The fake account scandal at Wells Fargo has already cost the bank nearly $4 billion in settlements and fines alone, but the fallout is not over yet.
Wells Fargo announced Monday that two members of its board, including Chair Elizabeth Duke, have stepped down after the House Financial Services Committee released a blistering report that accused the bank of continued mismanagement in the wake of the fake account scandal’s discovery.
Wells Fargo is the subject of an upcoming House Financial Services Committee hearing entitled “Holding Wells Fargo Accountable: CEO Perspectives on Next Steps for the Bank that Broke America’s Trust.”
The following day, Wells Fargo is the subject of another hearing that is supposed to include testimony from Duke and fellow board member James Quigley, but both have now stepped down from Wells Fargo’s board.
In advance of the hearings, scheduled for this week, the Democratic majority staff of the House Financial Services Committee released the results of a year-long investigation into Wells Fargo.
The report, titled “The Real Wells Fargo: Board & Management Failures, Consumer Abuses, and Ineffective Regulatory Oversight,” accuses the bank’s management of continued missteps in the aftermath of the fake account issue first being uncovered.
In 2016, the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the city and county of Los Angeles fined the bank $185 million for the bank’s employees opening up fake accounts in customers’ names.
According to the House Financial Services Committee report, Wells Fargo’s senior executives failed to “establish the safeguards necessary to protect consumers from harm.”
The report also claims that the bank’s board “failed to hold senior management accountable for the bank’s lack of progress under the consent orders, despite the performance concerns raised by regulators and certain board members.”
And now, two Wells Fargo’s board members have stepped down.
Initially, it was thought that Duke, a former member of the Board of Governors of the Federal Reserve System, would bring stability to the board when she took over in January 2018.
Prior to that, Duke served as a Fed Governor from August 2008 to August 2013. During her time at the Fed, Duke was chair of the Federal Reserve’s Committee on Consumer and Community Affairs and a member of its Committee on Bank Supervision and Regulation, Committee on Bank Affairs, and Committee on Board Affairs.
Duke joined Wells Fargo’s board as an independent director in January 2015 and served as vice-chair from October 2016 to December 2017.
But according to the Democrats’ report, Duke and other board members “appeared reluctant to engage in oversight of the bank’s efforts to comply” with 2016 consent orders with the CFPB and OCC.
And Sunday, both Duke and Quigley, the former CEO of Deloitte, handed in their resignations.
“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 have made these our top priorities. In addition, we hired new external leadership with the ability to be an effective change-agent, which we found with our CEO, Charlie Scharf. As the markets face increasing volatility, a strong Wells Fargo is needed now more than ever,” they continued.
“Out of continued loyalty to Wells Fargo and ongoing commitment to serve our customers and employees, we recommended to our colleagues on the board that we step down from our leadership roles and they have accepted our resignation,” Duke and Quigley said. “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.”
Replacing Duke as Wells Fargo board chair will be Charles Noski, who joined the board in June 2019. Noski is a retired vice-chair and former chief financial officer of Bank of America.
“On behalf of Wells Fargo and all of its employees, I would like to thank Betsy and Jim for the contributions they have made over the past several years,” Scharf said in a statement.
“They have helped the board navigate significant challenges relating to the sales practices issues, and they began the hard work of instituting necessary changes in leadership, governance, compensation programs and our business model that form the foundation on which we are continuing to rebuild the trust we’ve lost,” Scharf added. “We wish them the best.”
In addition to the two upcoming hearings this week, Wells Fargo is also the subject of another House Financial Services Committee hearing later this month.
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