Campaign News

Pressure mounted on Wells Fargo & Co. Friday following its fake-accounts scandal, as the bank faced new calls to allow affected customers to file lawsuits and for the board of directors to rescind the pay of a key senior executive.

The demands came just one day after Chief Executive John Stumpf resigned from a Federal Reserve advisory panel.

Senators had pushed for Stumpf not to be reappointed, saying it was inappropriate for someone who presided over improper sales tactics to be giving advice to an agency involved with bank regulation.

Stumpf has been under intense fire since the bank this month agreed to pay $185 million to settle investigations by Los Angeles City Atty. Mike Feuer, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency into an aggressive sales culture that led bank employees to open as many as 2 million accounts that customers didn’t authorize.

The Justice Department is investigating possible criminal charges, and some senators have called for a Labor Department investigation into whether the bank failed to pay employees overtime when they worked late nights and weekend to meet sales quotas.

A group of Senate Democrats continued to attack Wells Fargo on Friday, publicly calling on Stumpf to stop enforcing mandatory arbitration clauses in the agreements for customer accounts that were not authorized.

Sen. Sherrod Brown (D-Ohio) had pressed Stumpf on the matter at a Senate Banking, Housing and Urban Affairs Committee hearing Tuesday, arguing that it was unfair not to allow those customers the ability to file lawsuits against the bank.

Stumpf said at the time that he would have to “talk to my legal team.”

Brown said Friday that he and his colleagues want relief for bank customers and more answers from Wells Fargo.

“If Wells Fargo really does want to look out for the customers, if they really are in fact sorry, as the CEO said, for these unauthorized accounts, they ought to let the court system work if these people who were wronged want to bring suit,” he said.

Wells Fargo's collateral damage: customers' credit scores

Wells Fargo's collateral damage: customers' credit scores

The Democrats sent a letter to Stumpf on Friday, requesting more information about the arbitration clauses, including how many customer complaints about fake accounts were forced into arbitration proceedings.

Brown was among those writing to Stumpf, along with Patrick Leahy of Vermont, Richard Durbin of Illinois, Richard Blumenthal of Connecticut, Al Franken of Minnesota and Elizabeth Warren of Massachusetts.

A spokeswoman for Wells Fargo did not immediately respond to a request for comment.

Also on Friday, an activist investment group that is part of the Change to Win union federation wrote to Wells Fargo’s board, asking it to rescind at least part of the compensation earned by the executive who oversaw the employees who opened unauthorized customer accounts.

The letter from CtW Investment Group, which is a Wells Fargo shareholder, adds to the pressure on the bank to claw back some of the approximately $100 million earned by Carrie Tolstedt, the company’s former head of community banking.

Wells Fargo’s stock has declined by about 8% since the settlement was announced on Sept. 8.

On Thursday, five senators called for Stumpf not to be reappointed to the Federal Advisory Council, a 12-member body that meets four times a year with the Fed’s Board of Governors to discuss banking and economic matters.

Stumpf had represented the Fed’s San Francisco district, where Wells Fargo is based, since 2015.

He “made a personal decision to resign” and notified the Fed on Thursday, Wells Fargo spokeswoman Jennifer Dunn said.

“His top priority is leading Wells Fargo,” she said.

Sen. Angus King, an independent from Maine, organized the letter to the head of the board of directors of the Federal Reserve Bank of San Francisco asking that Stump not be reappointed to the advisory council when his term expires on Dec. 31.

“It would be ironic if the Federal Reserve, a key federal banking regulator tasked in part with ensuring the fair and equitable treatment of consumers in financial transactions, continued to receive special insights and recommendations from senior management of a financial institution that just paid a record-breaking fine to the Consumer Financial Protection Bureau for ‘unfair’ and ‘abusive’ practices that placed consumers at financial risk,” they wrote.

The letter also was signed by Warren and Democratic Sens. Maria Cantwell of Washington and Jeff Merkley and Ron Wyden, both of Oregon.

Their call was backed by Fed Up, a coalition of labor, community and liberal activist groups that has pushed to reduce the influence of bankers on Federal Reserve policies.

