This Week in ESG and Impact Investing

According to the Consumer Financial Protection Bureau (CFPB), Wells Fargo Bank (WFB) "incorrectly applied loan payments, erroneously imposed certain fees and charges, incorrectly repossessed customers' vehicles, and failed to refund certain unearned fees on debt cancellation products; (ii) with respect to home mortgage servicing, incorrectly denied mortgage loan modifications to certain qualified borrowers; and (iii) with respect to consumer deposit accounts, improperly froze or closed customer accounts, improperly charged certain overdraft fees, and did not always waive monthly account service fees consistent with its disclosures." While CFPB claims to have fined WFB $3.7 billion, a review of the consent order released by the Agency reveals several discrepancies. The average penalty per account totaled $252.35 excluding penalties for mortgage servicing errors. These mortgage errors, while substantially higher, applied to fewer than 3.500 accounts. According to the CFPB, ...

Wells Fargo will testify several times this month before the House Financial Services Committee, under the leadership of Rep. Maxine Waters, D-Calif. And Waters is no radical, despite what right-wing propagandists say . She is an experienced, capable legislator with a solid track record of protecting the public. Yet Waters is also not to be trifled with. Both the independent chairman and lead director at the board of Wells Fargo resigned Monday after Waters called for their resignation. Interestingly, those same two leaders are the only witnesses scheduled to testify at Wednesday’s hearing . (It’s long overdue that the entire board be replaced, as noted in 2018 .) In 2019, Wells Fargo reported net income of $19.5 billion . That was lower than the $22.4 billion the bank earned in 2018, as the cost of litigation started to impact profits. Wells recently agreed to pay regulators an additional $3 billion to cover fines for violating consumer protection laws. The bank has a long and sor...

According to a March 25, 2021 press release, "Greenwood, the digital banking platform for Black and Latino individuals and business owners..announced it has closed $40 million of Series A funding from six of the seven largest U.S. banks and the top two payment technology companies: Truist, Bank of America, PNC, JPMorgan Chase, Wells Fargo (Its still time to Clean House at Wells), Mastercard, and Visa."  The Greenwood online fintech platform (not a bank) officially opened its virtual doors for business on April 26, 2022.  The website notes that "Greenwood is not a bank. Banking services provided by Coastal Community Bank , Member FDIC. The Greenwood Debit Card is issued by Coastal Community Bank pursuant to a license by Mastercard International." It is significant to note that Coastal is not Black-owned, but they do have a significant social impact portfolio. We have no doubt that Greenwood attempted to enlist the aid of a Black bank, but, in addition to being small...

According to a press release, "Greenwood, the digital banking platform for Black and Latino individuals and business owners, today announced it has closed $40 million of Series A funding from six of the seven largest U.S. banks and the top two payment technology companies: Truist, Bank of America, PNC, JPMorgan Chase, Wells Fargo (Its still time to Clean House at Wells ) , Mastercard, and Visa." The investor group also includes the largest Hispanic bank in the US, Banco Popular. (Looks like the crisis has finally forced the realization that, as MLK noted , "we must 'live together as brothers or perish together as fools." ) FIS, TTV Capital, SoftBank Opportunity Fund, Lightspeed Venture Partners and All-Pro NFL running back Alvin Kamara were also listed as investors. For a startup to receive funding from six of the seven largest firms in its industry is significant. The key question is why and what will they do with this funding? Greenwood started out of the Bank...

According to the Financial Times, megabank Wells Fargo & Co “has asked the U.S. Federal Reserve to remove an asset cap introduced during its accounts scandal in order to allow it to support businesses and customers hit by the coronavirus economic fallout..” The growth cap was imposed after the bank “acknowledged that it improperly foreclosed on 545 distressed homeowners after they asked for help with their mortgages, created 3.5 million fake accounts, charged 570,000 customers for auto insurance they did not need, and illegally repossessed vehicles from hundreds of service members.” Former bank employees state that Wells "targeted black churches” and neighborhoods by offering escalating-interest mortgages, which some loan officers called “ghetto loans.” This week, the bank demanded that call center workers come to the office despite coronavirus, but agreed to pay "all of its domestic full-time employees who make less than $100,000 a year.. a pre-tax payment of $...

