West Hollywood City Councilmember John Duran last night offered a passionate defense of Wells Fargo, a bank that has been mired in scandals affecting millions of customers and whose five-year contract with West Hollywood expires March 3, 2019.
Duran spoke out as the Council considered a proposal for evaluating banks for a new contract. While six local residents urged the city not to consider Wells Fargo as an applicant because of its scandals, Duran argued that the bank’s history of support of LGBT organizations should be a major consideration.
Duran described himself as “a strong supporter of Wells Fargo Bank,” arguing that if it is judged for its recent illegal behavior, its past support for gay and lesbian causes also should be considered.
Duran cited as an example Wells Fargo’s support for the Gay Men’s Chorus of Los Angeles, a charity that Duran chairs that also benefits from donations from Athens Services, the city’s trash hauling contractor, and real estate developers and their lobbyists who do business with the city.
Duran also cited Wells Fargo’s early support for same-sex marriage rights and HIV/AIDS organizations. “Wells Fargo has been at the forefront of contributing to LGBT causes for over 30 years,” he said.
Duran particularly objected to a proposal by one resident that the federal Community Reinvestment Act rating be considered by the city in choosing which bank to do business with. In March 2017, the federal Office of the Comptroller of the Currency downgraded Wells Fargo’s CRA rating to “Needs to Improve” from the “Outstanding” rating it had had since 1994.
The fall in its rating is a result of the federal Consumer Financial Protection Bureau’s fining Wells Fargo for allowing employees to open fake credit or debit card accounts, lines of credit and checking accounts in the names of existing customers, who were charged for those accounts. Regulators determined that Wells Fargo had opened 3.5 million fake accounts, and in September 2016 the bank was fined $185 million as a result. Then in December 2016 it was discovered that Wells Fargo had engaged in other fraudulent activities, including issuing unwanted life and renters insurance policies. In October 2017, another scandal was uncovered when The New York times reported that Wells Fargo had forced hundreds of thousands of borrowers to buy unneeded auto insurance when they took out car loans, the cost of which resulted in the repossession of cars owned by 25,000 people.
The rating process recommended by the city’s Finance and Technology Services Department includes 21 criteria, for each of which points are awarded. Three of those criteria absolutely must be met for the bank to be considered, including that it have a state Community Reinvestment Act rating (but not a federal CRA rating) of “Satisfactory” or better. David Wilson, the city’s assistant city manager who oversee its financial activities, said the federal CRA wasn’t included out of a belief that the federal government’s position doesn’t always align with that of the City of West Hollywood on social issues
Six West Hollywood residents expressed their opposition to the city’s continuing to bank with Wells Fargo, citing the financial improprieties as well as the bank’s loans to the controversial Dakota Pipeline project and to companies that operate private prisons. The private for-profit prison system is controversial because of incidents of bribery and prisoner abuse and a situation where two Pennsylvania judges were found to have taken bribes of $2.8 million to send 2,000 children to a private for-profit prison.
City Councilmember Lindsey Horvath asked that the federal CRA rating be included in the city’s assessments of banks but not be included among the three standards that a bank absolutely had to meet. She also suggested adding investing in private prisons to the list of negative behaviors in the social responsibility criteria the city will use to evaluate banks. Not having “investments in organizations or companies that support the production of weapons, military systems or nuclear power” would add points to an applicant’s rating.
Councilmember John D’Amico asked that the city bar consideration of banks that have made political campaign contributions to Council members during the assessment period. Councilmember Lauren Meister asked points actually be removed for investing in tobacco or fossil fuels.
A City Hall report to the City Council on the process notes that working with a new banker will be complex. ” … the process to change banks is a very complex undertaking for a number of reasons. The City of West Hollywood currently maintains twelve accounts. Five of these accounts are subaccounts which sweep all balances into the General Account on a daily basis. In addition, the City has over 40 merchant accounts related to Visa/MasterCard and American Express transactions. A change will require updates to all electronic payments to vendors, payroll direct deposits to staff, changes to deposits being made by checks, cash, credit cards, electronic payments from external agencies such as State, County and federal agencies. “