Wells Fargo’s Duke Quits Before Turn in Washington Hot Seat
Wells Fargo’s Betsy Duke to Take Her Turn in Washington Hot Seat
(Bloomberg) -- Wells Fargo & Co. Chair Betsy Duke resigned from the company’s board ahead of a dramatic congressional hearing set for this week, succumbing to the same political pressures that have claimed multiple former leaders of the bank.
The lender said Monday that board member Charles Noski will replace Duke as chair. Duke faced a growing chorus of calls for her departure after Democrats atop the House Financial Services Committee issued a scathing report last week on the bank’s response to a series of consumer scandals.
Duke and board member James Quigley, whose resignation was also announced Monday, are set to appear before for a hearing Wednesday that the committee said will examine “the role of the board of directors in the bank’s egregious pattern of consumer abuses.” Wells Fargo didn’t say whether the hearing will go forward as planned.
“Since we were made aware of the egregious harms suffered by Wells Fargo’s customers, we were and remain fiercely determined to do right by them and to strengthen the bank’s culture and controls,” Duke and Quigley said in a statement. “We believe that our decision will facilitate the bank’s and the new CEO’s ability to turn the page and avoid distraction that could impede the bank’s future progress.”
Wells Fargo shares slumped 8.6% at 10:01 a.m. in New York amid a market-wide sell-off that sent the S&P 500 down 5.9%.
Political Scrutiny
Wells Fargo leaders have been in Washington’s crosshairs following a series of scandals that began with the 2016 revelation that bank employees opened millions of potentially fake accounts to meet sales goals. The company has faced unprecedented political and regulatory fallout in the years since, including repeated hearings, record fines for former executives and a growth cap put in place by the Federal Reserve.
Two former chief executive officers, Tim Sloan and John Stumpf, stepped down after tough hearings of their own in Washington that included calls for their ousters.
Duke’s exit represents a staggering change of fortunes for someone who took control of the board as part of the solution to the bank’s problems. The former Fed governor became chair in 2018 as part of a wider board shake-up, with the company touting her regulatory background and risk-management experience.
The remade board did little to quell regulators’ concerns. Last week’s report details multiple instances when agencies including the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau took issue with the board’s efforts. Officials described over-prioritization of earnings and reluctance to hold management accountable as being among their concerns, according to the report, which mentions Duke by name dozens of times.
Directors’ Responsibility
“Duke and Quigley failed in their responsibility as board members,” committee Chairwoman Maxine Waters told journalists last week, saying she planned to call for their resignations. Duke had been on Wells Fargo’s board since 2015, and Quigley joined in 2013.
The committee’s report also prompted external calls for Duke to leave and whispers inside the firm about when she might do so.
“She should’ve stepped down a long time ago, frankly,” Ryan Cohen, the Chewy.com founder whose stake in Wells Fargo exceeds $300 million, said of Duke before her resignation.
The committee’s Republican minority published a separate report last week with similar criticisms of the firm. The two reports differed over the role of regulators in the scandals, with Democrats saying authorities share blame for the bank’s failings while Republicans lauded enforcement efforts under President Donald Trump.
CEO’s Preparation
The latest set of hearings begins Tuesday with an appearance by CEO Charlie Scharf, less than five months into his tenure. The committee will seek his thoughts on next steps for what it calls “the bank that broke America’s trust.”
Scharf is preparing to answer questions on what he’s doing to get back in the good graces of customers, regulators and the public. He’s met with nearly half the House Financial Services Committee, including Waters, since taking over in October, people with knowledge of the meetings said.
He’ll be able to point to changes he’s made since taking the helm, including adding new leaders and settling past probes. And he can tout the bank’s recent announcements on minimum-wage increases, limited-fee bank accounts and lending to recipients of the Deferred Action for Childhood Arrivals program.
Scharf “can come on as a hard-nosed leader who is going to do the bidding of the public and fix things,” Davia Temin, founder of crisis consultancy Temin & Co., said in an interview. “America still loves a comeback kid.”
The board members faced a different task, Temin said. “It’s harder to be part of the problem and then the solution.”
Noski, the new chairman, joined the board last June. He’s also served as chief financial officer of Bank of America Corp.
To contact the reporter on this story: Hannah Levitt in New York at hlevitt@bloomberg.net
To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Daniel Taub, Steve Dickson
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