Will Philly join Wells Fargo boycott list?

WFC EARNINGS
After the recent aggressive bonus disclosures at Wells Fargo, Philadelphia is looking into a boycott.

California, Illinois, Ohio, Chicago, and Seattle say they have stopped depositing money with Wells Fargo, or hiring it to sell bonds, after the bank was forced to admit its aggressive sales-bonus policy encouraged thousands of workers to set up phony accounts - and bank bosses let the scams run for years.

As usual, these feel-good boycotts are piling up after the damage was done. Can Philly be far behind?

Sure enough, City Council voted last month, with majorities from both parties, "to investigate the impact" of what Wells Fargo did on city residents - and whether the city should "deposit or invest taxpayer funds in financial institutions such as Wells Fargo, which promote policies that defraud its customers . . ."

Democrats Cindy Bass and Bobby Henon have also drafted a bill that would dump Wells Fargo from the city's list of authorized banks, leaving PNC, TD, Citizens, Bank of America, Citi and two other New York banks, and two much smaller local institutions - Republic First and United - still officially clean enough to handle city taxes, fees, payroll, and payments.

But how much leverage does Philadelphia have, really? Philadelphia spent a little under $2 million last year on bank fees - a very small part of its $4 billion yearly budget.

Most of the fees weren't even paid to the banks; they were instead discounted from interest the banks owed the city on its deposits.

Wells would suffer a bit if it lost these city deposits. Treasury records show Wells collected $1.39 million, or 70 percent, of the $1.98 million the city paid depository banks last year. That's not counting what the banks made from investing city deposits elsewhere.

Members of a somewhat different group of financial companies - Wall Street firms like Goldman Sachs, JPMorgan, and Morgan Stanley, Philadelphia brokerage Janney Montgomery Scott, plus the big banks - compete for millions more in fees from the $1 billion-plus in bonds Philadelphia sells to raise cash each year.

Banks are also among the managers that collect more than $40 million in yearly fees from the city's woefully underfunded public pension plans.

Council members haven't as yet proposed cutting Wells from bond or pension deals. They are, however, fixated on studying bank behavior, again.

It's hard to believe more hearings will help. In 2014 the city ordered a 277-page report - you can read it on the city treasury website - titled "Lending Practices of Authorized Depositories for the City of Philadelphia."

The report shows, among other things, that PNC employed 2,700 in Philadelphia, Wells Fargo about 2,000, and TD Bank about 1,000.

Which means the three of them are generating something north of $10 million in yearly wage taxes alone. And bank jobs have been steadily vanishing here: Wells Fargo's predecessors, including Fidelity, CoreStates, and Meridian, employed more than 10,000 in Center City 20 years ago.

Maybe Council could usefully investigate why so many bank jobs went away - and think about how to get some back?

Wells inherited its role in city finance from one of its predecessors, the old Philadelphia National Bank, which was so deeply tied to city finances that two Commerce Bank executives went to prison in 2005 for trying to bribe the city treasurer to loosen the dominant bank's grip and throw them some fee deals.

City Finance Director Rob Dubow and Deputy Treasurer Christian Dunbar reminded me that Wells Fargo outpriced competing offers from Bank of America, TD, and PNC the last time the city's key payroll management contract went out to bid in 2012, and won the deal.

They expect the contract will be bid again later this year.

JoeD@phillynews.com

215-854-5194@PhillyJoeD

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