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NYC latest city to cut back on ties with Wells Fargo

Goldman Sachs estimated last year that the more than 500,000 Wells Fargo customers for whom the bank opened unauthorized credit cards may have ended up paying an extra $50 million to borrow money because of their damaged credit. (Associated Press)
By Ken Sweet Associated Press

NEW YORK – New York City is cutting back its ties with Wells Fargo, making it the latest major city or state government to suspend its business relationship with the bank following its sales practices scandal.

Mayor Bill de Blasio and Comptroller Scott Stringer said Wednesday they will vote as members of the city’s Banking Commission to bar city agencies from renewing or expanding existing contracts with the bank. Wells Fargo currently holds $227 million in city deposits.

“I encourage Wells Fargo to quickly clean up its act and do right by the millions of customers who trust the bank with their savings. Until then, we will not be entering new contracts with the bank,” de Blasio said in a statement.

More importantly, the two said they will vote to end Wells Fargo’s role as senior book runner for the city’s general obligation bond sales as well as book runner for the New York City Transitional Finance Authority, a city agency used to finance major capital improvements. Being a lead book runner allows banks like Wells to be the main bank when a city agency needs to issue fresh debt.

New York City is one of the larger bond issuers in in the country, issuing more than $7.1 billion in bonds for general obligations as well as Transitional Finance Authority bonds in 2016 alone. The ban will be effective for one year.

De Blasio said the city will revisit whether to allow Wells to hold government contracts for city deposits once the bank lifts its so-called Community Reinvestment Act rating from its current “needs improvement.” Wells Fargo got the “needs improvement” label earlier this year when federal regulators cited the sales practices scandal as part of the reason to downgrade the bank.

In a statement, a Wells Fargo spokesman said the bank “deeply values” its relationship with New York City and is working to restore its CRA rating.

Several states and cities have suspended their relationships with San Francisco-based Wells Fargo since the bank acknowledged in September that its employees opened up to 2 million accounts without customers’ permission.