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Hi, my name is Jim Macdonald, and I have an odd assortment of interests. In no particular order, I love Yellowstone, I am an anti-authoritarian activist and organizer, and I have a background in philosophy, having taught at the college level. My blog has a lot more links to my writing and my other Web sites. In Jim's Eclectic World, I try to give a holistic view of my many interests. Often, all three passions show themselves interweaving in the very same blog. Anyhow, I think it's a little different. But, that's me. I'm not so much out there, but taken together, I'm a little unusual.

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    Friday, February 10, 2012

    Foreclose on Wells Fargo: So Many Reasons to Divest

    Note: This article and many others I'm writing these days appears at the N. Rockies Indymedia site at rockyMT.org. - Jim
    ***

    There 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.