps they have taken to date, including election of a new chief executive, appointment of an independent chair and new board members, and a retooling of customer service and sales practices.

"Wells Fargo’s board and management team have taken many actions in response to its retail sales practices issues, including changes in senior leadership, executive accountability actions and numerous steps to ensure we make things right," company spokeswoman Erika Reynoso said in an e-mailed statement. "That work continues."

In June, Warren wrote a letter to the central bank calling for it to remove 12 members of the Wells Fargo Board of Directors.

Wells Fargo has been dealing with multiple lawsuits and regulatory inquiries after it created as many as 2.1 million credit card and checking accounts without customer authorization in order to meet aggressive sales targets, the subject of a settlement with regulators on Sept. 8.

The ensuing scandal damaged the bank’s reputation as a model for the industry, hammered its shares for several weeks and led to the resignation of CEO and Chairman John Stumpf, who also forfeited tens of millions of dollars worth of compensation.

On Sunday, the bank got preliminary approval to pay $142 million, and perhaps more, to customers whose credit scores were harmed by the unauthorized accounts. Still, it faces probes from federal, state and local government agencies, including the U.S. Department of Justice, as well as a number of private lawsuits, according to its quarterly securities filing in May.

Yellen last fall told lawmakers that the Fed had opened a "broad-based review" of compliance and governance systems at the largest banks, and regarded it as "very important that senior management be held accountable" for any wrongdoing.

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