City Council puts Wells Fargo in the penalty box — for one year
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After creating more than 2 million bank and credit card accounts that may or may not have received customer authorization, Wells Fargo has become a whipping boy for politicians seeking to score points with consumers.
Chicago aldermen on Wednesday joined the parade of pols beating up on the bank.
At the behest of its powerful finance chairman Edward Burke (14th), the City Council agreed to put Well Fargo in the penalty box for one year. That’s down from Burke’s original proposal of two years.
During that year, the financial services firm — that also agreed to pay $24 million in settlements and fines stemming from the improper repossession of cars owned by military personnel — will be prohibited from doing business of any kind with the city of Chicago.
That includes receiving city deposits or serving as an underwriter on city bond issues or trustee in any loan or redevelopment agreement. The bank would also be banned from brokering to buy investments on the city’s behalf or serving as a financial adviser.
Wells Fargo has received $19 million in fees from the city for a variety of financial services since 2005.
Chicago chief financial officer Carole Brown said the year-long ban “sends an important message to all institutions that do business with the city.”
And there’s an added incentive for going after Wells Fargo: The bank’s decision to punish the city for its junk bond rating.
“By the time that we were downgraded by Moody’s, all of our credit agreements would have gone into default had we not been able to re-negotiate them. The only credit bank that would not renegotiate with the city was Wells Fargo,” Brown said.
“From that point on, we have not done any underwriting business with them. . . . I felt that they did not partner with the city at a time when other institutions did partner with the city. They demanded payment.”
As a result of the one-year ban, Brown said, the city will “move quickly to terminate the few remaining deals” it has with Wells Fargo “as long as we are legally able to terminate the transactions and as long as the termination does not negatively” affect Chicago taxpayers.
Wells Fargo issued a statement saying it was “disappointed that the Chicago City Council has chosen to suspend a relationship with one of the nation’s safest and strongest financial institutions at a time when the city needs access to dependable financial partners. We have diligently and professionally worked with the city since 1970 to support its government, communities, and residents.”
City business, according to the Wells Fargo statement, is managed in a separate division from the retail bank. The company also noted that, in 2015, Wells “donated more than $2.8 million to 382 nonprofits, gave more than $803,700 to match our team members’ gifts to 370 educational institutions and foundations, and totaled $1.4 million in team member contributions to local nonprofits through our annual Community Support and United Way Campaign.”
Prior to the vote, Ald. Jason Ervin (28th) questioned why the ban is limited to one year instead of being a permanent ban.
Burke countered that the ban could be “re-visited” in a year.
“I don’t think it should be a permanent ban. Let’s see if this is a wake-up call for them. Let’s see if they’ve cleaned up their act,” Burke said.
Politicians across the state and around the nation have been tripping over themselves to get a piece of Wells Fargo and score points with an angry electorate.
Earlier this week, state Treasurer Mike Frerichs suspended $30 billion in state investments and state billings that pass through Wells Fargo.
On Wednesday, city Treasurer Kurt Summers disclosed his decision to divest $25 million in city investments with the bank from Chicago’s $7 billion portfolio.
Summers, a mayoral appointee, is widely viewed as a leading contender if Mayor Rahm Emanuel chooses not to seek a third term in 2019.
“Simply put, Wells Fargo profited handsomely by defrauding its customers, including many Chicagoans. We will not reward these practices. We will also defend the people we serve,” Summers said.