Compare and contrast surge versus congestion pricing. Provide a specific example of each currently in use. There are many types of auctions, each with strengths and weakness

September 13, 2021

The Honorable Jerome Powell

Chairman

Board of Governors of the Federal Reserve System

20th Street and Constitution Avenue NW

Washington, D.C. 20551

Dear Chairman Powell:

I write to urge the Federal Reserve Board of Governors (the Fed) to take immediate action in response to

the repeated, ongoing, and inexcusable failure of Wells Fargo & Company (Wells Fargo) to eliminate

abusive and unlawful practices that have cost consumers hundreds of millions of dollars.1 Under Janet

Yellen’s leadership, the Fed placed Wells Fargo under an asset cap in 2018 due to its “widespread

consumer abuses and other compliance breakdowns.”2 In the more than three years since then, numerous

additional revelations have surfaced about Wells Fargo’s continued unethical and anti-consumer

conduct. These new revelations have once again made clear that continuing to allow this giant bank with

a broken culture to conduct business in its current form poses substantial risks to consumers and the

financial system.3 For this reason, the Fed should use its longstanding authority under the Bank Holding

Company Act to revoke Wells Fargo’s status as a financial holding company (FHC) and require that it

separate its bank subsidiary from its other financial activities.45 Wells Fargo is an irredeemable repeat

offender; the Fed must act.

Last week, the Office of the Comptroller of the Currency (OCC) issued a consent order regarding Wells

Fargo Bank’s ongoing problems related to mortgage foreclosures and the bank’s failure to comply with

past consent orders issued by the agency.6 Among other things, the order noted, “The Bank’s inadequate

1 The Hill, “Wells Fargo to pay $250M fine for mortgage oversight lapses,” Sylvan Lane, September 9, 2021,

https://thehill.com/policy/finance/571626-wells-fargo-to-pay-250m-fine-for-mortgage-oversight-lapses. 2 Board of Governors of the Federal Reserve System, “Responding to widespread consumer abuses and compliance

breakdowns by Wells Fargo, Federal Reserve restricts Wells’ growth until firm improves governance and controls.

Concurrent with Fed action, Wells to replace three directors by April, one by year end,” February 2, 2018,

https://www.federalreserve.gov/newsevents/pressreleases/enforcement20180202a.htm. 3 Wells Fargo is a $1.9 trillion dollar institution and the fourth-largest financial holding company in the United States. It is the

parent company of dozens of subsidiaries that encompass multiple business lines. Securities and Exchange Commission,

“Form 10-K Wells Fargo & Company, Exhibit 21, Subsidiaries of the Parent,” February 23, 2021,

https://sec.report/Document/0000072971-21-000197/wfc-1231x2020xex21.htm. 4 12 U.S. Code § 1843(m)(4). 5 American Banker, “Fed should force Wells Fargo into being a simpler bank,” Jeremy Kress, October 26, 2018,

https://www.americanbanker.com/opinion/fed-should-force-wells-fargo-into-being-a-simpler-bank. 6 Office of the Comptroller of the Currency, “OCC Assesses $250 Million Civil Money Penalty, Issues Cease and Desist

Order Against Wells Fargo,” September 9, 2021, https://www.ots.treas.gov/news-issuances/news-releases/2021/nr-occ-2021-

95.html.

2

controls, insufficient independent oversight, and ineffective governance related to loss mitigation

activities have caused the Bank’s failure to timely detect, prevent, and quantify inaccurate loan

modification decisions and impaired the Bank’s ability to fully and timely remediate harmed

customers.”7 In other words, Wells Fargo has both failed to establish an effective program to prevent

customers from foreclosing on their homes and has been unable to compensate consumers harmed by

the bank’s previous abusive practices.

This latest consent order comes after nearly two decades of scandals, which have resulted in multiple

enforcement orders issued by financial regulators, including the OCC, the Fed, the Consumer Financial

Protection Bureau (CFPB), and the Securities and Exchange Commission (SEC).

