Wells Fargo scandal may force New York City to find new bank

City rules may require New York to yank its deposits from Wells Fargo, one of 20 banks approved to hold the city’s cash.

A commission is set to meet next week to decide which banks are approved for city deposits for the next year — and advocates point to the city’s own rules to argue officials are legally required to bump the embattled bank from the list.

Wells Fargo — embroiled in a scandal over the creation of up to 2 million fake accounts — was knocked down to a “needs improvement” rating by federal regulators in March under the Community Reinvestment Act, citing an extensive pattern of discriminatory and illegal lending practices.

New York City rules say that in order to be designated to get government deposits, a bank must have at least a “satisfactory” rating.

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Citigroup Agrees to $97.4 Million Settlement in Money Laundering Inquiry

But no jail time…

For years, Citigroup employees feared that millions of dollars the bank was moving to Mexico might be suspicious. Yet in many cases, the bank did not alert regulators or step up its monitoring for money laundering, federal prosecutors said Monday.

Even as the Citigroup unit Banamex USA was growing to dominate remittances from the United States to Mexico, the bank did not properly safeguard its systems from being infiltrated by drug money and other illicit funds, prosecutors said.

On Monday, Citigroup agreed to pay $97.4 million in a settlement after a long federal investigation into Banamex USA. In exchange, the Justice Department will not file criminal charges against the bank in connection with inadequate oversight of Banamex USA, which is based in California.

As part of the agreement, Banamex USA “admitted to criminal violations by willfully failing to maintain an effective anti-money-laundering” compliance program, the Justice Department said.

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Amid Divestment Protests, More Cities Explore Public Banks

Next City website:

Despite the momentousness of the occasion — CNBC characterized it as serving Wells Fargo its “walking papers” — it was a surprisingly quiet vote, with little fanfare or any more than the usual audience, according to Bass. “We did not get our advocacy community rallied up for this particular vote,” she says. They’re saving that moment for when the city pulls all of its deposits out of Wells Fargo.

“This work will continue,” adds Bass.

Part of that work includes exploring the possibility of setting up a public bank for the city of Philadelphia, which could take over payroll functions and city deposits permanently, among other functions. At-large Council Member Derek Green initiated that exploration by passing a resolution in January 2016 authorizing the council’s Committee on Commerce and Economic Development to hold hearings regarding public banking. The first hearing took place in February 2016.

The universe seems to have conspired to put the right person at the right time in the right elected office. Green spent several years in banking in Philadelphia and then, while working for former City Council Member Marian Tasco, drafted one of the first municipal anti-predatory lending laws in the U.S. With deep experience in both banking and government, Green was mulling over a public bank even before he was sworn in last January alongside new Mayor Jim Kenney. The public banking resolution was his first solo act as a legislator.

“When they took direct lending out of branches,” Green said last year to open up the first public banking hearing, “that’s one of the reasons why I left banking, because at that point, I no longer could be the banker that I wanted to be … .”

Green hopes that a public bank can restore banking to be the community-driven, character-based lending that he was able to do successfully in his early days, particularly when it comes to small business lending. Most banks these days don’t have branch-based loan officers, as Green pointed out. That makes it pretty much impossible to maintain the relationships that are especially essential for small business lending.

A public bank can change the local or regional economics of banking. The Bank of North Dakota is the last remaining public bank in the country. The state legislature established it in 1919. It opened its doors on July 28 of that year, with $2 million in capital ($28 million in today’s dollars accounting for inflation). With $7.2 billion in assets today, it functions largely as a “banker’s bank,” mostly making low-interest loans alongside or directly to community banks and credit unions around the state. With such a reliable, affordable and local source of capital, North Dakota community banking is stronger than in other parts of the country. It’s a big reason why North Dakota has more banks and credit unions per capita than any other state.

Petition urges Berkeley to cut ties with Wells Fargo

BERKELEY — A petition on change.org urges the city to cease doing business with San Francisco-based Wells Fargo bank.

The petition was launched in apparent anticipation of the council’s taking up of the matter on May 30.

Wells Fargo & Company was reported last year to have opened more than 1.5 million accounts for clients without their knowledge, notes a report accompanying a draft resolution to cease doing business with the bank co-sponsored by council members Linda Maio, Sophie Hahn, Ben Bartlett and Mayor Jesse Arreguin.

“In addition, Wells Fargo has been engaged in financing the private prison industrial complex and the Dakota Access Pipeline,” the report continues. “These practices are of great concern. Since we learned of these practices our banking services contract with Wells Fargo was reduced markedly, at Council request, and we are assured we will terminate as soon as possible. Wells Fargo will have to compete with other banks as we seek new services and our criteria for selection must be clear and consistent with the City’s articulated values.”

Under the draft resolution, Berkeley would “extend the current banking services contract with Wells Fargo Bank only through May 2018.”

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Banks Want a Piece of the Payday-Loan Pie

WASHINGTON — Some banks want to take on payday lenders.

Financial firms, spurred by the Trump administration’s promises to deregulate, hope to return to offering short-term, high-interest loans after being pushed out of the sector by Obama-era rules. Two leading trade groups, the American Bankers Association and Consumer Bankers Association, recently proposed to Treasury Secretary Steven Mnuchin several steps they say would encourage banks to offer such loans.

The groups call for scrapping 2013 guidelines that forced banks to virtually abandon the market. Also on their wish list: blocking the Consumer Financial Protection Bureau from rolling out the sweeping rules on payday lending proposed last year, which they say would hamper their return to the sector.

Letting banks and credit unions offer small loans, proponents say, would help the millions of U.S. households that pay billions of dollars in fees each year to payday and auto-title lenders that often charge annual interest rates exceeding 300%.

“We feel very strongly that we want to serve all our customer segments,” said Mark Erhardt, senior vice president of retail product management at Fifth Third Bancorp.

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The story behind the only bank prosecuted after the 2008 financial crisis

After the 2008 financial crisis took millions of investment dollars from Americans, shell shocked financial advisers and briefly turned the country upside down, only one bank was indicted: Abacus Federal Savings in Chinatown, New York — the 2,531st largest bank in the U.S.

Founded by Chinese-American immigrant Thomas Sung in the 1980s, the bank has six branches in three states and primarily serves the Chinese community. Federal prosecutors indicted it in 2009 for mortgage fraud, securities fraud, and conspiracy after it reported to regulators it had discovered a loan officer was laundering money there.

Rather than plead guilty, the Sungs went to court. A new documentary from Oscar-nominated “Hoop Dreams” director Steve James follows the subsequent legal battle, which plays out in the film as a David and Goliath tale of a small bank taking the fall for the financial crisis over an isolated incident with a corrupt loan officer.

“Too big to fail turns into small enough to jail, and Abacus is small enough to jail,” journalist Matt Taibbi says in the film, calling the bank “as easy a target as you could possibly pick.”

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Watch Elizabeth Warren make mince meat out of Mnuchin