Seattle is cutting banking ties with Wells Fargo because of its role as a lender to the Dakota Access Pipeline project. The bank says if the city wants out, Wells Fargo will sever its contract with the city immediately, with no penalty.
If the city of Seattle really wants to break up with Wells Fargo Bank, it’s free to do so, the bank says. Now.
Calling for a bank that reflects the city’s values, the Seattle City Council voted 9-0 last month to eventually cut banking ties with Wells Fargo because of its role as a lender to the Dakota Access Pipeline project.
The bill asks Mayor Ed Murray to inform Wells Fargo the city will not be renewing its financial-services contract when it expires at the end of 2018 and refrain from new cash investments in Wells Fargo securities for at least three years.
But if the city really wants out, the bank will sever its contract with the city immediately, with no penalty, and will help the city find a replacement, Phillip Smith, head of government and institutional banking for Wells Fargo, stated in a letter delivered to Murray and council members Tuesday.
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In an interview, Smith said he was surprised to hear the city decided to terminate the relationship. The city sourced Wells Fargo through a competitive bid. Finding a replacement bank will therefore cost taxpayers more, he noted. It may also be difficult to do.
Of the other banks big enough to provide financial services for the city, most also are lenders to the Dakota Access Pipeline, or its operator, Energy Transfer Partners, of Dallas, or for that matter, other pipelines and fossil-fuel energy projects, Smith noted.
“This is a dangerous precedent for Seattle,” he said of the city’s decision to end its 18-year relationship with the bank.
The city cycles about $3 billion a year through the bank — all the revenue the city receives, even from parking meters. The city’s average daily balance in the bank has been about $10 million over the past six months, according to Wells Fargo.
The current contract with Wells Fargo began Jan. 1, 2013, and extends through Dec. 31, 2018, with the option of five additional one-year extensions.
While other jurisdictions have punished Wells Fargo for the scandal over its practice of creating millions of fraudulent bank and credit-card accounts, Seattle is the first to make the pipeline a major reason for severing ties with the bank.
The vote came after impassioned pleas from pipeline opponents.
Some council members declared their vote as a move to strike a blow against not only Wells Fargo, but “the billionaire class.”
“Take our government back from the billionaires, back from [President] Trump and from the oil companies,” Councilmember Kshama Sawant said.
It wasn’t the first time the city has taken action against Wells Fargo.
Under the direction of Murray and the council, Wells Fargo is no longer issuing bonds or brokering investments for the city after a national scandal in which Wells Fargo workers created millions of fake, unauthorized bank and credit-card accounts. The decision last October cost Wells Fargo a $100 million bond deal on behalf of Seattle City Light.
According to figures provided by Wells Fargo, in the Seattle area, the total number of potentially harmed businesses was 61, with $640 refunded. An additional 289 consumer accounts were refunded $4,041. The total of consumer credit accounts affected was 18, with $387 refunded. Business credit cards were refunded $774, affecting 16 customers.
Murray supported the legislation to walk away from Wells Fargo last month and said he would sign it. He had no immediate comment about the letter, which his office had just received.
Tim Burgess, head of the council’s committee on Affordable Housing, Neighborhoods & Finance committee, declined to comment.
Smith said he found the city’s decision a “head scratcher” given the disruption, extra work and cost it will lead to, born by city staff and taxpayers. The bank also has paid more in local taxes than it has earned in its banking-services contract, Smith pointed out in the letter.
“We understand the talking about it,” Smith said of breaking off the relationship with the city’s bank. “We are unhappy about it, but usually when they get to the ‘let’s get to the facts’ place of what they are contemplating, the better governance takes over.
“That’s the part that is questionable.”
Meanwhile, work continues on the Dakota Access Pipeline, which is nearly completed.