US Fed Caps Wells Fargo's Assets in 'Unprecedented' Move
Bank can't grow until it proves widespread misconduct is in the past
By Michael Harthorne,  Newser Staff
Posted Feb 3, 2018 2:00 PM CST
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The Federal Reserve is imposing more penalties on Wells Fargo, freezing the bank's growth until it can prove it has improved its internal controls.   (AP Photo/Matt Rourke, File)

(Newser) – In what CNN calls an "unprecedented" punishment, the US Federal Reserve on Friday ordered Wells Fargo to halt all growth until "it sufficiently improves its governance and controls" in the wake of "pervasive and persistent misconduct." The bank admitted in 2016 to opening 3.5 million fake accounts and lines of credit without its customers' knowledge, leading to damaged credit reports and millions in bogus fees, AFP reports. The bank also, among other things, strong-armed up to 570,000 customers into getting auto insurance they didn't need. Under the Fed's order, Wells Fargo will be frozen at $2 trillion in assets. It has 60 days give the Fed its plans for improving and until the end of September to be reviewed by a third party. One officials says it's the first time the Fed has capped the growth of an entire financial institution.

"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," Fed chair Janet Yellen says. She issued the order on her last day in the role. “This is akin to the last scene in The Godfather," one analyst tells Bloomberg. “Chair Yellen decided to handle unfinished business on her way out the door.” Wells Fargo, which says it's "confident" it can meet the conditions set by the Fed, saw its stock fall more than 6% following the order. Sen. Elizabeth Warren lauded Yellen's decision, saying it "hits them where it hurts." "We have the tools to rein in Wall Street—if our regulators have the guts to use them," the Wells Fargo critic tweeted.

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