By George Joseph
Mayor Eric Adams and Comptroller Brad Lander are facing calls from progressive advocates to cut off Wells Fargo’s ability to hold municipal deposits following allegations of racial discrimination.
Wells Fargo is one of 30 banks approved by the city to compete for contracts to host revenue, payroll and other bank accounts for city agencies. On Monday, Public Bank NYC, a coalition pushing for a government-run municipal bank, formally asked city officials to revoke that designation.
In a letter signed by 21 community groups and sent to the mayor and comptroller Monday, the coalition argued that Wells Fargo had violated city anti-discrimination rules by disproportionately denying Black homeowners’ applications to refinance their home mortgage loans, as shown in federal Home Mortgage Disclosure Act data.
The city’s Banking Commission requires that approved banks file a certificate promising that their board of directors have established and “will adhere to a policy of nondiscrimination in the bank’s delivery of banking services to all customers” in New York.
In 2020, the bank rejected 52.6% of completed refinancing applications from Black New York City residents with conventional primary mortgages for single-family homes, denying nearly 300 homeowners the chance to lock in lower interest rates or access equity from their properties.
That denial rate was nearly double that for white applicants to Wells Fargo and more than double that of the rest of the industry for Black applicants across the five boroughs.
“This alarming disparity — which indicates a clear violation of the City’s designation requirements — is only the latest in a long line of scandals and misconduct by Wells Fargo, and calls for unequivocal action by the Commission rescinding the bank’s designation,” Public Bank NYC wrote in the letter.
THE CITY ran its own analysis of Wells Fargo refinancing data for 2018-2019 for the same class of applicants and found a strikingly similar pattern for Black New Yorkers; 52% were denied refinancing by Wells Fargo over those years.
The letter also cited a nationwide Bloomberg News investigation into Wells Fargo, which found similar denial rates across the country last year. The story prompted congressional scrutiny and was cited in a national class action lawsuit filed earlier this month.
In response to a request for comment from THE CITY, Wells Fargo blamed the numbers on Black Americans’ underlying financial realities and noted that it had poured millions into supporting “racially-diverse small businesses,” community development financial institutions and nonprofits, including some in New York City.
“We are confident that our underwriting practices are consistently applied regardless of the customer’s race or ethnicity, and that additional, legitimate, credit-related factors were responsible for the differences in our refinance approval rate for Black homeowners,” the bank wrote in an email. “Wells Fargo is fully committed to helping close the minority homeownership gap in the U.S., which is the result of systemic inequities in housing that go back decades and a financial system that has not been sufficiently inclusive of diverse communities.”
In the years after the Great Recession, the Department of Justice accused Wells Fargo of playing a role in shaping those very “systemic inequities.”
In 2012, federal authorities announced a $184 million settlement with the bank for allegedly steering Black and Latino borrowers into subprime mortgages and charging them higher fees in the run up to the financial crisis.
According to one former Wells Fargo loan officer, bank employees in that era referred to Black customers as “mud people,” terming their subprime products “ghetto loans.” Another claimed the bank targeted Black church leaders, figuring their influence could be used to spread subprime loans across their congregations.
Three Men and a Decision
The decision to cut off Wells Fargo’s from city deposits ultimately comes down to three city leaders: the comptroller, the mayor and the commissioner of finance, a mayoral appointee.
In response to questions from THE CITY, Lander confirmed that his office is in talks with the mayor’s office about the future of the city’s banking relationship with Wells Fargo. Lander also said that his office had reached out to Wells Fargo to express its concerns, but did not confirm whether he would support a move to de-designate the bank.
“Wells Fargo stands out amongst its peers in rejecting more than half of its Black homeowner applicants seeking refinancing, reflecting a pattern of discrimination that is deeply troubling,” said Lander. “Racially biased lending practices going back decades have denied Black families access to generational wealth and financial stability. It is unacceptable that those practices continue in 2022.”
In a statement on behalf of the Mayor’s Office and the city Department of Finance, a spokesperson said that City Hall is committed to tackling racial inequity in the financial system, but did not directly criticize Wells Fargo.
“For too long, Black and Brown New Yorkers have faced significant barriers to accessing financial products that can help them build wealth and participate in the American dream,” the Adams spokesperson said. “We will work to hold financial institutions accountable and serve all communities across the city equitably.”
A former city official, who spoke on the condition of anonymity because they were not authorized to speak by their former agency, argued that the city may be constrained by procurement rules, which govern how the city can select vendors for services like city fund accounts.
The former official also said that the city may be concerned about Wells Fargo suing the city if the bank did get de-designated because the bank currently has an “outstanding” rating with the Community Reinvestment Act, a decades-old federal law that pushes banks to meet the needs of low- and moderate-income communities.
“This is the type of thing that would likely have to be reviewed by a judge assuming Wells were to sue,” the former official said.
Sandy Nurse, a council member representing East New York, a neighborhood with a large concentration of Black homeowners, said that the city should not be daunted by potential litigation.
“I do not think we should place public dollars on deposit with banks that have failed to serve communities equitably,” she said. “So lawsuits can happen, but this is a stand I think the city should be taking personally.”
City officials have previously penalized Wells Fargo for its perceived failures to serve community needs.
In 2017, city officials began cutting Wells Fargo off from new city contracts for depository services and committed to stop renewing its existing contracts after the financial institution suffered a downgrade in its Community Reinvestment Act rating. At the time, city officials said the bank was enmeshed in the city’s financial architecture, and could only be weaned off gradually.
Then in the spring of 2021, after the bank’s rating had improved, the administration of Mayor Bill de Blasio restored Wells Fargo’s full designation status, giving it the opportunity to seek contracts to host city funds.
Despite its recent restoration, as of today, Wells Fargo does not hold any actual city funds, according to a balance disclosure form obtained by THE CITY through a Freedom of Information Law request.
Advocates say the city should take advantage of this temporary lack of financial connection, and instead direct future city dollars to a public bank which they feel would be more accountable to the needs of all city residents.
“Wells Fargo’s latest scandal should serve as a wake-up call for the City,” said Andy Morrison, an organizer for the New Economy Project which helps coordinate the Public Bank NYC coalition.
“Instead of placing billions of public dollars with banks that discriminate and otherwise harm communities of color, the City should establish a public bank that will partner with responsible lenders to reinvest in truly affordable housing and other critical needs in historically-redlined neighborhoods,” he added.