Federal Reserve Chairwoman Janet Yellen promised lawmakers the central bank will scrutinize all big banks in the wake of Wells Fargo & Co.’s phony account scandal, the latest sign that fallout from the firm’s missteps could affect the entire industry, the Wall Street Journal reported today. During a contentious hearing on bank regulation before the House Financial Services Committee, Yellen faced questions from both parties about whether the Fed has adequately addressed the risks posed by the largest U.S. banks. Several Democrats said the Wells Fargo scandal was an indication that big banks are too big to manage and should be broken up. Rep. Sean Duffy (R-Wis.), without citing Wells Fargo, questioned whether the Fed has failed to end the problem of taxpayer bailouts for big banks. Read more.(Subscription required.)
The House Financial Services Committee will hold a hearing today at 10 a.m. ET titled “Holding Wall Street Accountable: Investigating Wells Fargo’s Opening of Unauthorized Customer Accounts.” John G. Stumpf, Wells Fargo chairman and CEO is the only witness scheduled to testify. For more information, please click here.
In related news, the California treasurer took the unusual step yesterday of suspending many of its ties with Wells Fargo as it continues to reel from the scandal over the creation of as many as two million unauthorized bank and credit card accounts, the New York Times reported today. The state treasurer, John Chiang, said that he was suspending Wells Fargo’s “most highly profitable business relationships” with the state for at least a year, including the lucrative business of underwriting certain California municipal bonds. On Tuesday alone, he said, he had pulled Wells Fargo off two large municipal bond deals. Chiang said that he was also suspending making any additional investments in Wells Fargo securities and would suspend the bank’s work as a broker-dealer hired to buy investments on the treasurer’s behalf. Read more.