“Commercial banks already have too much influence within the Federal Reserve System,” the coalition said Thursday. The coalition also asked its members to sign a petition calling for Stump’s “immediate dismissal” from the advisory panel.

“Stumpf, as the CEO of a bank accused of ‘unfair’ and ‘abusive’ practices, should have no role advising the Federal Reserve’s Board of Governors on policies affecting working families,” Fed Up said.

By Jim Puzzanghera

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American Banker - April 9, 2015, by Kevin Wack - The nation's largest banks are again under attack — this time over how they treat their own rank-and-file employees. 

A coalition called the Committee for Better Banks, which includes unions and community groups, is planning protests Monday outside big-bank offices in Minneapolis and St. Paul, Minn.  The organizers are marrying long-standing complaints about the impact of bank practices in low-income neighborhoods and the large salaries of top executives with newer gripes about the banks' treatment of their own tellers and sales representatives.  The central message is that the country's biggest banks should be paying higher wages, offering better benefits, and eliminating aggressive sales goals that can create stress for lower-pay employees.  "While the financial industry has recovered in a big way since the crash — it's really come back strong — frontline workers have not experienced that," said Aditi Sen, a research analyst at the Center for Popular Democracy, an advocacy organization that released a report Thursday in connection with the upcoming protests.

In May 2014, the annual mean wage for tellers at depository institutions was $26,720, or $12.84 per hour, according to the Bureau of Labor Statistics.

It's not clear whether the upcoming protests will include a substantial number of bank employees. Erin Mahoney, a spokeswoman for the coalition, said in an email that "thousands of bank workers have been engaging with us" using petitions and other methods.

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Since election night 2016, the streets of the US have rung with resistance. People all over the country have woken up with the conviction that they must do something to fight inequality in all its forms. But many are wondering what it is they can do. In this ongoing "Interviews for Resistance" series, experienced organizers, troublemakers and thinkers share their insights on what works, what doesn't, what has changed and what is still the same. Today's interview is the 61st in the series.

Today we bring you a conversation with José Lopez, one of the co-organizing directors at Make the Road New York, and Daniel Altschuler, the director of civic engagement and research at Make the Road New York.

Read the full article here.

Nearly a decade after the housing bubble burst, one grim legacy endures.

Far too many homeowners are still struggling to make mortgage payments, or have quit paying altogether. But one of the most robust attempts to address the overhang of delinquent loans is bumping up against an uncomfortable reality.

Since 2010, government entities like the Department for Housing and Urban Development, Fannie Mae and Freddie Mac have auctioned off thousands of delinquent mortgages. The auctions should be a win-win: they take those problem loans off the government’s books so taxpayer dollars aren’t strained. They also offer homeowners the possibility of a fresh start: investors who pay far less than the loan is worth are able to cut the borrowers a better deal than the government can.

But there’s been some pushback. Groups like the Center for Popular Democracy and progressives like Massachusetts Senator Elizabeth Warren criticized the government for enabling what they called a “land grab” by the same Wall Street investors whom many saw as responsible for faulty lending in the first place.

The government responded by encouraging nonprofit organizations to compete alongside financial institutions. Groups focused on helping homeowners, rather than realizing a bottom line, would do good and do well, the agencies reasoned.

But there’s a catch.

The scale of the auctions is so big — some are measured in the billions of dollars — and the scope of what’s being asked so vast that only two nonprofits have successfully purchased mortgages. What’s more, that doesn’t seem likely to change soon.

There are plenty of nonprofits with ample experience in community development and helping homeowners, said Julia Gordon, executive vice president of the National Community Stabilization Trust, a nonprofit focused on the blight left behind by vacant properties.

What nonprofits lack is access to capital, particularly equity funding, Gordon told MarketWatch. While there are plenty of investors interested in the distressed mortgage space, the yields such investors want may not be compatible with the mission focus of a nonprofit.

“Some nonprofits are realizing that the returns private investors are demanding can’t be achieved if you also want to achieve good neighborhood outcomes,” Gordon said.

