Berkeley to reassess Wells Fargo, open account to bids

The City of Berkeley will look at switching its account out of Wells Fargo. Photo: Lance Knobel

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.”

Mechanics Bank: one of the local financial institutions likely to bid for Berkeley's business later this year

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.

Related:
City council to consider switch from Wells Fargo [01.30.12]

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  • Anonymous

    Thank you Berkeley councilmembers!

  • Anonymous

    Tracey, you write that Wells Fargo “owned few so-called underwater homes in Berkeley.”  That doesn’t make sense to me:  a home is underwater if the borrower owes more than it is worth.  Being underwater is a situation a borrower would find him/herself in, not a bank.  The bank might foreclose on a home and then sell it at a loss, but that’s not being underwater.  

    Separately, the anti-Wells and pro-Mechanics fervor the Council/Mayor seem to have in varying degrees would be well served by coverage that acknowledged, as I just learned by calling Mechanics to ask, that they (Mechanics) only started offering home mortgages _last month_.  The mortgages they do offer are (as is the case with many banks) resold to other companies for servicing, with Wells being prominent among them.  

    I get that some people feel that they were taken advantage of during the bubble.  At the same time, a lot of people have been able to finance home purchases because Wells and other large lenders made that service possible.  Implying, as some folks here seem to be doing, that Mechanics deserves ethical accolades for a service it didn’t provide to ANY borrower is like lauding me for my stellar performance in the Superbowls I don’t even watch, let alone play in.  

    With the benefit of hindsight, we can all others to fault for what went wrong in this most recent bubble, as with any of the others that preceded it.  Arreguin and Moore’s position seems pretty simplistic, but as we’ve seen time and again, our council is great with the circuses (Occupy, now this), less so with the bread (how about those streets?  cost of Occupy? etc).

    Tracey, you yourself were an active real estate blogger during your stint at Redfin, writing (as the wheels were coming off in October 2008 AFTER Lehman collapsed) about “berkeley bargains to be had,” including one place you had “been following for quite a while” and deemed an “out-and-out bargain” at $1.2 million.  Turns out that it sold two months later for only $1.1 million and Zillow now thinks it’s worth only $900,000.  I’m sure you were just relying on the information you had at the time and my point is that so was everyone else: the buyer, the seller, the lender, and the appraiser.  That borrower might be close to underwater now.  But maybe they don’t mind being underwater when they’re out back, floating in the solar-heated pool that charmed you too.

    My point is that nobody, including you, had a crystal ball then or now.  For our council to single out one party to this (or thousands of other transactions like and unlike it) is just pandering.  Meanwhile, those streets aren’t going to fix themselves!

  • Completely Serious

    Another symbolic, no cost gesture by our Council.  How about real action on local issues, like the huge unfunded pension liabilities, busted up streets, closed pools, rats etc.  Please address the real, hard problems instead of grandstanding again.

  • Marie Louise

    The author may want to report that of all the banks that were involved in the subprime mortgage crisis, Wells Fargo was one of the banks with no major responsibility in the crisis and fairly disciplined mortgage lending policies. Wells Fargo has been part of our community for a very long time and many of us have had our accounts at Wells Fargo for 20 years or more and appreciate having the bank have several branches in town. Additionally, the Wells Fargo branch on Solano Avenue has won the branch of the year service award nationally for Wells Fargo and those of us who use that branch appreciate the quality of the service. The author reports significant contributions from Wells Fargo to the Berkeley community overall. I am not sure what the purpose is here to turn up the heat on this bank other than to blindly follow the Occupy movement here. 

  • lauram

    I agree, I switched to Wells Fargo because the service at the California State Employees Credit Union on Shattuck was so lousy and fees were being attached to services that Wells offered free.

  • Bruce Love

    Wells Fargo:

    http://www.nakedcapitalism.com/2010/10/wells-fargo-outed-as-member-of-robo-signer-club.html

    “There’s nothing like a bank being shown to be a liar.

    “I was told yesterday that Wells Fargo has been making the rounds among policy types in DC this week to tell its story that (of course) the foreclosure crisis is overblown. Moreover, Wells reportedly said that it was not like the other major servicers, that it ran a tight shop and hadn’t engaged in the bad practices of other firms, particularly the use of improper affidavits, aka robo signers.

    “This was a particularly stupid claim to make, since there are depositions which attest to the Wells’ use of robo signers. And in an interesting bit of synchronicity, the Financial Times got hold of one and made it the subject of its lead article today. [Oct. 14, 2010]

    “[….]

    “Note also that Wells’ robo signer reports to have signed up to 500 documents a day. This level is coming to look like an industry norm.”

  • Bruce Love

    Are folks generally familiar with the problems of foreclosure fraud – a story that Yves Smith is famous for breaking and working?   (She writes under that pen name for the nakedcapitalism blog.  You may have heard her on various news programs or on some dedicated episodes of Harry Shearer’s Le Show.)

    Generally speaking, in the slicing and dicing of some mortgages, many promissory notes apparenty became irreperably detached from the corresponding titles.   The court relies on a clean record of assignments of these documents in order to establish who has the right to foreclose — who can take the house.  In an alarming number of cases, the courts have agreed with defendants that the party attempting to foreclose lacks standing to do so.  In their rush to fuel the real estate bubble, and to save money, the banks and financial institutions cut corners on the title assignments and the chickens are coming home to roost.  In some instances, fraudulent documents have been filed with courts, attempting to forge evidence of valid title assignments.

    What does that mean when you buy a formerly foreclosed upon house?  You better hope the seller actually has a right to it.   Wells Fargo has a solution, though: push all of the title risk onto the buyer.

    Yves documents Wells’ conduct here: Latest Real Estate Time Bomb: Title of Foreclosed Properties Clouded; Wells Fargo Dumping Risk on Hapless Buyers.

  • Bruce Love

    Poor conduct in the financial disaster is not limited problems in loan origination.    Wells certainly didn’t need a crystal ball to know that robosigning is wrong or that failing to fully disclose title risk to buyers (while seeking indemnifcation for that failure) is wrong.

  • EBGuy

    Not to mention, Wells has helped many Wachovia mortgagors refinance to more palatable terms.

  • Bruce Love

    The state of New York has just today filed suit against Wells Fargo, Bank of Marica, JPMorgan Chase, and …. the Mortgage Electronic Registration System Inc. (MERS).

    This suit concerns what I posted earlier: title fraud in furtherance of foreclosure fraud.   That’s right, it’s alleged that these banks (and the shell company, MERS) have basically been stealing houses by defrauding the courts.   (A similar case was filed last December by the Massachusetts attorney general.)

    http://money.cnn.com/2012/02/03/news/economy/banks_sued/

  • MakesMeWantNader

    Also check out a recent discussion about TBTF banks in SF:

    http://analytical-crm.com/UnMoney_TBTF.pdf