By Doug Oakley
Berkeley is considering closing its Wells Fargo account worth $350 million and entrusting the money to a community bank or credit union, saying the bank is partly to blame for the financial crisis of the last four years.
The City Council voted unanimously Tuesday night to study cutting ties with the bank and rewarding "responsible financial institutions" with its business.
The city manager will return with a report in May on the feasibility of ending the 8-year-old contract, which is up for renewal at the end of this year.
Wells Fargo posted a profit of about $15.9 billion last year. It currently holds about $1 billion worth of deposits from Berkeley customers, according to the Federal Deposit Insurance Corp.
"Wells Fargo Bank ... was a key part of the subprime lending crisis which led to our overall economic collapse," according to the item before the Council, written by members Darryl Moore and Jesse Arreguin.
During discussion on the issue, Mayor Tom Bates said he closed his personal account with Wells Fargo and moved it to "a community bank." But he cautioned council members that the bank loans lots of money to Berkeley institutions and gives to charity in the city.
"They've funded loans to our teen center, the Freight & Salvage Coffeehouse, the Ed Roberts Campus," Bates said. "I'm not here to defend their record, but in our hometown they have done some really good things in the past."
Wells spokesman Ruben Pulido said the bank donated $3 million to 89 Berkeley nonprofits in the last three years.
Asked whether community giving and loaning money to local organizations excuses the bank from its role in the financial crisis through the sale of loans customers couldn't pay back, Pulido defended the bank.
"Wells Fargo has always had responsible underwriting standards," Pulido said. "When people are behind 60 days or longer on their home loan payments, we work with them and in 75 percent of the cases we find a solution besides foreclosure. If you look at small business lending, philanthropy and helping people in foreclosure, we feel pretty good."
Rauly Butler, senior vice president of retail banking for Mechanics Bank, came to the meeting and let it be known his bank wants a piece of the action if Wells is cut loose.
"There has been some talk about, can community banks handle this size of business," Butler said. "The answer is, yes they can and I want to thank you for taking up the issue."
Butler said his bank, which has about $216 million in deposits from Berkeley customers, already handles money for Albany, El Cerrito, Richmond and San Pablo.
Before taking a vote on the matter Tuesday night, Council members Arreguin and Susan Wengraf both spoke about Berkeley making a statement with its actions.
"We pass a lot of things here that are just symbolic," Wengraf said. "But this may be the single most significant thing we do as a city. It will send a real message."
Arreguin said changing the account would "send a statement that we are investing our taxpayer dollars in a fiscally sound and moral way."
Doug Oakley covers Berkeley. Contact him at 510-843-1408. Follow him at Twitter.com/douglasoakley.