Earlier this month, Wells Fargo, the third-largest bank in the United States, acknowledged that it improperly foreclosed on 545 distressed homeowners after they asked for help with their mortgages. The bank has exhibited a seemingly established pattern of negative behavior, from creating 3.5 million fake accounts to charging 570,000 customers for auto insurance they did not need to illegally repossessing vehicles from hundreds of service members. At the start of the year, Wells ranked 26 on the Fortune 500’s 2018 rankings of the largest U.S. corporations by total revenue. It is also the second-largest retail mortgage lender and the largest debit card issuer by purchase and transaction volume. These facts establish the bank as a systemically important financial institution. My firm’s economic models suggest that the next recession may very well start with a major hack at a SIFI like Wells Fargo. This underscores the importance of stemming the ongoing problems at Wells as quickly and ...

Maggie L. Walker founded St. Luke Penny Savings Bank in 1903, a time when Jim Crow laws and institutionalized prejudice conspired to prevent blacks from borrowing money or from even having bank accounts. This was done, of course, to keep blacks in a position of economic servitude, a situation blacks still suffer from to this day. Born a year before emancipation, Ms. Walker, the daughter of a former slave, is the first American women to have successfully opened a bank. (Having attempted in 2008 to raise $50 million to create  a black-owned bank holding company  to make capital investments in and own parts of new and existing black-owned U.S. banks, I can tell you that this is no easy task.) She did so in the South. In Richmond, Va., the capital of the confederacy. during a time when even white women were not allowed to vote.  In the South . (Oh, and she also led a boycott of Richmond’s segregated trolley car system, 50 years  before  the Montgomery Bus Boyc...

The Securities and Exchange Commission’s (SEC) recent report defines tokens sold through ICO offerings as “securities.” This is neither appropriate nor in the public interest. This definition will restrict the ability of startups to raise much needed capital without having to go to commercial banks, investment banks and venture capitalists, institutions who long ago abdicated their role in providing capital to deserving startups and small businesses. (Commercial banks, investment banks and venture capitalists focus on providing capital to a narrow group of non-minority and non female firms. As Uber and others (Google?) have shown, many of the women who dared work for these commercial bank, investment bank and venture capitalist supported firms found themselves harassed..and we know what happened when they sought funding.) In a press release, the SEC concluded that anyone using "..distributed ledger or blockchain enabled means for capital raising (needs) to take appropriate st...

On July 24th, I attended a Branchless Banking Roundtable discussion sponsored by the Financial Services Innovation Coalition (FSIC) at the Rayburn House Office Building in D.C.  Panelists include the Co-Founder of BankMobile, Luvleen Sidhu, Founder of Creative Investment Research, William Michael Cunningham, and the founder of HBCU Wall Street, Torrence Reed. The moderator was the founder of FSIC, Kevin B. Kimble. During the hour-long discussion, they discussed issues related to the inefficiency of bank branches, the problem of bank transaction fees, and how newly developed technologies can change people’s way of banking. The discussion kicked off with agreement among the panelists that bank branches are no longer a necessary part of people’s banking experience. Based on statistics, bank branches are, on average, only getting one account opened each week per branch, which equals 52 accounts opened a year at each branch. Apparently, the influence of bank branches on ...

We note with interest the designation of Urban Partnership Bank as a Minority Depository Institution. According to Crain’s Chicago Business, “The $1 billion-asset bank based on Chicago's South Side (formerly South Shore Bank) is officially a minority lender despite an ownership dominated by Wall Street giants like Goldman Sachs Group Inc. and J.P. Morgan Chase & Co.” ( http://www.chicagobusiness.com/article/20130611/NEWS01/130619972/wall-street-owned-urban-partnership-bank-officially-a-minority-bank ) A Minority Depository Institution, as defined by Section 308 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), used to be a bank in which 51% or more of the common stock was owned by one or more members of the following groups: Black American, Asian American, Hispanic American, or Native American . The threshold now for MDI designation is a bank that meets one or more of the following standards: 1.     ...

I saw an article recently on Black banks in the US that was filled with inaccuracies. It was a public relations piece for the banking industry, so I thought I would post something based on my 20 years of research experience in the sector. 1. What is the historical significance of Black banks? They were created at a time when discrimination against Black people   was legal in the US. They served as the only financial service   providers to the community. 2. Do Black banks have the same level of significance to the Black  community today? Why or why not? No. They are too small to serve the community in any meaningful way. For example, they cannot serve as a line of defense against predatory lending . The result: b anks like Wells Fargo are free to target black communities for shoddy loans :  http://www.washingtonpost.com/ business/economy/former-wells- fargo-loan-officer-testifies- in-baltimore-mortgage-lawsuit/ 2012/06/12/gJQA6EGtXV_story. html Some Black banks we...

