Wells Fargo in Crosshairs of N.Y. City, Connecticut

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New York City officials became the latest to take aim at Wells Fargo as the bank's fake-accounts scandal resonates through the municipal bond world.

Mayor Bill de Blasio and Comptroller Scott Stringer late Wednesday night said in a joint statement that they might cancel business with the bank.

"The scope of misconduct at Wells Fargo is simply shocking, damaging the bank's finances and reputation. The board's clawback of compensation from senior executives is a start, but is far from enough," de Blasio and Stringer said in a statement.

"The board must restore investor and public confidence by completing its independent investigation quickly and holding senior management accountable," said de Blasio and Stringer. "If they fail to adequately address these issues, we will be forced to reexamine our business relationships and investments."

Federal prosecutors are investigating sales practices at Wells Fargo after revelations that thousands of its employees secretly created accounts without clients' approval. The Consumer Financial Protection Bureau fined Wells Fargo $185 million earlier this month over 2 million bank and credit card accounts that customers may not have authorized.

Bank chief executive CEO John Stumpf will forfeit $41 million under a clawback policy that the bank's board members invoked.

On Wednesday, New York's Metropolitan Transportation Authority left Wells Fargo Securities off its new rotation of senior managers pending a "responsibility review" of the bank's practices, and California Treasurer John Chiang suspended the bank from underwriting state bonds.

The California State Public Works Board's $527.54 million of lease revenue refunding bonds, which Wells Fargo had scheduled to price on Tuesday, will now come to market next week. Loop Capital Markets and Raymond James & Associates were named joint senior managers for the delayed sale after Chiang sanctioned Wells.

Jefferies said it will price the state of California's $200 million of general obligation index floating rates consisting of Series 2016B new issue bonds and a Series 2013C remarketing.

On Thursday, Connecticut Treasurer Denise Nappier said her office decided last week to modify the assignment of lead banker for an upcoming GO bond sale in light of recent news.

Nappier cited "ongoing investigations associated with Wells Fargo, including the potential distraction and uncertainty for the bank," and added Morgan Stanley as co-bookrunning manager alongside Wells Fargo for the October sale.

The treasurer said the addition of Morgan Stanley was made "in an abundance of caution to help ensure the success of the sale."

Wells Fargo had been previously assigned as the sole bookrunner.

Nappier said her staff is reviewing the state's other business relationships with Wells Fargo, including its holdings of securities through its pension and trust funds, and said it is monitoring ongoing investigations.

In Massachusetts, the Pension Reserves Investment Management board said its only relationship with Wells Fargo was part of its real estate debt program.

"We haven't taken any steps to change those arrangements," said a PRIM representative.

The state of Illinois had "no comment" when asked about the status of its relationships with Wells Fargo. The firm is among the 15 in the state's newly established senior manager pool.

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