City officials are considering joining the national Move Your Money movement by ditching Wells Fargo in favor of a community bank or credit union.
The move would be a response to allegations that Wells Fargo played a major part in the subprime mortgage crisis and contributed to the financial decay of the American economy. Berkeley experienced an upsurge in foreclosures, claim city officials, affecting the stability of the city's neighborhoods despite a strong home ownership market.
The recommendation not to renew the city's contract will be addressed at the Jan. 31 council meeting, when the council will decide whether or not to study of the potential impacts of moving the city's account, and begin investigating alternative banking options. An evaluation and report will be due May 1.
"Short sighted and failed investment practices by some of our country’s biggest private sector financial institutions have led to the collapse of our country’s economic system, massive unemployment, and the foreclosure of countless mortgages among homeowners," the recommendation states. The results have included "massive decline in revenues to the State of California treasury" and subsequently "a dramatic decline in revenue for local governments, including the City of Berkeley."
The city recommendation cites federal allegations that banks like Wells Fargo "falsified loan documents and pushed borrowers into subprime mortgages with higher interest rates which they could not afford, even though lower interest rate mortgages were available." The U.S. Department of Justice also alleges that Wells Fargo unfairly targeted minorities for these predatory loans.
Despite "unethical practices," the bank was one of the first to receive a federal bailout totaling $25 billion during the crux of the economic crisis in 2008.
If Berkeley's "Responsible Banking Policy" recommendation is approved, the city will review its banking and investment practices "to ensure that public funds are invested in responsible financial institutions" that support the community.
The city has had a contract with Wells Fargo Bank since 2004 for a wide range of services, including deposit accounts, comprehensive online banking services, credit card services and armored car services. Prior to 2004, the city's bank account was held by Bank of the West for 12 years.
Have you moved your bank account from a national corporation to a community bank or credit union? Let us know in the comments.