Wells Fargo's Betsy Duke quits before turn in Washington hot seat

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Wells Fargo 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 morning that Duke had stepped down and is being replaced as chair by board member Charles Noski. 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 the committee Wednesday for a hearing examining “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.

Elizabeth "Betsy" Duke, pictured here in 2010 when she was a Federal Reserve governor, had been Wells Fargo's board chair since 2018.
Elizabeth "Betsy" Duke, pictured here in 2010 when she was a Federal Reserve governor, had been Wells Fargo's board chair since 2018.

“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 on Monday. “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.”

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 executives, Tim Sloan and John Stumpf, stepped down after tough hearings of their own in Washington that included calls for their ousters.

The latest set of hearings in front of the House Financial Services Committee begins Tuesday with an appearance by CEO Charlie Scharf, less than five months into his tenure. The panel will seek his thoughts on next steps for what it calls “the bank that broke America’s trust.”

Directors’ responsibility

Duke had been on Wells Fargo’s board since 2015, and Quigley joined in 2013.

“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.

The board has been touting its turnaround efforts. An annual filing last year trumpeted a refreshed board with beefed-up oversight and governance practices. When Scharf got the top job, Duke said he would advance a “continued transformation.”

But the report last week by Democrats was full of detailed accusations of board and management doing too little. That 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

Inside Wells Fargo, 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 the 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 was previously chief financial officer of Bank of America Corp.

Bloomberg News