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Indybay Feature
Foreclose on Wells Fargo: So Many Reasons to Divest
by Jim Macdonald
Friday Feb 10th, 2012 10:10 PM
This article that arises from the context of a divestment campaign in Bozeman, Montana, speaks more generally about the evils of Wells Fargo and all the many reasons - both well known and not so well known - why people should divest from big banks, particularly Wells Fargo.

wells_fargo_home_mortgage_foreclosure.jpThere are a lot of reasons to get your money out of the big banks – starting in Bozeman with Wells Fargo and U.S. Bank – but I don’t think people realize just how many reasons there are.  Let’s look at Wells Fargo, in particular, where Occupy Bozeman has put out a call to divest.

I think everyone knows that Wells Fargo took over $35 billion in bailout money and is neck deep in the housing crisis – most recently being a party to a $26 billion settlement for a lawsuit brought by all 50 states regarding improprieties with foreclosures.  What people don’t necessarily know, however, is Wells Fargo’s poor record on the environment, its ownership stake of corporations in the private prison industry, and charges it faces of discriminatory lending to African Americans and discriminatory practices against people with disabilities.  Wells Fargo also spends a lot of the money it makes from your accounts on lobbying and political contributions.  People may not know just how much money Wells Fargo makes from these practices, and they may not know that not every financial institution functions this way.  There are alternatives to all these things, as well as to the high fees, low rates of return, and poor customer service that are also the hallmarks of Wells Fargo. 

In brief, Wells Fargo contributes to economic disparity in this country.  A first step toward economic justice in our community requires you to divest from Wells Fargo and other big banks.  That will help our region, too, because it will keep your money here.  More importantly, though, if a divestment campaign like this works – and evidence is that divestment campaigns like this are beginning to take hold – we will actually be taking a concrete step toward empowering the people rather than the economic interests of the one percent.  It will represent a dramatic shift toward embracing an economy that considers the community stakeholders first rather than the one we have now that enriches the most affluent at the expense of everyone else.

Let us take a look at some of the reasons why you should divest from big banks in general and Wells Fargo in particular.

Wells Fargo Bank, headquartered in San Francisco, is the fourth largest bank in the United States and is the country’s largest mortgage provider.  Last year, Wells Fargo’s net income was approximately $15 billion from $73 billion in gross profits. 

Whatever you feel about profit, the bank ultimately is there not to serve its customers but to provide a profit for its shareholders.  Therefore, there are often incentives for a bank to take actions that are not necessarily to the benefit of many of the bank's own customers. 

That is how Wells Fargo has been implicated repeatedly in the housing crisis.  Wells Fargo, like other big banks, engaged heavily in the subprime loans that precipitated much of the economic downturn.  In fact, in July 2011, the Federal Reserve levied an $85 million fine, the largest ever of its type, against Wells Fargo for falsifying documents and pushing borrowers to the high-interest subprime loans.  Worse than that, there are charges that Wells Fargo has specifically targeted poorer, particularly African American, borrowers for these bad mortgages.  The charges are serious enough that the Department of Justice is currently investigating Wells Fargo on those charges.

Wells Fargo could do this to customers even if they believed that the buyer would default because it turned around and sold many of those mortgages to other investors, thus turning a profit.  In many cases, the customers would have qualified for a lower interest loan, but Wells Fargo still steered people to the subprime loans because more money was to be made from it with very little consequence.  For when the bottom fell out and banks were beginning to wobble and fail, most of those banks were deemed too big to fail, and so there were very few consequences.  Wells Fargo received $36.9 billion in the bailout.  Then, the government arranged the sale of Wachovia - a bank that was failing - to Wells Fargo in a sweet deal of about $1 per share.  There were also relatively few legal consequences.  An $85 million fine is nothing for a company that nets over $15 billion a year.  Even a $4 billion share in a $26 billion settlement comes out to only $2,000 per person - a small consolation for ruining people's lives.  It only amounts to one quarter of profits, and it was money the bank had already saved and accounted for.

