Wells Fargo (NYSE: WFC) hasn’t yet recovered from the scandal stemming from fraudulent practices within the bank to open checking and credit card accounts in the names of people who did not authorize them. Now, Wells Fargo is facing a series of boycotts by major metropolitan areas.
The city of Seattle has just voted unanimously not to renew its contract with Wells Fargo when it expires next year, which will result in a loss of $3 billion in annual cash flow for the bank. The city cited multiple reasons for the move, mostly with regards to the bank’s integrity.
Seattle had already canceled a $100 million bond agreement between the city’s electric company and the bank, at the same time state treasurers of Illinois and California froze their accounts with Wells Fargo – for up to a year. Now, in addition to Seattle, the Davis CA city council also unanimously voted to close their accounts, worth approximately $124 million, by the end of this year.
Wells Fargo total deposits last year came to over $1 trillion, so these losses are not going to have a major impact on its bottom line. However, if the trend continues with other municipal areas following suit, the cumulative effect could be quite damaging. Minneapolis and Philadelphia are both considering taking similar actions.
In addition to the massive fraud scandal, cities are citing other examples of why they feel Wells Fargo is not a trustworthy institution for their funds.
- Dakota Access Pipeline – Wells Fargo is a major lender for a project which has been the source of major protests by the residents of the cities.
- Private Prisons Financing – The bank is one of the six leading financers for this unpopular industry.
- Immigrant Discrimination – A recent lawsuit claims the bank is “illegally denying student loans to young immigrants who are protected from deportation and allowed to work and study in the U.S. under a program created by former President Barack Obama.”
A spokesperson for Seattle says that the city’s bidding process will “incentivize ‘Social Responsibility’” when choosing a banking partner.