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Wells Fargo’s Chairwoman, Betsy Duke, Resigns After Critical Report Wells Fargo’s Chairwoman, Betsy Duke, Resigns After Critical Report
(about 5 hours later)
Wells Fargo’s chairwoman, Elizabeth A. Duke, has resigned, the bank announced on Monday, bowing to pressure from Washington ahead of what is likely to be another round of grilling from Congress over its history of deceptive consumer practices. The former Federal Reserve governor who led Wells Fargo’s board as the bank tried to reform itself has stepped down, bowing to pressure from Washington over the company’s stumbling efforts to fix deceptive consumer practices that brought it billions in fines.
Ms. Duke, who is known as Betsy, resigned on Sunday. She had been the bank’s chairwoman since January 2018, and a director since 2015. James H. Quigley, a director since 2013, also stepped down from the board, the bank said. The chairwoman, Elizabeth A. Duke, stepped down from her post on Sunday. She had led the board since January 2018. Another director, James H. Quigley, also resigned, the bank said.
A report issued last week by the House Financial Services Committee was deeply critical of both board members. A report issued last week by the House Financial Services Committee was deeply critical of both board members for what it cast as their obstinately complacent response to the bank’s problems.
According to the report, Ms. Duke and other board members were reluctant to meet with regulators about fixing the bank’s problems, and she complained about being included on letters that regulators were sending to Wells Fargo with directions. And Mr. Quigley, the report said, sought a light touch from a political appointee at the federal consumer protection agency. According to the report, Ms. Duke and other board members were reluctant to meet with regulators, and she complained about being included on letters that government officials were sending to Wells Fargo that laid out necessary steps. And Mr. Quigley, the report said, was involved in discussions with other bank officials about the possibility of securing an easy pass from the Consumer Financial Protection Bureau.
After the report was issued, Representative Maxine Waters, Democrat of California and the chairwoman of the committee, called for both to step down. After the report was issued, Representative Maxine Waters, Democrat of California and the chairwoman of the committee, called for both board members to step down.
The committee examined the bank’s interactions with regulators after it revealed a series of consumer abuses starting in late 2016, including employees opening fake bank accounts and charging unwarranted fees. The bad behavior stretched back to at least 2002. Ian Katz, an analyst with Capital Alpha Partners, said he was surprised that the resignations happened so quickly. The bank apparently concluded that some individuals had to go, he said.
The practices, which underscored a toxic sales culture at Wells Fargo, led to the ouster of several leaders of the bank, including a former chief executive, John Stumpf. His replacement, Timothy J. Sloan, resigned last year after taking heat for not cleaning up the lender fast enough. “This does help Wells’s case that it’s trying to get its house in order,” he wrote in a research note.
The report from House Democrats also faulted Mr. Sloan and his interim successor, C. Allen Parker. A spokeswoman for the board declined to comment beyond the company’s statement.
According to the report, Mr. Sloan gave inaccurate testimony during a hearing before the committee about the bank’s compliance with orders from its main regulator, the Office of the Comptroller of the Currency. The report also said that Mr. Parker had had communications with an official at the Consumer Financial Protection Bureau who had promised “political oversight” of any enforcement actions against the bank. The report said Mr. Parker kept Mr. Quigley apprised of those communications. Ms. Duke stepped down in 2013 from the Fed, where she helped lead efforts to overhaul financial regulation. Her regulatory expertise was to be a boon for Wells Fargo, which has been under scrutiny since 2016, when it revealed a series of consumer abuses. Bank employees had opened fake accounts in customers’ names, charged mortgage customers unnecessary fees and forced auto loan borrowers to buy insurance they did not need. The practices stretched back to at least 2002.
Charles H. Noski, who joined the board last June, will take over as chairman. Nine of the board’s remaining 12 members joined in 2017 or later, after the end of the period when the bank opened fake and unauthorized accounts. The fallout has spanned years. The bank paid $1 billion in fines to the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau in 2018, and last month agreed to pay $3 billion to settle criminal charges and a civil action related to the abuses. Wells Fargo remains under tight growth restrictions imposed by the Federal Reserve in 2018, which analysts expect to continue through this year.
Ms. Duke had been scheduled to appear before the House committee at a hearing this week. Wells Fargo’s current chief executive, Charles W. Scharf, is scheduled to testify before the same House committee on Tuesday. The scandal, which underscored a toxic sales culture at Wells Fargo, led to the departures of several bank leaders. A former chief executive, John Stumpf, left in 2016. Mr. Stumpf was fined $17.5 million last month — a rare top executive to be penalized personally — and two other former executives faced lesser penalties. Regulators have sought fines from five other former bank officials.
The subject of the hearing, the committee said, is the “next steps for the bank that broke America’s trust.” The report issued by House Democrats said the poor executive behavior continued after Mr. Stumpf’s departure, into the tenures of the bank’s next two leaders: Timothy J. Sloan, who resigned last year, and his interim successor, C. Allen Parker.
This is a developing story. Check back for updates. According to the report, Mr. Sloan gave inaccurate testimony during a hearing before the committee about the bank’s compliance with orders from its main regulator, the Office of the Comptroller of the Currency. Mr. Sloan stepped down not long after the hearing, at which he was criticized for not cleaning up the bank fast enough.
The report also said that Mr. Parker had communications with an official at the Consumer Financial Protection Bureau who had promised “political oversight” of any enforcement actions against the bank. The report said Mr. Parker kept Mr. Quigley apprised of those communications.
More than three years after Wells Fargo’s misdeeds erupted into public view, the bank is still trying to change its culture. Rank-and-file employees have said that they remain under heavy pressure to squeeze cash from customers.
Charles H. Noski, who joined the board last June, will take over as chairman. Nine of the board’s remaining 12 members joined in 2017 or later, after the period when the bank opened fake and unauthorized accounts had ended.
Ms. Duke had been scheduled to appear before the House committee at a hearing this week. Wells Fargo’s current chief executive, Charles W. Scharf, who joined the bank less than five months ago, is scheduled to testify before the same House committee on Tuesday. The hearings were scheduled to proceed; a committee representative declined to comment.
The subject of the hearing, the committee said, was the “next steps for the bank that broke America’s trust.”