What the Wells Fargo Crackdown Signals to Corporate America
The Federal Reserve imposed penalties on Wells Fargo the other week after a cascade of problems surfaced over the last two years,
ranging from opening dummy accounts in the names of customers to forcing borrowers to take out unnecessary automobile insurance.
It requires Wells Fargo to enhance the board’s oversight of operations, improve its risk management with an outside review of its progress
and — most important — temporarily limit asset growth until its compliance issues are addressed.
The central bank sent letters to the former chief executive John G. Stumpf and to the former chairman Stephen W. Sanger, criticizing their performance as “an example of ineffective oversight
that is not consistent with the Federal Reserve’s expectations” for a bank of its size and scope.
Although the order falls short of a takeover of the bank, it shows just how much the board had failed, in the
view of its primary regulator, to meet its basic obligation to ensure that Wells Fargo is managed properly.