N.J. Town Pulls Public Funds From Wells Fargo -- Update
The city of East Orange in northern New Jersey has pulled public funds from Wells Fargo & Co. after lawmakers accused the bank of engaging in predatory-lending practices and exacerbating the city's foreclosure crisis.
City officials said Wells Fargo holds 13% of the 439 mortgages currently in foreclosure in East Orange. City councilman Chris James said the bank forced people from their homes and then let the vacant properties fall into disrepair.
"We can't have the city's money, that's from hard working people's taxes, in this system," said Mr. James, a Democrat who led the divestment push. Mr. James also pointed to Wells Fargo's investment in the controversial Dakota Access Pipeline and last year's revelation that bank employees had opened more than 2 million unauthorized deposit and credit card accounts to meet ambitious sales goals as additional reasons for cutting ties with the company.
East Orange's City Council voted in February to close all its accounts with Wells Fargo and Mr. James said on Monday that the city had completed the process. City officials were unable to provide the amount of funds in question.
Other cities and states across the country have also divested from Wells Fargo. In Seattle, council members voted in February to pull $3 billion in public funds from the bank when its contract with the city ends next year. Illinois said in October that it would halt $30 billion in investment activity with Wells Fargo, citing the sales-tactics scandal.
A spokesman for Wells Fargo said the company is committing to boosting homeownership and to supporting "racially and ethnically diverse home buyers." East Orange's population of about 65,000 is 89% black, according to the U.S. Census.
The spokesman also said Wells Fargo is one of 17 financial institutions that has invested in the Dakota Access Pipeline and its loans represent less than 5% of the total financing. He also said the company is taking steps to fix its sales practices and restore trust with customers.
Wells Fargo holds just under $1 billion, or 5%, of $20 billion in deposits from New Jersey's state, local and county governments.
Mike Affuso, director of government relations for the New Jersey Bankers Association, said East Orange can take its funds to one of the more than 100 other certified depositories in the state.
"The government deposit space is very robust," Mr. Affuso said. "Consumers can do whatever they want, this is how the marketplace works."
East Orange Mayor Lester Taylor said he supported the divestment.
"I am committed to sending a strong message that we will not do business nor consider doing business with any institution that intentionally preys upon homeowners in our city," he said in a statement.
Trina Scordo, executive director of the nonprofit organizing group NJ Communities United, said she hopes other cities follow East Orange's example and stop doing business with banks that peddled toxic mortgages.
"Adjustable-rate mortgages, bubble payments, robo-signing -- all the pieces that came along with that foreclosure crisis," Ms. Scordo said. "It didn't just go away because people stopped talking about it."
Mr. James, the East Orange councilman, acknowledged that Wells Fargo wasn't the only bank accused of predatory lending. He said the city is in the process of reviewing its relationships with other banks.
Write to Kate King at Kate.King@wsj.com
(END) Dow Jones Newswires
April 24, 2017 19:49 ET (23:49 GMT)