The recent $26 billion settlement has to do with how Wells Fargo and other big banks dealt with foreclosing the properties of people who could no longer afford their homes because of high interest rates, a precipitous drop in home values, a lack of buyers, and the subsequent loss of jobs.  Wells Fargo and other big banks often falsified foreclosure documents and repossessed homes with either fraudulent or incomplete documentation.  They have also been very slow at working with homeowners on reducing their mortgage payments - part of a federal program in which Wells Fargo is supposed to be participating called HAMP (Home Affordable Modification Program).

When Wells Fargo finally forecloses on a home, many of these homes sit vacant as real estate owned properties (REOs).  While Bozeman has a great shortage of space available for rent and a problem with affordable housing, Wells Fargo and other REOs sit vacant.  Others are up for auction, and still others sit there with their owners waiting to be repossessed.

Most people, however, have some knowledge that Wells Fargo has been a big bank that's continued to profit despite hurting customers, particularly related to its mortgage business.  However, there are even more things to consider that are less well known.  Some of those are directly related to Wells Fargo's practices, some are related much more generally to the nature of banks.  Not all financial institutions are the same; there are key things that make a credit union - for instance - distinct from a huge bank like Wells Fargo.

Let's start with Wells Fargo's record on the environment.  When we think of banks, we do not typically think of environmental impact; nevertheless, because banks finance all kinds of projects, we can see what kinds of projects that Wells Fargo finances.  All big banks brag about their environmental record, and Wells Fargo is no exception.  There is no doubt that corporations have the luxury to do many things - both good and bad.  Nevertheless, there are some things you might consider.  Wells Fargo is a large financier of the coal industry, a distinction that led one report to list Wells Fargo as the 19th worst polluting bank in the world.  The Rainforest Action Network has criticized Wells Fargo for financing illegal logging projects in Indonesia.  On the issue of natural gas hydraulic fracturing (or fracking), Wells Fargo has funded Chesapeake Energy all while being one of the leading lenders who will not give mortgages for homes with gas leases.  They seem to know a home where fracking occurs is a bad investment all while funding the practice.

Wells Fargo also has the distinction of having an ownership stake in two private prison corporations.  They have $120 million in investments in the GEO Group and the Corrections Corporation in America.  These private prison corporations house inmates and detain undocumented immigrants for a profit at government expense and use their political connections to influence policies on crime and immigration.  This has been particularly true in Arizona, where the Corrections Corporation of America has had a cozy relationship with Gov. Jan Brewer and may have used its influence to pass one of the harshest and most notorious anti-immigrant bills in the country, SB 1070.  Activists in Arizona have as a result not only called on Wells Fargo to divest from the private prison industry but also on customers to divest their money from Wells Fargo altogether.

If all that is not enough, last year Wells Fargo settled a case brought by some disabled customers.  The suit brought by people who were deaf, hard of hearing, or have speech disabilities alleged that Wells Fargo refused to accommodate them in telephone services.  This suit was settled for $16 million.

Is it necessary to add that Wells Fargo is spending more money on lobbying politicians than ever before and does its fair share of contributing to political candidates?

We could go on and on.

All of that may make no difference to you if Wells Fargo were a good choice for you and your money.  Certainly, no one can compete with the convenience that big banks provide in offering many branches, many ATMs, and a wide array of financial services.  Many people may opt for a big bank if they only live in the area seasonally or must travel a lot for work, if only to avoid ATM fees.  Banks may stay open longer, and online banking may be more robust.  

However, these positives may actually be more costly to you and yield less return than other financial choices, particularly credit unions.  Indeed, report after report after report show that fees and interest rates at big banks are higher, while rates of return are lower.  Whatever you save from ATM fees (and local credit unions are often part of national networks and sometimes will reimburse ATM fees), you are losing many times over in the ways that banks like Wells Fargo skim from you.

The biggest reason that a bank like Wells Fargo is so expensive relative to a credit union is that credit unions are not-for-profit financial institutions.  They are not sharing their profits with shareholders somewhere else.  Instead, they pass the savings to their members, who also as members have some say in their governance.  Credit unions also have no incentive to ruin you through risky mortgages or other exotic financial instruments.

