Last night Berkeley’s City Council voted unanimously to review its banking arrangements with Wells Fargo when the current contract expires at the end of 2012.
This followed a recommendation by councilmembers Jesse Arreguín and Darryl Moore to consider alternatives to the 160-year-old San Francisco bank which, they said, “was a key part of the subprime lending crisis which led to our overall economic collapse”. (View the responsible banking policy Council item.)
Berkeley’s FY11 city budget is about $324 million, and bank deposits are around $10 million, according to a local banking executive. Berkeley has banked with Wells Fargo since 2004 and the contract was last renewed in 2009.
Moore said the fact that the contract was up for renewal at the end of this year provided the perfect opportunity to “look into our options”.
Councilmembers Max Anderson and Susan Wengraf added their names to the recommendation.
Anderson said he did not consider this a knee-jerk reaction to the macroeconomic situation, but rather a need to support small businesses and startups in Berkeley.
“This is not about the 99% and the 1%,” he said, “but a realisation that the Community Reinvestment Act has not borne fruit, and that any bank that seeks our business needs to invest in our community and have a fund dedicated to startups.”
Wengraf stressed that such a move would go beyond making a statement, saying: “This might be the single most important thing [the city] can do. It’s not symbolic, it would be a real blow, and would send a strong message.”
Mayor Tom Bates, who said he recently moved his own money out of Wells Fargo, nevertheless stressed the bank’s important role in the Berkeley community. He cited the $3 million Wells Fargo has donated to nonprofits locally.
“Wells Fargo does wonderful things for our community. We would like to see their record improve on helping businesses to expand and to make employment part of their agenda,” he said. Bates added that, despite comments from members of the community at the meeting about what was described as Wells Fargo’s “predatory” role in foreclosing on people’s homes, in particular those of immigrants, the bank owned few so-called underwater homes in Berkeley, and that in most cases the bank was working with residents to enable them to keep their homes.
Wells Fargo spokesperson Ruben Pulido confirmed that the bank holds mortgages on fewer than 10 foreclosed homes in Berkeley. He added that, nationally, over the past year, fewer than 2% of homeowner-occupied loans in Wells Fargo’s servicing portfolio have proceeded to foreclosure sale.
Wells Fargo has also made below-market rate loans to several organizations in Berkeley, Pulido told Berkeleyside, including the recently opened Berkeley-Albany YMCA Teen center ($9.5 million), Freight & Salvage Coffeehouse ($13 million), Affordable Housing Associates ($500,000) and Resources for Community Development ($750,000).
“We invest where our team members live and work,” he said. “We value the City of Berkeley and we continue to have conversations with its leaders.”
Rauly Butler, senior vice president of retail banking for Mechanics Bank, which handles the accounts of neighboring Albany, El Cerrito, Hercules, Richmond and San Pablo, addressed the councilmembers, assuring them that many, but not all, smaller banks could handle its account. He said it would be prudent for the city as a business to reevaluate its options and look at competitive bids.
Speaking to Berkeleyside, Butler questioned whether Wells Fargo would stop making large financial contributions to Berkeley if the city pulled its business.
“Too many people here bank with Wells Fargo,” he said. “They need to invest in the city.”
Wells Fargo has six branches in Berkeley and Federal Deposit Insurance Corporation figures put its total deposits in Berkeley at $1.026 billion. The second largest bank in Berkeley by that measure is Bank of America, followed by Chase, Citibank, and East Bay-headquartered Mechanics Bank which has Berkeley deposits of $216 million.
Berkeley’s city manager will report back in May on the city’s banking policy and what it expects from its bankers, after which the account will go out to bid, with a decision on the contract to be made in the fall.