In what may be the most damaging blow to Big Banks since the overwhelming success of Bank Transfer Day in late 2011, the City of Berkeley recently announced its intention to withdraw all financial assets from Wells Fargo.
On Tuesday night, the City Council voted unanimously to find a more socially-minded institution to hold approximately $300 million in city assets. Council members said that they hoped the decision would send a very strong message to the Big Banks ultimately responsible for the housing crisis that sent the economy spiraling.
“I feel that this is one way in which we can make a statement and push for wider changes and promote better banking practices and more equity in our society,” Councilmember Jesse Arreguin told a local ABC news outlet.
In preparation for this major financial migration, the City of Berkeley is searching for a local credit union or community-based bank that can handle the payment collections, revenue sharing, and sophisticated money transfers its requires.
While credit unions and smaller banks can normally offer all of the same financial services, unique arrangements might have to be made in order for them to collateralize such a large amount of assets, since they don’t usually carry that much FDIC insurance.
As might be expected, the local Wells Fargo branch was shocked and somewhat defensive following the City Council’s announcement.
“Over the past three years, Wells Fargo has donated more than $3 million to 89 nonprofits in Berkeley… And less than two percent of homeowner-occupied loans in our servicing portfolio have proceeded to foreclosure sale,” said Wells Fargo spokesman Ruben Pulido.
While that may be true on a local level, there is no denying the dubious actions of the Wells Fargo corporation:
- Wells Fargo was a significant player in the subprime crisis. In 2006, the last year before the subprime bubble started to burst, Wells originated or co-issued $74.2 billion worth of subprime loans, making it one of the top subprime lenders in the country.
- As recently as September 2008, Wells still held $48 billion worth of subprime mortgages in its servicing portfolio, making it the nation’s sixth largest subprime servicer.
- Despite its large portfolio of at risk mortgages, Wells Fargo has started trial mortgage modifications for only 11% of its 292,515 borrowers who are eligible for the Obama Administration’s Making Home Affordable Program (and are at least 60 days past due). At Wachovia, which Wells Fargo acquired in 2008, the number is even lower, 2% of 74,231 eligible borrowers.
- Wells Fargo put taxpayers on the hook for up to $36.9 billion in bailout funds and programs plus an unknown amount from the Federal Reserve’s $8 trillion in emergency programs. This money was supposed to help the banks get the economy going again. But little of this money has gone to relieve struggling homeowners and increase the flow of credit to small businesses (bullet points sourced via SEIU).
In my opinion, the City of Berkeley is to be applauded for its decision to take bold action against the Big Banks, many of which have yet to face any significant consequences for their negligent and often illegal actions. Let the politicians form their task forces and sub committees. In the mean time, intelligent citizens like those on the Berkeley City Council will continue to take action in the most powerful manner possible: voting with their dollars.
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