Something else working in favor of putting your money somewhere small rather than somewhere large is that very little of the money you put into a big bank stays in the local region.  In other words, the money you spend gets put somewhere else.  It gets put into the pockets of wealthy investors, into the hands of polluters, and into the hands of the private prison industry.  It goes lots of other places as well, but you get the point.  If you keep your money in some local context, you should better be able to take action against any abusive use of that money.

It is an understatement, then, to say that there are a lot of reasons to take your money out of Wells Fargo and other similar big banks.  We have seen that although Wells Fargo has been fined or settled out of court repeatedly that these sanctions do not make a dent in their profits.  The only leverage that we can exert is to make a concerted effort to divest.  So long as we give permission to Wells Fargo, they will continue to engage in activities that create the economic hardships we have seen, that widen the gulf between rich and poor, that pollute our air and water, and that abuse those most vulnerable in our society.  Without our money, at least they will not be able to do these things in Bozeman.

One worry about such campaigns is the fear that we may not have the power to do enough and that Wells Fargo will continue to churn out record profits no matter what we do.  Fortunately, Occupy Bozeman is hardly the first group in recent months to propose divestment.  Last fall's Bank Transfer Day, where many thousands of people moved their money from big banks to credit unions, was more than a blip on the radar.  In fact, credit union membership is rising.  So, there already is a wave away from big banks.  The wave, however, is not yet big enough.  We need to help it along and need to take creative action here in Bozeman that will foreclose the only properties that should be foreclosed - the big banks, starting with the biggest - Wells Fargo.

Stopping Wells Fargo by itself will not bring economic justice to our community.  It will not by itself end the class gap or bring an end to the evils in the economic and financial system.  However, it can be an important start toward that goal.  If a bank like Wells Fargo can no longer operate in Bozeman, it will have taken massive community support.  That will say at least two things.  One, it will show people that Bozeman is a place that values its community and is serious about economic justice.  Two, in building a strong community movement around this issue, it will provide a forum where the many other issues of economic injustice can be heard, discussed, and acted upon.  We will not be a community that considers the expedience of a few more ATMS to mean more than justice.

If you want to help, it starts by getting your own money out of a big bank.  It then continues by talking with your friends and sharing this and other information with them.  However, more than that, there will be opportunities for more action against Wells Fargo.  These things are being discussed at every weekly Occupy Bozeman General Assembly.  You have the opportunity to do something.  What's more, if you don't, we see what the consequences are.  Because we give so much money to the big banks, a lot of people are hurting.  You can be part of the solution; do not be part of the problem.  It is hard enough taking on a huge corporation; it is impossible if those in our community enable them.

There are so many reasons to take your money out of Wells Fargo.  For all the information we are finding related to our divestment campaign against Wells Fargo, you can start your own (and contribute to our) research at occupybozeman.org.


Comments  (Hide Comments)

by Jim Macdonald
Sunday Feb 12th, 2012 10:42 AM
To what you write:
"- Wells Fargo attempted to refuse bailout money but was forced to take it by the government so customers would not pull all funds out of unhealthy banks forcing the collapse to spread."

So what? All this says more about the nature of big banks and the toxicity of the investment.

"- The $26 billion settlement will allow busuness to get back to normal in this country. I don't like it either, because if it was a citizen that kicked thousands of people out of their homes with shoddy paperwork they would go to prison. The banks should be accountable as a citizen would be, but the fault lies with your government for not enforcing the law evenly. Also, in the robo-signing scandal Wells Fargo was clearly identified as the best of the big banks by far in this regard. Bottom line is, the settlement is unfair but if you don't like it complain to your Attorney General for accepting it."

No one is letting the government off the hook. It would be like saying that if a rapist got off, that we should direct our ire only at the government instead of the rapist. That is an absurd line of argument.

