The Fed also took the unprecedented step of prohibiting Wells Fargo from growing any larger than its total asset size at the end of 2017, or $2 trillion, without clearance from the central bank.
During Yellen's four-year term, unemployment fell to 4.1 per cent, from 6.7 per cent when she took office.
"We can not tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again", outgoing Fed Chair Janet Yellen said in a statement. He decided against reappointing the Democrat in favor of nominating Powell, a Republican.
The Dow Jones industrial average closed at 25,520 on Friday after a 665-point drop.
The financial system is now much better capitalised and the banking system more resilient than during the global financial crisis a decade ago, Yellen said. Yellen said. "And I think our overall judgment is that, if there were to be a decline in asset valuations, it would not damage unduly the core of our financial system".
Wages in January posted the biggest annual increase in almost 10 years, with the growing USA economy adding jobs at a solid pace, and while business and consumer confidence remains high just as a massive corporate tax reform is starting to take effect.
Before becoming Fed chair in 2014, Yellen had served as the central bank's vice chair and was president of the Fed's San Francisco regional bank.
The Fed specifically cited the need to strengthen oversight by the bank's board of directors, and sent letters outlining the failures to Stumpf and another former director.
"I don't want to speak for the President but I suspect [Powell's] background in the private industry may be something he finds attractive", Steve Wood, chief market strategist at Russell Investments, told Forbes when Powell's appointment was announced in November 2017.
In a prepared statement Wells Fargo said that within the next 60 days it would be providing details to the Federal Reserve about its plan of enhancing the governance oversight by the board and the operational risk and compliance management of the company. "I think I've had a seat at the table to make the arguments that I thought needed to be made and to advocate for good policy".