CHICAGO – Wells Fargo would lose out on financial business with the city of Chicago for two years under an ordinance proposed Friday by the City Council's powerful Finance Committee chairman in the aftermath of the firm's phony accounts scandal.
The bank also would lose investment business with the state under a ban the state treasurer is expected to announce Monday. It's unclear whether the treasurer's action would impact state debt which falls under the purview of the Governor's Office of Management and Budget.
"The city council should not engage in any business for the next two years with this institution that has deceived, defrauded and duped its customers," Burke said in a news release. The ordinance is expected to be discussed at a committee meeting Wednesday but it's unclear whether any action would be taken.
Under the proposed ban, the firm could no longer act an underwriter, adviser, or in a municipal depository capacity during the ban. The firm has collected $19 million in fees for city related work over the last decade, according to the committee.
A spokeswoman for Mayor Rahm Emanuel's administration on Thursday had no comment on whether the administration was considering any punitive actions against the bank in the wake of the scandal. The city has not used Wells Fargo Securities as a senior manager since it refused to lower the rating threshold for three swaps after termination events were triggered by downgrades in 2015. Wells Fargo did not demand immediate repayment and the city eventually paid off the swaps.
Gov. Bruce Rauner's administration over the weekend said it would not use the firm on bond sales, although it did not set a time frame on the firm’s exclusion from deals. “The Rauner Administration has not done any bond business with Wells Fargo to date, and the administration previously chose not to do business with Wells Fargo on the current bond deal that is in progress. Illinois will not be using Wells Fargo for any new bond sales until further notice,” a statement Sunday read. The firm is one of 15 that made the cut for a new senior manager pool the state intends to draw from for upcoming negotiated bond sales. The administration previously had no comment on whether it planned to join other issuers in penalizing Wells Fargo when asked Thursday.
Illinois Treasurer Michael Frerichs' office on Friday said it would announce on Monday a suspension of state investment activity with the bank.
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.
The action in Illinois follows statements from New York City officials that they might cancel business with the bank. 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. 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.