The top Democrat on the House Financial Services Committee introduced on Wednesday a bill that would empower federal banking regulators to break up large banks that have records of customer abuse.
The bill from Rep. Maxine Waters (D-Calif.), called the Megabank Accountability and Consequences Act, would give regulators, including the Federal Reserve, Federal Deposit Insurance Corporation and comptroller of the currency, sweeping new powers over the largest U.S. banks.
Waters's bill comes as Wells Fargo faces growing scrutiny over several sales scandals, including one that involves up to 3.5 million accounts opened without customer consent.
The bill would make federal regulators review every bank deemed “globally systemically important” by the Fed’s Board of Governors. Such banks with more than $250 billion in assets are deemed critical to the international financial system and could trigger a global crisis upon collapse.
The eligible banks are already subject to strict federal oversight meant to ensure each firm’s stability and compliance with federal laws.
Banking regulators would have to judge each large bank’s compliance with consumer protection laws with parameters developed by the Consumer Financial Protection Bureau. Banks that show a “pattern of abusive behavior” toward customers could be ordered to disassemble.
“Rampant violations of consumer protections by megabanks are just as consequential to a megabank’s safety and soundness as capital levels or other indicators of bank health,” Waters said.
“My bill ... will require federal prudential banking regulators to fully exercise their authorities and shut down megabanks that repeatedly show indifference toward consumer protection. It’s time to hold these financial institutions accountable and put people over profits.”
Waters named Wells Fargo, JPMorgan Chase, Citibank and Bank of America as several major banks that should broken up under the bill, which won’t likely see action in the GOP-controlled House.
In response to Waters' efforts, Wells Fargo touted their roots in California, where the San Francisco-based bank was founded.
“Wells Fargo is proud to be a leading business, employer, and community member with deep ties to our home state of California," said Wells Fargo. "We will continue working diligently to demonstrate our continued commitment to our customers, the public and the state.”
The bill is sponsored by several House Democrats, including Reps. Keith Ellison (Minn.), Marcy Kaptur (Ohio), Michael Capuano (Mass.) and Pramila Jayapal (Wash.). Several labor and consumer groups, including the AFL-CIO, Americans for Financial Reform and the National Consumer Law Center, also backed the bill.