Wells Fargo's New Chairman Elizabeth Duke Knows Crises -- Update

By Emily Glazer Features Dow Jones Newswires

This isn't the first banking crisis Elizabeth Duke has faced.

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Ms. Duke, who was named incoming independent chairman of Wells Fargo & Co. on Tuesday, will help oversee the bank it is struggling with several scandals across its businesses. She will start her new job Jan. 1.

She had a similar start to her role as Federal Reserve governor in August 2008, as the financial crisis was enveloping the country. She served in the role at the central bank through August 2013.

"There was no way that I, or anyone else, could have foreseen the tumultuous events that were about to unfold," she said in a February 2011 speech. About a year later, during another speech she said: "I witnessed firsthand the damage that can result from reckless lending and weak risk-management practices."

That echoes some of the problems facing Wells Fargo, about a year after its sales-practices scandal emerged and weeks after reports of new problems in its consumer-lending unit around auto-related products.

Ms. Duke will lead the board even as Wells Fargo shareholders have said they are wary of directors' role, with nine directors receiving less than 75% approval for reelection at the bank's annual meeting in April. Ms. Duke received 75%. Generally, directors receive support of 95% or more.

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The onetime Fed governor first made a name for herself as a community banker, then as a lobbyist -- the first female to run the American Bankers Association. She also served on the board of directors of the Federal Reserve Bank of Richmond.

At the Fed, she was known for acknowledging the regulatory burden for smaller banks and speaking publicly that they shouldn't be treated equal to larger firms, said Peter Conti-Brown, a Fed historian and assistant professor at The Wharton School of the University of Pennsylvania.

Ms. Duke once said in a speech that she "chose a career in banking for one simple reason: I needed a job." Ms. Duke began as a part-time drive-through teller. She later got a full-time job at a startup bank with 11 employees whose president became her mentor. After he died suddenly of a heart attack, Ms. Duke took his place as chief executive of Virginia-based Bank of Tidewater. That bank was ultimately acquired by Wachovia Corp., where she worked briefly prior to its merger with Wells Fargo during the financial crisis.

Much of her focus as a community banker was lending to small businesses, something Ms. Duke has reiterated throughout her career as a lobbyist and later as a Fed governor. "I fully expected to complete my career working as a community banker in my hometown," she said in the February 2011 speech.

Write to Emily Glazer at emily.glazer@wsj.com

This isn't the first banking crisis Elizabeth Duke has faced.

Ms. Duke, who was named incoming independent chairman of Wells Fargo & Co. on Tuesday, will help oversee the bank as it is struggles with several scandals across its businesses. She will start her new job Jan. 1.

She had a similar start to her role as Federal Reserve governor in August 2008, as the financial crisis was enveloping the country. She served in the role at the central bank through August 2013.

"There was no way that I, or anyone else, could have foreseen the tumultuous events that were about to unfold," she said in a February 2011 speech. About a year later, during another speech, she said: "I witnessed firsthand the damage that can result from reckless lending and weak risk-management practices."

That echoes some of the problems facing Wells Fargo, about a year after its sales-practices scandal emerged and weeks after reports of new problems in its consumer-lending unit around auto-related products.

Ms. Duke said in an interview she wasn't seeking the chairman role since she planned to lower the stress after her time at the Fed. But she acknowledged that for Wells Fargo, "it is time to change into another gear" and she has experience to help the bank do that.

Ms. Duke will lead the board even as Wells Fargo shareholders have said they are wary of directors' role, with nine directors receiving less than 75% approval for reelection at the bank's annual meeting in April. Ms. Duke received 75%. Generally, directors receive support of 95% or more.

The onetime Fed governor first made a name for herself as a community banker, then as a lobbyist -- the first female to run the American Bankers Association and the Virginia Bankers Association. She also served on the board of directors of the Federal Reserve Bank of Richmond.

At the Fed, she was known for acknowledging the regulatory burden for smaller banks and speaking publicly that they shouldn't be treated equal to larger firms, said Peter Conti-Brown, a Fed historian and assistant professor at The Wharton School of the University of Pennsylvania.

Ms. Duke once said in a speech that she "chose a career in banking for one simple reason: I needed a job." Ms. Duke began as a part-time drive-through teller, after studying drama at the University of North Carolina at Chapel Hill. She planned to be an actress but put it aside given the necessity of getting a job.

She later snagged a full-time job at a startup bank with 11 employees whose president became her mentor. He died suddenly of a heart attack and Ms. Duke took his place as chief executive of Virginia-based Bank of Tidewater during the savings and loan crisis. That bank was ultimately acquired by Wachovia Corp., where she worked briefly before its merger with Wells Fargo during the financial crisis.

Much of her focus as a community banker was lending to small businesses, something Ms. Duke has reiterated throughout her career as a lobbyist and later as a Fed governor. "I fully expected to complete my career working as a community banker in my hometown," she said in the February 2011 speech.

Now, though, she's focused at the task at hand. Ms. Duke said her role as chair will be on rebuilding the trust between the board and management, getting the board back to a "strategic level" and ensuring "a confidence level" that management is going to do their jobs.

Mary Jo White, former chairman of the Securities and Exchange Commission, who advised Wells Fargo's board on its recent changes, said when she advises boards, especially highly-regulated entities like banks, there is the need for a mix of expertise such as financial regulation, banking, public company CEOs and accounting. And Ms. Duke certainly brings deep regulatory experience, said Ms. White, now a senior partner at Debevoise & Plimpton LLP.

Ms. Duke said Wells Fargo CEO Timothy Sloan and his management team appropriately handled the most recent issues around auto-related products the bank is dealing with since it self-identified the problems through its enhanced risk management, stopped the practices, changed leadership, restructured the business, investigated the size and scope of remediation, and kept the board and regulators informed.

"If you're going to really look through and try to improve your business practices, you're going to find problems in a company of this size and this complexity," she said. "It's how you deal with those--that is really telling to me."

Write to Emily Glazer at emily.glazer@wsj.com

(END) Dow Jones Newswires

August 15, 2017 21:44 ET (01:44 GMT)