Wells Fargo stock shed more than 8 percent of its value as investors responded to sanctions imposed by Janet Yellen, in her last act as Chair of the Federal Reserve.
The Fed Board of Governors penalized the bank at 6 pm on Friday evening, as Yellen was on her way out the door. On Monday morning at the opening bell, Wells stock dropped to $58.71 per share, after ending last week at $64.07 per share.
Fed governors issued the order because of widespread abuses revealed by a September 2016 settlement between Wells Fargo and the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency.
In the settlement, the bank admitted to opening more than 2 million accounts without customer consent. Executives and managers pushing tellers to reach sales goals contributed to the problem, the agreement stated.
In Friday’s order, the Fed put a cap on Wells Fargo’s growth, limiting the firm to the amount of assets it reported at the end of last year.
The Fed also said that four members of the Board of Directors would be forced out, as a result of the action. Three are expected to leave by April and a fourth by the end of the year, the central bank said in a press release.
“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,” said Yellen.
The move drew immediate praise from a lawmaker who has, since last summer, been calling for the Fed to remove 12 members from the bank’s board.
“Fines alone will never rein in fraudulent behavior at the big banks and by pushing out Board Members at Wells Fargo, Chair Yellen sends a strong message,” Sen. Elizabeth Warren (D-Mass.) said Friday. “Her decision today demonstrates that we have the tools to rein in Wall Street–if our regulators have the guts to use them.”
Jerome Powell, President Trump’s pick to replace Yellen, was sworn in on Monday morning.
Powell is seen as one of Trump’s more moderate nominees: he has been a Fed governor since 2012, after being asked to serve by Preident Obama. On Friday, Powell voted with Yellen to penalize Wells Fargo.
Trump’s current interim CFPB Director, by comparison, is taking a more hands-off approach to regulation. Top White House budget aide Mick Mulvaney has ceased enforcement of the agency’s payday lender rule, amid a wider review of CFPB operations.
Mulvaney has also stopped pursuing an investigation into Equifax, according to a report published on Monday by Reuters.
The former Congressman has declined to subpoena the credit ratings agency and its executives, the wire service said. He has also spurned plans from previous Director Richard Cordray to develop a mechanism to test Equifax’s data protection.
Under Mulvaney’s watch, the CFPB also turned down offers from the Fed, the OCC, and the FDIC “when they offered to help with on-site exams of credit bureaus,” Reuters also reported.
Last year, Equifax revealed that up to 144 million Americans had their private data compromised, after the company’s servers were breached by hackers. Under federal law, credit rating agencies can buy and sell information about consumers without their consent.
