The Los Angeles City Council’s Budget and Finance Committee took a monumental step forward today with divestment and bank accountability. Under the revised and strengthened Request for Proposal (RFP) for banking services contract, Wells Fargo will be disqualified from commercial banking services with the City of Los Angeles due to their downgraded Community Reinvestment Act (CRA) rating.
Wells Fargo currently holds a national CRA rating of “Needs to Improve” for their long history of consumer fraud, corruption, and discriminatory practices against communities of color. Divest LA has consistently advocated the enforcement of the CRA rating as a pre-qualifier for banks bidding on the City’s contracts.
Councilmember Paul Krekorian, Chairman of the Budget Committee, instructed Finance to work with the City Attorney's office to report on further defining social responsibility, accountability measures, and predatory sales practices.
The revised RFP contains high standards for social responsibility and corporate citizenship. This includes requirements to conform to the City’s Responsible Banking Ordinance (RBO) and have a “Satisfactory” or better rating under the Community Reinvestment Act. The City will also debundle their accounts with too-big-too-fail banks, and award contracts with 12 different qualified financial institutions, with a scope of work that includes social responsibility.
We are encouraged by the sections regarding socially responsible banking – which will have a weighted score of 20 percent on a 100-percent scale. Comparative to other progressive cities, Seattle has a 15 percent scoring on social responsibility, and San Francisco has 5 percent. Los Angeles is leading the way!
Wells Fargo’s long and growing list of harmful and illegal practices clearly demonstrate their predatory nature and the urgency for the City to reinforce their fiduciary duty to safeguard its citizens and to hold our communities as top priority.
The current RFP states that additional factors measuring “social responsibility” include contributions and participation in local Los Angeles businesses and programs. It is imperative that when considering Wells Fargo’s social responsibility score, factors must reach beyond the bank’s local contributions, and include their overall disparaging national record of unethical and predatory banking behavior.
Additional recommendations include updating the RFP scoring process to not only prohibit CRA scores below Satisfactory, but to provide higher scores for banks with Outstanding CRA ratings. Scoring should also be included to address negative investments, such as highly destructive fossil fuel projects. From the repression of indigenous rights, to Tar Sands, Arctic drilling, to dangerous pipelines, the City of Los Angeles must continue to take steps to stop doing business with companies who profit on injustice.
In addition to passing the updated RFP, Divest LA urges the City to require a national and state CRA rating of “Satisfactory” or better in the City’s Responsible Banking Ordinance. This will directly address unethical financial institutions currently providing investment banking services to the City.
In incredible news for the Public Bank LA campaign and advocates of public banking, the Committee discussed adding termination clauses with banks in order to pave the way for the creation of a municipal public bank.
Divest LA is encouraged by the City's latest move to strengthen the RFP banking contract in regards to socially responsible banking, efforts to enforce the Responsible Banking Ordinance, and the prohibition of illegal and unethical banking practices. The final report will be released by the end of the month on November 27, 2017. We look forward to witnessing the final vote to divest, paving the path towards a new era of accountability for financial institutions and corporations doing business with the City of Los Angeles.