Of the two nonprofits that have successfully bid in the government auctions, one, New Jersey Community Capital, dominates. They’ve won about $290 million of loans so far. The sole other nonprofit, Hogar Hispano, has won $16 million. Hogar did not respond to a request for comment.

NJCC is a community development organization whose mission is helping New Jersey cities and towns. But as one of the best-established nonprofits in the country in this space, they’ve been asked to work more broadly than that since the early days of the government auctions.

From the beginning, NJCC understood the tension between returns for investors and results for communities, said Peter Grof, deputy to the president of the organization. But NJCC believed that it was not only possible to strike that balance, but also that it could chart a course that other nonprofits could follow.

NJCC funds its purchases with a ratio of about 50% to 60% debt to equity, Grof said. The equity investors are often private-equity firms, while the debt piece comes from what Grof calls “socially-motivated investors” or major financial institutions like Prudential Financial PRU, +3.94%   and MetLife MET, +3.81%  .

Grof says NJCC is uncomfortable with the “Wall Street vs. Main Street” concept that surrounds discussions about how to handle the delinquency overhang. “We understand and appreciate housing advocates. We couldn’t do a lot of our work if not for them,” he said. “They make it simple, beat up on the banks and Wall Street. That’s fine, there has been some bad behavior. But we don’t see it as us vs. them, ‘property investors are evil.’”

Instead, Grof said, NJCC focuses on achieving appropriate outcomes for troubled homeowners and for their neighborhoods. Sometimes that means fighting the natural urge to want to keep borrowers in their homes, and realizing it’s best to let them walk away.

“We’re about trying to bring back normal real estate market dynamics to these communities,” he said. “We understand communities have a normal ebb and flow. It’s not just about creating opportunities for people to stay, it’s about creating opportunities for people to leave, if that’s appropriate.”

To some extent, some of those advocates would agree. “What’s most important is outcomes not ownership,” Julia Gordon said. “The government agencies have a responsibility to have an idea of what they want to have happen with these notes once they sell them. It’s their responsibility to communities and the housing market. Bad outcomes weaken housing markets.”

Amy Schur, a campaign coordinator for the Center for Popular Democracy, agrees. “We believe that both HUD and FHFA should set much higher standards for all notes sales around the commitment to and quality of modifications, and around affordable housing and meeting community needs,” she said.

Schur and her group believe that if the government set more stringent requirements, it would prompt for-profit investors to partner with local community organizations. She believes such partnerships would produce the yields institutional investors are seeking while enabling the mission-driven groups to do their work. Schur also believes that while many smaller nonprofits would prefer to buy smaller tranches of mortgages, many of the investors who provide equity to more established organizations would like bigger pools.

NJCC is “on course” to achieve more than the government’s “neighborhood stabilization outcome” goals, Grof said. He stresses that it’s still too early to total up the final outcomes for all loans. In New Jersey, where NJCC focuses on principal reduction mortgage modifications and developing affordable rentals out of homes where modifications aren’t possible, the NSO rate should be about 85%. In Florida, he estimates it will be about 65% to 70%.

Government agency spokesmen speak carefully about the note sales. “We believe the program is doing what it was designed to do,” said a spokesman for HUD. He answered a question about how the nonprofit portion of the sales were going by ticking off a list of ways the government has tried to improve the program to benefit nonprofits: lengthening the amount of time between a sale announcement and when it takes place, making smaller pools of loans, and concentrating them by geography.

A spokesman for Freddie Mac said it’s “certainly an objective” to encourage more nonprofit participation. Asked about whether the type of investor is as important as making sure good outcomes are achieved, he said only that “the winning bidder is determined on the basis of economics.”

Fannie Mae did not respond to a request for comment.

As of January, in all of HUD’s sales, foreclosure had been avoided in 27.9% of the homes, 34.3% had been foreclosed on, and 35.5% had no resolution. Fannie and Freddie have not yet reported on the outcomes of their sales, although such a report was expected by the end of the first quarter, as previously reported.

Despite the government’s efforts, “the appetite isn’t there,” Grof said. “The risks and the challenges turn off our competitors.”

By Andrea Riquier

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