"- The poor record on the environment (with noevidence offered by you to support this claim) is ridiculous. Wells Fargo (and the former Wachovia) have been leaders in the push for electronic banking and check clearing. Customers are given the option to eliminate paper documents (free of charge) for everything except those required by law. Additionally, Wells has been the best friend this country's green businesses have. It has taken risks to finance many unproven businesses in an effort to be a good environmental partner. Also, Wells has been a leader in the movement toward data center energy consumption reduction. This effort has been costly and risky, but the management at Wells thought it was worth it. Bottom line, Wells is willing to risk profits to do the right thing."

The article clearly says that corporations can do good and bad things; this is what's afforded to a corporation so large. Does the article say anything false about Wells Fargo's investments? Everyone can play every side of every issue (that was the point); however, that's a large part of the hypocrisy. No doubt local banks do many of the same things. Ultimately, the difference is that it's far easier to hold those smaller banks accountable.

"- The assertion that taking your money out of Wells Fargo will keep more of your money in the community is absurd. Wells Fargo, unlike the other 3 of the "Big 4" is a Super Regional bank, not an internation investment bank like JPM, C, and BAC."

First of all, that's false. Wells Fargo now has an investment branch because it bought Wachovia.

"The primary mission of Wells Fargo Bank is to collect deposits and lend them back tot he community. By the way, that is the reason Wells has thrived despite the headwinds that have crushed their competition. Wells has been the largest small business lender in America for years. While most banks would not lend to small businesses during the credit crisis, Wells loaned over $1 billion to small businesses in 2011 alone. Your plan to save the community without small business lending is GENIUS! Once all the small businesses have dried up we can all just barter for our granola and hemp shirts."

As an anti-capitalist, I'm not so opposed to your extremes as your silly reductio argument imagines. Nevertheless, the idea that the percentage of Wells money is staying in the community relative to community banks and local credit unions is ridiculous for a lot of reasons. Money goes to projects far outside the immediate area; they also get swallowed up by profits. If it's just a matter of comparing Wells to the alternatives, there's no argument to be made for Wells Fargo. Frankly, I'm not terribly fond of most of the alternatives, but that's another story.

"-Your statement that "Wells Fargo, like other big banks, engaged heavily in the subprime loans that precipitated much of the economic downturn" is patently false. Again, this is precisely why Wells was able to take over Wachovia - a bank of comparable size that just 1 year earlier was contemplating taking over Wells. The big difference (enough to make Wachovia's $90 billion in market cap disappear in a week) is that Wachovia's subprime exposure eclipsed the value of the company while Wells Fargo's subprime exposure was a drop in the bucket becuase of high lending standards. These standards were at the expense of profits for several years while other banks were laughing, but who is laughing now?"

This is wrong. They did engage heavily so heavily that they were levied large fines for their practice. That they were smart enough to sell off their exposure is part of the point, right? They could push bad mortgages on to their customers and not have it bite them because they could resell those mortgages at a significant profit. Secondly, when you talk about Wachovia, for all intents and purposes, you are also now talking about Wells Fargo since that's the entity we are dealing with today.

"- The sweet deal that was "arranged by the government" for Wells to buy Wachovia was a proposal by Wells, actually. Once the goverment had accepted the proposal by CitiGroup to buy Wachovia for $2.6 billion and let the FDIC pay for any losses over $42 billion on Wachovia's portfolio (you could presume that to be a taxpayer expense of AT LEAST $48 billion), Wells stepped in with an offer that was much sweeter for the government and taxpayers. Wells offered $15.1 billion to purchase Wachovia and leaves the FDIC on the hook for $0. It is true that the IRS announced tax breaks for institutions taking over failing banks, and Wells will be able to offset some of the Wachovia losses using these breaks but the same would have been true if Citi had taken over Wachovia. So brainiac, the Wachovia deal was really a "sweetheart" deal for us since our government was willing to spend at least $48 billion of your money to help Citi do this deal before Wells offered to do it at no expense to taxpayers."

All that speaks to the problem and only makes the case stronger. When big banks fail, either it comes at huge tax payer expense or corporations in part responsible actually profit from the arrangement. All those are reasons to divest. Your clarification of the facts only bolsters the point. It was a sweet deal for Wells Fargo; we have seen how it has turned out. It's the kind of deal that's going to happen every time things go to hell, (or it won't happen, and things will still be worse). You make the mistake of thinking that because one in a set of choices might be better or worse, that it makes any difference to the point. The point isn't to look at the world of Wachovia and what should have been done but rather to look at a world where people invest in big banks and what the consequences are.

