SAN FRANCISCO (CN) – Wells Fargo’s hometown on Tuesday became the latest entity to cut ties with the financial powerhouse amid fallout over a phony accounts scandal that has rocked the nation’s third largest bank in assets.
The San Francisco Board of Supervisors unanimously approved a resolution suspending the city’s commercial banking with Wells Fargo for two years and requiring the bank submit a redress plan for affected San Francisco customers before it will reconsider doing business with the financial giant.
“We need a new approach here in San Francisco,” said District 11 Supervisor John Avalos, who sponsored the measure. “This resolution is about cutting ties with many of the services the city and county receives from Wells Fargo.”
In September, Wells Fargo agreed to pay $185 million to settle claims that its employees opened millions of unauthorized deposit and credit card accounts for customers in order to meet aggressive sales quotas.
Embattled CEO John Stumpf resigned in October after intense criticism over the bank’s failure to penalize top executives that oversaw the program.
The bank fired some 5,300 lower-level employees and ended its sales quota program in September, but few executives faced consequences for overseeing the “Gr-Eight” initiative, which encouraged employees to open at least eight accounts for each customer and disciplined employees that failed to meet daily sales quotas.
Under the terms of the board’s new resolution, Wells Fargo will not be considered for the city’s securities investments or repurchasing agreements for the next two years.
The resolution also urges the city’s retirement board to terminate all financial dealings with the bank.
The city chose not to cut Wells Fargo from underwriting its bonds or providing liquidity and credit support, based on a recommendation by the city’s controller that such a move could burden the city with higher costs.
However, Avalos said the board is not taking ending those ties with the bank off the table. The board will revisit the issue on July 1, 2017, to see if Wells Fargo has responded to the city’s request for a redress plan and details on how many San Franciscans were impacted by the scandal, he said.
“If no action is taken by July 1, further sanctions should be taken against Wells Fargo,” Avalos said.
In a Dec. 7 letter, the San Francisco Chamber of Commerce urged the board not to approve the resolution sanctioning Wells Fargo and cutting ties with the San Francisco-based bank.
Jim Lazarus, the chamber’s senior vice president of public policy, said the banking oversight system has already investigated and penalized Wells Fargo, and that the bank has taken steps to correct the sales practices that led to a breach of trust with customers.
“For the city and county of San Francisco to weigh in now does nothing to protect the bank’s customers or the general public,” Lazarus wrote. “In fact, what the resolution calls for is a series of steps that could put thousands of San Franciscans out of work.”
Wells Fargo is the city’s largest private employer, with 8,000 employees in San Francisco and 17,000 in the greater Bay Area, according to the chamber.
Lazarus noted that the bank has also been one of the region’s largest charitable donors, making more than $100 million in gifts over the last five years to Bay Area schools and nonprofits.
Despite those pleas from the business community, members of the city’s legislative board seemed to agree that the bank should be penalized for its conduct.
“It’s important for the city of San Francisco to say this is unacceptable,” District 6 Supervisor Jane Kim said at Tuesday’s meeting. “We expect far more from the institutions that are actually profiting off of our taxpayer dollars. We should be sanctioning Wells Fargo to the best of our ability so they understand there are penalties for defrauding our residents here.”
Wells Fargo first opened for business in San Francisco in 1852, in the midst of the California Gold Rush. Its headquarters remain at 420 Montgomery Street, where it was first established more than 150 years ago, according to a company memo provided to the board.
In September, the state of California’s treasurer also announced it would immediately suspend securities investments with Wells Fargo and stop using the bank as an underwriter for the sale of state bonds.
A consulting firm concluded in October that the bank could lose $212 billion in deposits and $8 billion in revenue over the next 18 months because of the scandal, according to Forbes.
Wells Fargo spokesman Arati Randolph did not respond to an email seeking comment Tuesday afternoon.