The bank was immersed in scandal in 2016 when investigations revealed that, beginning in “2002

…employees used fraud to meet impossible sales goals. They opened millions of accounts in customers’

names without their knowledge, signed unwitting account holders up for credit cards and bill payment

programs, created fake personal identification numbers, forged signatures and even secretly transferred

customers’ money.”8 Ultimately, this behavior, which revealed “complete failure of leadership at

multiple levels within the bank,” resulted in a $3 billion settlement with the DOJ and SEC.9

Since 2016, numerous other examples of abusive and unlawful behavior by Wells Fargo have come to

light, including activity that occurred following the imposition of the Fed’s asset cap in February 2018.

As the COVID-19 pandemic raged, an investigation by my staff during the summer of 2020 revealed

that Wells Fargo had placed as many as 1,600 customers into forbearance on their mortgages without

their consent, potentially affecting their ability to refinance mortgages, their credit reports, and consumer

bankruptcy plans.10

Other examples of Wells Fargo’s misconduct include the following:

 Between January 2008 and July 2015, Wells Fargo repossessed vehicles belonging to 450

members of the military in violation of the Servicemembers Civil Relief Act (SCRA).11 And

a second set of different SCRA violations came to light in a September 2016 settlement with

the Department of Justice (DOJ) that brought the total number of servicemembers eligible for

relief to 860.12

 Between January 2012 and July 2016, “[m]ore than 800,000 people who took out car loans

from Wells Fargo were charged for auto insurance they did not need … push[ing] roughly

274,000 Wells Fargo customers into delinquency and result[ing] in almost 25,000 wrongful

7 Office of the Comptroller of the Currency, “In the Matter of Wells Fargo Bank, N.A.” Consent Order, 2021,

https://www.occ.gov/static/enforcement-actions/ea2021-035.pdf. 8 New York Times, “The Price of Wells Fargo’s Fake Account Scandal Grows by $3 Billion,” Emily Flitter, February 21,

2020, https://www.nytimes.com/2020/02/21/business/wells-fargo-settlement.html. 9 Id. 10 Letter from Senators Warren and Schatz to Wells Fargo CEO Charles Scharf, July 29, 2020,

https://www.warren.senate.gov/imo/media/doc/2020.07.29%20Letter%20to%20Wells%20Fargo%20on%20Forbearance%20

Filings.pdf. 11 Department of Justice, “Justice Department Obtains $5.4 Million in Additional Relief to Compensate Servicemembers for

Unlawful Repossessions by Wells Fargo Dealer Services,” press release, November 14, 2017,

https://www.justice.gov/opa/pr/justice-department-obtains-54-million-additional-relief-compensate-servicemembers-

unlawful. 12 Id.

3

vehicle repossessions.”13 Active-duty servicemembers were among those harmed.14 Wells

Fargo signed settlements with 50 states and Washington, D.C.,15 the OCC, and the CFPB16 to

resolve those claims.

 In 2015, the OCC found deficiencies in Wells Fargo’s internal controls related to the Bank

Secrecy Act (BSA) and Anti-Money Laundering (AML) rules in the Wholesale Banking

Group. The consent order noted that “the Bank has failed to make acceptable substantial

progress toward correcting previously identified BSA/AML problems that were previously

brought to its attention.”17

 Wells Fargo employees in the bank’s Wholesale Banking Group reportedly changed

information on business customers’ documents without authorization in 2017 and 2018,18

resulting in a DOJ investigation to determine whether “there is a pattern of unethical and

potentially fraudulent employee behavior tied to management pressure.”19

 Wells Fargo disclosed in March 2018 that the bank’s wealth management business was under

investigation to determine if the bank made “inappropriate referrals or recommendations,

including with respect to rollovers for 401(k) plan participants, certain alternative

investments, or referrals of brokerage customers to the company’s investment and fiduciary

services business.” 20

 Wells Fargo has struggled to make whole the customers who were harmed by the company’s

misdeeds. In 2018 the company sent out 38,000 “erroneous communications to customers

that it forced to buy unneeded auto insurance.”21 It “sent refunds to people who weren’t the

bank’s customers; notified those who were harmed of incorrect amounts to be paid; and told

people of coming refunds even though they had never gotten the insurance.”22 It did not

promptly provide refunds to “as many as 110,000 customers who were charged improper fees

to extend interest-rate commitments they received from Wells Fargo on their mortgages.”23