Mar 23, 2011. According to recent news reports, " After a three-month trial, a Los Angeles Superior Court jury returned a $3,520,000 lending discrimination verdict today against Wells Fargo Bank. (Opal Jones, et. al v. Wells Fargo Bank, N.A., Wells Fargo Home Mortgage, et. al Los Angeles Superior Court, Case No. BC337821) The class action lawsuit alleged the bank consistently and knowingly discriminated against borrowers in minority neighborhoods, resulting in these borrowers paying more for their loans than borrowers in non-minority areas of Los Angeles County. The jury found that the race, color, ancestry and/or national origin of the plaintiffs and the class they represent was a 'motivating reason' for Wells Fargo’s conduct."

Summary version from The American Banker Newspaper. Wednesday, May 19, 2010. Story by Robert Barba. Sources said early Tuesday that the struggling $2.3 billion-asset lender had secured $140 million in capital commitments, well exceeding the $125 million it needed to become eligible for a $75 million investment from the Treasury Department. Though most of the companies on the roster have been solid supporters of community development financial institutions, Goldman Sachs Group Inc. and General Electric Co.'s GE Capital were two newcomers. They also were among the biggest investors in the group, kicking in $25 million and $20 million, respectively. Another headline investor in ShoreBank is Citigroup Inc., at $20 million. Others include Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., U.S. Bancorp, Morgan Stanley, Northern Trust Corp. and PNC Financial Services Group Inc. Also on board were State Farm, the Ford Foundation and the John D. and Catherine T. MacArth...

As we noted in June , Wells Fargo has a real issue. Now, they have been sued by the State of Illinois. According to recent news reports , "Illinois filed a lawsuit on Friday against Wells Fargo & Co. accusing it of discriminating against black and Latino homeowners by employing racially biased lending practices. San Francisco-based Wells Fargo & Co. allegedly sold high-cost subprime mortgage loans to minorities while white borrowers with similar incomes received lower-cost loans, according to the lawsuit, filed in Cook County Circuit Court by Illinois Attorney General Lisa Madigan. 'As a result of its discriminatory and illegal mortgage-lending practices, Wells Fargo transformed our cities' predominantly African-American and Latino neighborhoods into ground zero for subprime lending,' Madigan said."

According to recent news reports , "One of the nation's largest banks allegedly set up a special sales office to steer risky subprime loans to residents in Prince George's County, Baltimore city and other predominantly black communities..Wells Fargo Bank employees allege in a lawsuit. According to the sworn statements by two former loan officers filed June 1 in U.S. District Court of Maryland as part of a lawsuit being pursued by the City of Baltimore against Wells Fargo alleging discriminatory and predatory lending, bank employees targeted black neighborhoods and churches for the escalating-interest mortgages, which some in the office called 'ghetto loans.' Many customers with sufficient income, credit and savings to qualify for fixed, lower-interest mortgages were still urged to take subprime loans..because the higher rates meant bigger profits for the bank: 'If a loan officer referred a borrower who should have qualified for a prime loan to a subprime loan, ...

1. Topic: TARP Accountability: Use of Federal Assistance by the First TARP Recipients 2. Date and Time: Feb 11, 2009, 10:00 am – 1:00 pm 3. Place: 2128 and 2172 Rayburn House Office Building 4. Chairman: Mr. Barney Frank, Chairman of the House Financial Services Committee 5. Witness List: Mr. Lloyd C. Blankfein, Chief Executive Officer and Chairman, Goldman Sachs and Co. Mr. James Dimon, Chief Executive Officer, JPMorgan Chase and Co. Mr. Robert P. Kelly, Chairman and Chief Executive Officer, Bank of New York Mellon Mr. Ken Lewis, Chairman and Chief Executive Officer, Bank of America Mr. Ronald E. Logue, Chairman and Chief Executive Officer, State Street Corporation Mr. John J. Mack, Chairman and Chief Executive Officer, Morgan Stanley Mr. Vikram Pandit, Chief Executive Officer, Citigroup Mr. John Stumpf, President and Chief Executive Officer, Wells Fargo and Co. Eight bank CEOs from companies receiving the first TARP funds testified before the House Financial Services Committee. All t...