"- Saying Wells Fargo has been very slow at working with homeowners on reducing mortgage payments is ridiculous. In fact, Wells has written 728,000+ loan mods between January, 2009 and December, 2011. Of those, 16% were through the government's (poorly regarded) HAMP program and 84% were through programs pioneered at Wells. These modifications are unprecedented, and not required by the government. Why are they making these modifications for people who commited to repaying a loan and then were unable to repay? Because these are unprecedented times, Wells innovated homegrown solutions that are also unprecedented. Solutions designed to help both lender and lendee survive this together - like the partners they should be. If you can seriously call this slow, I challenge you to come up with a better strategy Einstein!"

Give me a break - and the ad hominems keep rolling. Wells does nothing because these are "unprecedented" times; any lender has an interest in minimizing its losses. Again, the problem is the world that's been set up by investment and reliance on big banks. These are the results.

"- You are correct that Wells is invested in private prisons, and I am not a fan of the industry as a whole. The problem is, your government wants to lock people up but wash their hands of the dirty work. Fix the govermnet to fix this problem, the lender does not to make moral determinations about the businesses they lend to."

The tight relationship of industry and government are not problems dealt with separately. Does money drive policy, or does policy drive money? Does government want SB 1070 without a CCA embedded in the governor's office? As someone with no fondness for capital or government, you have to take on both. This campaign is one of those avenues. If others are organizing against state power, they'd have my support as well.

"I wish I could continue my response, but I have to wrap this up. I wish the movement success, and I wish you success in understanding this crisis (and the players) better. You have clearly proven to have a low understanding and it must be embarrassing to do so in a public forum."

I'll leave the ad hominems to you. But, you have said a few things that are false and nothing that weakens the argument. In the ways you have strengthened the argument against investment in big banks and Wells Fargo, I can't speak for the movement, but I give you my thanks.

Cheers,
Jim
by BB
Saturday Feb 18th, 2012 1:43 PM
Reply to In Reply:

How much does Wells Fargo pay you to shill for them? Rhetorical. Most of your comment was so long-winded and full of corporate propaganda that I will simply address what affects me personally.

I happen to live in a small, wilderness community where Wells Fargo dominates. There is not a single credit union to turn to, in order to rid myself of this evil, loansharking, corporate predator or I would run, not walk, as fast as possible to divest myself from this vampire.

As a WF customer I can attest to the disgusting ways they treat their customers. Customer Service is a JOKE and does not exist. They have also begun tacking the exact same fees onto their customers accounts for which B of A earned such a huge blow back recently from the public, but alas, WF has gotten away with it:

A monthly $3 Debit Card Activity Fee** will be charged to your checking account for purchases or payments
(including recurring payments) made on or after October 14, 2011, using any debit or ATM card linked to your
Wells Fargo checking account. This fee applies in any monthly statement cycle when you make at least one
purchase (U.S. or international) using any debit card linked to your account. (The use of a Wells Fargo or
Wachovia ATM is not a purchase or payment.)
The fee will appear on your statement starting November 14, 2011. Please note that retailers may also charge a
fee for purchases.

``````````
They've gone even further by forcing customers to keep a minimum balance of $1500 in their bank or suffer a $7 per month penalty:

Effective September 12, 2011, the following changes will take place:

• A $7 monthly service fee will apply, which can
be waived with one of the following options:

– Maintain a $1,500 minimum daily balance
– The total amount of qualifying direct deposits
each statement cycle into this account must
be $500 or more.

Do us all a favor, "in reply," crawl back into the corporate pit from whence thou came and butt out.
by Anonymous
Monday Feb 20th, 2012 8:55 AM
Wells Fargo and other banks paid people to sign documents fraudulently in the foreclosure process. One wonders if they are paying people to engage in a propaganda war, as well, having these people pretend that they aren't representing the bank.
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