And it created a refund request process that required customers “to agree to a refund through

the mail before sending them money,” despite its own estimates that “half or fewer” of

13 New York Times, “Wells Fargo Forced Unwanted Auto Insurance on Borrowers,” Gretchen Morgenson, July 27, 2017,

https://www.nytimes.com/2017/07/27/business/wells-fargo-unwanted-auto-insurance.html. 14 Id. 15 American Banker, “Wells Fargo to pay state regulators $575M over phony accounts, other scandals,” Rachel Witkowski,

December 28, 2018, https://www.americanbanker.com/news/wells-fargo-to-pay-state-regulators-575m-over-phony-accounts-

other-scandals. 16 CNN Business, “Wells Fargo fined $1 billion for insurance and mortgage abuses,” Donna Borak, April 20, 2018,

https://money.cnn.com/2018/04/20/news/companies/wells-fargo-regulators-auto-lending-fine/index.html. 17 Id. 18 Wall Street Journal, “Wells Fargo Employees Altered Information on Business Customers’ Documents,” Emily Glazer,

May 17, 2018, https://www.wsj.com/articles/wells-fargo-employees-altered-information-on-business-customers-documents-

1526564170. 19 Wall Street Journal, “Justice Department Probing Wells Fargo’s Wholesale Banking Unit,” Emily Glazer, September 6,

2018, https://www.wsj.com/articles/justice-department-probing-wells-fargos-wholesale-banking-unit-1536244490. 20 Securities and Exchange Commission, Form 10-Q, Quarterly Report Pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934 for the quarterly period ended May 31, 2018, Wells Fargo & Company,

https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/sec-filings/2018/first-quarter-10q.pdf. 21 Wall Street Journal, “Wells Fargo Fumbles Efforts to Repay Aggrieved Customers,” Gretchen Morgenson and Emily

Glazer, February 10, 2018, https://www.wsj.com/articles/wells-fargo-struggles-to-repay-aggrieved-customers-1518295023. 22 Id. 23 Id.

4

affected customers would take the necessary steps to secure a refund.24 In September 2018,

the OCC rejected Wells Fargo’s plan for remunerating customers pushed into unneeded auto

insurance, finding that the bank was not doing enough “to ensure it has found and

compensated every affected driver.”25

 A February 2019 report revealed that employees in the Wholesale Banking division of Wells

Fargo “routinely falsified clients’ signatures and otherwise doctored paperwork,” beginning

in 2016, to comply with a legal settlement with the OCC related to violations of anti-money

laundering laws.26

 In August 2019, reports identified multiple instances of Wells Fargo closing customers’

accounts without authorization and subsequently charging overdraft fees.27

 In February 2020, the SEC announced charges against Wells Fargo’s investment adviser and

broker dealer business lines for recommending certain investment products to retail clients

from February 2012 through September 2019 “without having adequate compliance policies

and procedures and without providing financial advisors proper training and supervision” of

these products.28

In addition to these scandals and the over $5 billion in penalties the bank has been fined to date,29 Wells

Fargo has had to fire two Chief Executive Officers and multiple other senior executives.30

The severity and frequency of the actions listed above indicate that additional fines and consent orders,

and changes in governance at Wells Fargo have been unable to address the bank’s longstanding

problems and its inability to meet regulatory requirements and treat its consumers honestly and fairly. I

strongly supported the Fed taking the unprecedented step of imposing an asset cap in 2018,31 but it is

clear that even with such a cap in place, Wells Fargo is simply ungovernable. I am therefore once again

asking the Fed to further limit Wells Fargo’s ability to continue harming its consumers and undermining

the safety and integrity of our banking system.

