Oregon Senators Jeff Merkley and Ron Wyden on Friday welcomed news that Wells Fargo CEO John Stumpf has stepped down from the Federal Reserve’s Federal Advisory Council.
On Thursday, Merkley and Wyden had joined colleagues in calling on the Federal Reserve Bank of San Francisco’s Board of Directors not to reappoint Stumpf to another term on the Council. The Council is responsible for consulting with and offering direct insight to the Board of Governors of the Federal Reserve System on a broad range of issues related to the banking system.
The Senators made their call in a letter that was also signed by Senators Angus King (I-ME), Elizabeth Warren (D-MA), and Maria Cantwell (D-WA). The letter came after revelations that Wells Fargo, under Stumpf’s leadership, opened roughly two million checking and credit accounts without the knowledge of their customers.
“The leader of a bank responsible for creating millions of fraudulent accounts has no business on an advisory panel that gives input on many important consumer protection issues,” said Merkley. “Mr. Stumpf’s resignation from this council is a good first step—now he should take further steps to truly take full responsibility for this debacle.”
“The shocking revelations about how millions of Americans were defrauded on Mr. Stumpf’s watch clearly disqualified him from continuing to serve on this key advisory council,” Wyden said. “While I am gratified that he has resigned this position, there is obviously much more he needs to do before his bank can regain the full confidence of consumers.”
The complete text of yesterday’s letter can be read below:
September 22, 2016
Roy A. Vallee
Chairman of the Board, San Francisco Board of Directors
Federal Reserve Bank of San Francisco
101 Market Street
San Francisco, CA 94105
Dear Chairman Vallee:
Given the importance of emphasizing both personal accountability at the senior management level and a healthier internal banking culture in the aftermath of the serious problems that provoked allegations of fraudulent activities at Wells Fargo, we write to urge you and the San Francisco Board of Directors not to reappoint John Stumpf to the Federal Advisory Council for a third one-year term in January 2017.
As you are well aware, the twelve members of the Federal Advisory Council are chosen by the Reserve Banks to represent the twelve Federal Reserve Districts at the Federal Reserve Board. The Council normally meets four times a year, and each member typically serves three one-year terms. Section 12 of the Federal Reserve Act grants the Council power to consult directly with the Board of Governors of the Federal Reserve System on a broad range of economic, monetary, and financial issues. Members are asked for individual insights into regional trends as well as recommendations in regard to key decisions made by the central and Reserve Banks.
It would be ironic if the Federal Reserve, a key federal banking regulator tasked in part with ensuring the fair and equitable treatment of consumers in financial transactions, continued to receive special insights and recommendations from senior management of a financial institution that just paid a record-breaking fine to the Consumer Financial Protection Bureau for “unfair” and “abusive” practices that placed consumers at financial risk.
We do not wish to suggest that declining to reappoint Mr. Stumpf to a customary third term on the advisory council is the single corrective action to right all wrongs in this situation. Far from it. United States Senators both on and off the Banking Committee have publicly offered stronger tools for enhanced accountability, including recouping compensation from senior management. To overlook this option, however, would represent a failure on our part to review and identify all measures available to hold Mr. Stumpf personally accountable for the misconduct that took place on his watch. Perhaps even more distressing, it would leave a corporate voice that has admitted to betraying customer’s trust on a powerful and reputable federal advisory body. This must and can be rectified.
Please be advised that this situation may offer lessons for Congress should it seek to improve, through legislation, the membership of the Federal Advisory Council and similar advisory bodies at other federal banking regulators.
In closing, we appreciate your consideration of our suggestion as you prepare to reappoint a member to the Federal Advisory Council in January 2017.