Wells Fargo may be Warren Buffett's favorite bank, but the endorsement of America's favorite benevolent plutocrat hasn't spared it from an unusually severe punishment (as far as too big to fail banks go).

Two hours after markets closed on Federal Reserve Governor Janet Yellen's last day in office, the central bank announced sanctions against Wells for a host of consumer and oversight abuses dating back to its infamous cross-selling scandal, that saw bank branch employees open millions of fraudulent accounts in customers' names.

In a press release, the Fed said it would bar Wells from expanding its assets beyond their end-2017 level until it "sufficiently improves its governance and controls." Also, the Fed is demanding that Wells replace three current board members by April and a fourth board member by the end of the year. The release says the board of directors must also improve its oversight practices. The bank will not be allowed to grow until the Fed approves a detailed plan of action to be submitted by the bank.

"The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers,” Yellen said in a statement. "The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers."

As the release explains, in recent years, Wells pursued a business strategy that prioritized growth over managing risks and offering sufficient oversight of the firm's lending practices. As a result, the firm cheated customers of its auto-lending division and also overcharged some mortgage borrowers. And that was AFTER the cross-selling scandal mentioned above. The bank is also facing a criminal probe into its foreign-exchange desk, which allegedly overcharged its large corporate clients. The firm lacked "an effective firm-wide risk management framework in place that covered all key risks." This, the Fed says, prevented the serious compliance breakdowns from being adequately reviewed by the board.

Emphasizing the need for improved director oversight of the firm, the Fed's disciplinary board sent a letter to Wells Fargo board members confirming that the firm's board of directors did not meet supervisory expectations during the period when these abuses were perpetrated. Letters were also sent to former Chairman and Chief Executive Officer John Stumpf and past lead independent director Stephen Sanger stating that their performance in those roles, in particular, did not meet the Federal Reserve's expectations.

Wells has provoked a vociferous public outcry because of these abusive lending practices, which have impacted millions of Americans. The pension funds of several states and municipalities have even divested their WFC shares in protest.

And to make matters worse, this is only the SECOND piece of bad news that Wells Fargo received today - we outline the second below.

Responding to the letter, Wells promised to make things right and its board said it would deliver its improvement plan within 60 days.

After today's market bloodbath, WFC shares plunged a staggering 8% in after-hours trading...