WASHINGTON — Federal Reserve Chair Janet Yellen, who has been in the hot seat over the central bank’s interest-rate policy, now has another headache: Wells Fargo.
Yellen is likely to face sharp questions from a House committee Wednesday over whether federal banking regulators fell down on the job by not detecting practices at Wells Fargo that allegedly had the nation’s second largest bank opening millions of accounts without customers’ permission.
Yellen is scheduled to testify before the House Financial Services Committee on the Fed’s responsibilities to supervise the nation’s largest banks.
Earlier this month, U.S. and California regulators fined Wells Fargo $185 million. They charged that bank employees opened unauthorized accounts and signed up customers for online banking, debit cards and other services without their knowledge in an effort to meet aggressive sales targets.
The Labor Department, meanwhile, is investigating possible abuse of Wells Fargo employees. A group of Democratic senators asked the department to see whether tellers, branch managers and customer service reps were harassed and threatened with termination unless they met sales goals for pushing bank products such as new credit cards.
About 5,300 Wells Fargo employees have been fired since 2011 over the sales practices.
In testimony last week before the Senate Banking Committee, Wells Fargo CEO John Stumpf apologized for the misconduct and promised assistance to affected customers. He is scheduled to testify Thursday before the House panel.
Yellen could also face questions Wednesday about a Fed recommendation that Congress limit the ability of banks to hold ownership stakes in nonfinancial firms.
The Fed last week voted 7-3 to keep its key interest rate where it has been all year. But it did send a strong signal that it is prepared to raise rates before the end of the year, with many expecting a move in December.
At a press conference after the Fed’s rate decision, Yellen was asked about the Wells Fargo case. She said she was “distressed” to see banks only addressing problems of employee misconduct after they crop up, rather than having solid procedures in place to ensure that employees act “in an ethical and appropriate manner.”
The actions at San Francisco-based Wells Fargo, which are believed to have gone on for many years, have raised questions about the role of regulators — including the Fed — in monitoring banks. Yellen told reporters last week that Fed examiners will pay close attention to banks’ control procedures to prevent such lapses in the future.