24 Id. 25 Reuters, “Exclusive: U.S. regulators reject Wells Fargo’s plan to repay customers – sources,” Patrick Rucker, September

11, 2018, https://www.reuters.com/article/us-wells-fargo-insurance-exclusive/exclusive-u-s-regulators-reject-wells-fargos-

plan-to-repay-customers-sources-idUSKCN1LR2LG. 26 The Capitol Forum, "Wells Fargo: Employees Doctored Signatures, Raising Possibility of Federal Penalties," February 14,

2019. https://thecapitolforum.com/wp-content/uploads/2019/02/Wells-Fargo-2019.02.14.pdf. 27 New York Times, “Wells Fargo Closed Their Accounts, but the Fees Continued to Mount,” Emily Flitter, August 16, 2019,

https://www.nytimes.com/2019/08/16/business/wells-fargo-overdraft-fees.html. 28 Securities and Exchange Commission, Consent Order, February 27, 2020, https://www.sec.gov/litigation/admin/2020/34-

88295.pdf. 29 Los Angeles Times, “Regulators are unhappy with how slowly Wells Fargo is repaying ripped-off consumers,” Hannah

Levitt, August 31, 2021, https://www.latimes.com/business/story/2021-08-31/regulators-are-unhappy-with-how-slowly-

wells-fargo-is-repaying-ripped-off-consumers. 30 Board of Governors of the Federal Reserve System, “Responding to widespread consumer abuses and compliance

breakdowns by Wells Fargo, Federal Reserve restricts Wells' growth until firm improves governance and controls.

Concurrent with Fed action, Wells to replace three directors by April, one by year end,” February 02, 2018,

https://www.federalreserve.gov/newsevents/pressreleases/enforcement20180202a.htm. 31 Warren Statement on Fed Chair Yellen’s Regulatory Actions Against Wells Fargo, February 02, 2018,

https://www.warren.senate.gov/newsroom/press-releases/warren-statement-on-fed-chair-yellens-regulatory-actions-against-

wells-fargo.

5

Under the Bank Holding Company Act, financial holding companies (FHCs) like Wells Fargo are

required to be “well capitalized” and “well managed.”32 When an FHC or one of its depository

subsidiaries fails to meet these requirements, the Fed is required to provide notice to the FHC and give

the institution on opportunity to correct its deficiencies.33 If the holding company fails to correct its

deficiencies within 180 days, the Fed may require the FHC to “divest control of any subsidiary

depository institution,” or, if the FHC instead chooses, “to cease to engage in any activity” that is not

permissible for a bank holding company.34 This Fed authority ensures that the size and complexity of a

company does not interfere with its ability to provide safe, fair, and transparent core banking services to

its customers.35

In order to remain “well managed,” an FHC must earn at least satisfactory scores on its CAMELS

(Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity)36 composite and

management ratings used by banking supervisors.37 These scores are confidential. But past reporting has

indicated that Wells Fargo’s CAMELS rating was downgraded in 2017,38 and it is inconceivable that

Wells Fargo could have earned an upgraded CAMELS score given the sheer number and ongoing nature

of scandalous and unlawful behavior at the bank since then.

The Fed must therefore act to protect consumers and the integrity of the banking and financial system

and revoke Wells Fargo’s status as an FHC. The Fed should move quickly to require the company to

“spin off or sell its investment bank and other nonbanking activities,”39 and do so in a way that ensures

customers can continue to have access to banking services without disruption or inconvenience.

This matter is of urgent importance. Earlier this year, media outlets reported that Wells Fargo is actively

working to expand its investment bank, despite the firm’s asset cap.40 Wells Fargo executives are

seeking to compete with other giant Wall Street banks by, among other things, “lending to hedge funds

looking to ramp up bets”41—the same activity that triggered $10 billion in losses among megabanks

earlier this year.42 Given Wells Fargo’s woefully inadequate internal controls, the firm cannot be trusted

to conduct such risky activities in a safe and sound manner. In addition, I am concerned that Wells

Fargo’s senior executives are focused on expanding risky investment banking activities instead of

remediating consumer harms and improving lax internal controls. The Fed should immediately revoke

Wells Fargo’s FHC status to ensure t