By Erin Durkin
The city will stop depositing its cash at Wells Fargo, after the bank got in hot water with the feds for discriminatory lending, Mayor de Blasio and City Controller Scott Stringer announced Wednesday.
The city’s Banking Commission, which de Blasio and Stringer sit on, is set to vote Wednesday afternoon to ban any new contracts with the scandal-scarred bank, and to bar agencies from extending existing contracts when they expire.
“What happened at Wells Fargo was a fraud — and there should be consequences. We need to send a message to this bank and the broader industry that ethics matter,” Stringer said.
Wells Fargo — embroiled in a scandal over the creation of up to two million fake accounts — was knocked down to a “needs improvement” rating by federal regulators in March under the Community Reinvestment Act, citing an extensive pattern of discriminatory and illegal lending practices.
As the Daily News first reported, city rules require banks to be bumped off the list of those allowed to take city deposits if their rating falls below satisfactory.
The city has about $227 million in Wells Fargo accounts. It will not yank all the money immediately, but it will eventually have to be withdrawn as contracts expire unless the bank raises its rating and gets back on the list.
“The rules are very clear: if you fall below ‘satisfactory,’ we will no longer do banking business with you. I encourage Wells Fargo to quickly clean up its act and do right by the millions of customers who trust the bank with their savings,” de Blasio said. “Until then, we will not be entering new contracts with the bank.”
The city will also ban Wells Fargo from running municipal bond sales for a year, but will make an exception for affordable housing bonds.
Wells Fargo spokesman Kevin Friedlander said more than four years have passed since the last period of time it was evaluated for under CRA, and the bank is seeking to expedite its next review.
“Wells Fargo appreciates the continuing dialogue with New York City and deeply values our relationship with the city,” he said. “We hope to restore a national CRA rating that reflects our strong track record of lending to, investing in, and providing service to low- and moderate-income communities.”
It has been rare historically for banks to get bumped below a satisfactory rating, said Andy Morrison, campaigns director for the New Economy Project.
“It speaks to just how terrible Wells Fargo’s business model is, and how pervasive its discriminatory lending practices are,” he said. “Those discriminatory lending practices harm New Yorkers, particularly New Yorkers of color in New York City neighborhoods.”
The bank has also been targeted by opponents of the Dakota Access Pipeline, who have pushed the city to divest from Wells Fargo and other banks helping fund the pipeline which runs under the only water source for the Standing Rock reservation.
“This is an incredible win for water, and for all of humanity really,” said Betty Lyons, executive director of the American Indian Law Alliance.