The top Democrat on the House banking committee, Rep. Maxine Waters, D-Calif., on Thursday said she was "committed" to breaking up Wells Fargo (WFC) - Get Report through legislation she plans to introduce shortly.
"What you need to know is I am committed to breaking up Wells Fargo and if that leads us to a conclusion that all the big banks need to be broken up so be it," Waters told reporters after a hearing that had Wells Fargo CEO John Stumpf testifying for failing to prevent employees' creation of as many as 2 million unauthorized customer accounts. "We're going to look at how they [Wells Fargo] are organized and we're going to come up with a bill and let's see what happens."
The hearing, which lasted over four hours, comes after Wells Fargo earlier this month was fined $185 million by state and federal regulators for setting up phony consumer credit card and savings accounts. Seeking, in part, to limit the public relations damage from the scandal, Wells Fargo's independent directors are requiring Stumpf to forfeit unvested equity awards valued at about $41 million. In addition, Carrie Tolstedt, the executive who oversaw a division that created unauthorized customer accounts, agreed to lose $19 million in unpaid equity awards.
However, lawmakers at the hearing weren't appeased and many from both parties argued that the Wells Fargo scandal was on-going and expanded over a number of years, which illustrates why large banks need to be broken up. They argued that fines the mega-bank was hit with were just a cost of doing business and contended that Stumpf couldn't adequately oversee such a large company.
Waters, however, took her criticism one step further and said she plans to introduce a bill to force break up after hearing Stumpf testify. She noted that Wells Fargo has $1.9 trillion in assets and 268,000 employees, as of June 30, and over 6,000 branches. "They [Wells Fargo] are huge. He doesn't know what is going on in this bank," she said.
It's unclear how much backing Waters legislation may get if she ever introduces her bill. Some Democrats and Republicans appeared to support Waters' approach in theory, including Reps. Brad Sherman, D-Calif. and Steve Pearce, R-Texas. who both suggested at the hearing that Wells Fargo was too-big-to-manage.
However, similar legislation in the Senate seeking to essentially break up big banks, even one bill that is bipartisan in nature, hasn't had any success or even many co-sponsors. In addition, Wells Fargo may not be easy to break up along specific business practices because of its large focus on commercial banking.
Isaac Boltansky, analyst at Compass Point LLC in Washington said that he expected headlines calling for breaking up Wells Fargo to continue for the foreseeable future. However, he contends that "there is neither the procedural mechanism nor the political will necessary to break-up the nation's largest banks generally, or Wells Fargo specifically," he said in a statement.
One anti-big-bank legislation introduced in the Senate by Sen. Sherrod Brown, D-Ohio, and Sen. David Vitter, R-La., would drive up capital buffers at banks to levels that would push firms to divest assets. However, Waters said that was not the direction she planned to go with her bill.
"We've always talked about increasing capital as a way of reining them in and making them sure they reduce the risk. I'm beyond that now. I'm for breaking up now," she said.
Stumpf responded to concerns about the size of Wells Fargo several times, arguing that the bank wasn't too big to manage. "I disagree that we're too big to manage. We need to focus more on this issue and on operational and compliance issues and we do many many areas really well. I'm sorry we haven't gotten everything right along the way," Stumpf said.
Waters also argued that Stumpf was over-boarded because and as a result not focused enough on Wells Fargo's problems. According to relationship mapping service BoardEx, a service of The Deal, Stumpf sits on the boards of Chevron (CVX) - Get Report , Target (TGT) - Get Report and is an adviser to the Federal Reserve Bank of San Francisco in addition to his chairman and CEO role at Wells Fargo. "He's over-committed to too many other boards," Waters said. "There is a fiduciary responsibility to the other boards he's sitting on and he's got a huge bank."