Citing consumer abuses at Wells Fargo & Co., Rep. Maxine Waters, D-Calif., announced Oct. 4 that she was uniting with a number of House Democrats to introduce a bill that would pressure banking regulators to break up a megabank for repeated violations of consumer protection law.
The bill would place controls at federal banking regulators that would require the agencies to review, penalize, or wind down a global systemically important bank, or G-SIB, based on definitions of consumer violations as set by the Consumer Financial Protection Bureau. At a press conference, Waters said the bill is a result of regulators failing to come down hard enough on Wells Fargo after a string of scandals involving millions of unauthorized accounts and unwanted collateral protection auto insurance. Waters argued that regulators failed to hold bank executives accountable, adding that regulators levied fines that should have been far steeper.
"The prudential regulators, which have the capability of shutting down a recidivist megabank, have not exercised that capability, even in the most appalling cases of wrong doing," Waters said.
Although Waters acknowledged that while Democrats have used Wells Fargo as an example, she "absolutely" feels the other large banks should also be broken up, alleging discriminatory lending, illegal credit card practices, foreclosure abuses, and other consumer law violations at the three other G-SIBs that sell consumer products: Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp.
The "Megabank Accountability and Consequences Act" would require the CFPB to define repeated consumer law violations, which would serve as a test for the banking regulators to enforce "severe" penalties, such as restricting certain lines of a bank's business; removing and banning executives from the banking industry; or winding down the bank entirely. The enforcement process would be subject to judicial review and would require the regulators to testify to Congress with any findings. The CFPB, state, and local government agencies could also petition the federal regulators to take action against a G-SIB, which would then require a public hearing.
Waters pointed out that the bill does not give the federal regulators new authorities. Waters and House Democrats recently called on the regulators to consider revoking Wells Fargo's banking charter, and Sen. Elizabeth Warren, D-Mass., told Wells Fargo CEO Tim Sloan that he should be fired Oct. 3 — both of which banking regulators can do based on current law.
"We're moving to utilize authority that's already in law and it is possible and it can be done," Waters said.
The bill would also require executives and directors at the G-SIBs to annually confirm that their banks are in full compliance with federal consumer protection laws, as suggested by the Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP.
The bill has seven Democratic cosponsors, but faces an uphill battle in both the House and the Senate, where the Republicans both control the majority.