Wells Fargo Seeks to Atone, Hires Former New York Fed Exec to Manage Regulatory Matters
Embattled banking institution Wells Fargo announced this week that it named Sarah Dahlgren as its new head of regulatory relations. Dahlgren previously spent 25 years with the Federal Reserve Bank of New York, where she worked a number of jobs including examiner, executive vice president, and head of financial-institution supervision.
Wells Fargo CEO Tim Sloan explained,
“Wells Fargo is focused on transforming our risk management practices and we are committed to being very engaged and completely transparent with our regulators so they have a full understanding of the progress we are making in building a stronger organization. Hiring a leader with Sarah’s background is another important step in strengthening our risk infrastructure and organization.”
A number of fraudulent practices over the past few years have placed the bank in hot water with federal, state, and tribal authorities. Massive scandal involving the opening of hundreds of thousands of fraudulent bank accounts and unauthorized insurance charges have made Wells Fargo a frequent whipping post and poster child for the need for stricter banking controls.
An investigative report by the Los Angeles Times in 2013 initiated a multi-party investigation by the City and County of Los Angeles, the Federal Reserve’s Office of the Comptroller of the Currency (OCC), and the Consumer Financial Protection Bureau (CFPB). The investigation culminated in a record $185 million fine for the bank and the dismissal of over 5,000 Wells Fargo employees.
House Republicans have used the CFPB’s missteps during the fraudulent account scandal to attack the effectiveness of the agency. A House Financial Services (HFS) Committee staff report in September 2017 documented considerable contradictions surrounding the independence of the CFPB’s investigation after the LA Times broke a story of Wells Fargo’s fraudulent activity. The memorandum recommended seeking penalties against Wells Fargo of around $10 billion; the CFPB ultimately entered into an agreement with Wells Fargo that fined the bank only $100 million. Internal agency communications referenced in the HFS staff report explain the CFPB may have hastily negotiated the penalty in order to be the first entity to publicly announce a fine against the troubled bank.
For nearly a year, the saga surrounding Wells Fargo has been a flashpoint between Republicans and Democrats on the House Financial Services Committee vying for control over the CFPB. The agency again courted partisan controversy recently when President Trump tweeted stern words to the bank after news broke that Interim CFPB Director Mick Mulvaney might show leniency.
Although public perception of Wells Fargo is unlikely to improve in the near future, a respected former financial regulator can hopefully bring the bank back into compliance and slowly rebuild national trust in our financial institutions.
