Wells Fargo, the nation's largest mortgage lender, is also the bank for the City of Berkeley. Photo: Lance Knobel

Update, 01.31.12: Wells Fargo spokesperson Ruben Pulido sent us the following statement at 4:30 pm today:

“Wells Fargo is committed to the city of Berkeley.  We are working with local leaders to support the community and help people who are facing financial challenges. Over the past three years, Wells Fargo has donated more than $3 million to 89 nonprofits in Berkeley. Wells Fargo works diligently with customers to find solutions that prevent foreclosures. Over the past year, less than 2% of homeowner-occupied loans in our servicing portfolio have proceeded to foreclosure sale. Wells Fargo currently owns less than 10 properties in the Berkeley market.”

Original story: The City of Berkeley might switch its banking from Wells Fargo, seen as one of the major banks at the heart of the financial crisis and mortgage meltdown.

At tomorrow night’s City Council meeting, a proposal by Jesse Arreguín and Darryl Moore asks staff to evaluate shifting the city’s banking relationship from Wells Fargo when the current contract expires at the end of 2012.

“We have a responsibility to show we are investing the taxpayers’ money not only in a fiscally responsible way, but in a socially responsible way,” said Arreguín. “We want to do business with someone who invests in our community.” 

If passed, the recommendation asks staff to report back to council by May. Arreguín said that would allow for a banking RFP to be issued this summer, and for the council to reach a decision by the fall.

“Berkeley has a record of using its voice to lead to social change,” Arreguín said. “Through the actions we take, we’ve been able to influence other cities.” He cited Berkeley’s early action on divestment from South Africa in the 1970s as an example of the city’s record.

In their recommendation to the City Council, Arreguín and Moore write that “Wells Fargo Bank… was a key part of the subprime lending crisis which led to our overall economic collapse”. Wells Fargo and Bank of America were particular targets of November’s Move Your Money Day, which had a significant response in Berkeley.

Berkeley has used Wells Fargo since 2004, when it left Bank of the West. The contract was last renewed in 2009. The recommendation before the council asks staff to look at alternatives “including but not limited to Community Banks, membership-based Credit Unions or Community Development Financial Institutions (CDFI)”.

Given the scale of Berkeley’s banking needs — the city budget exceeds $300 million — Arreguín said it was important to make sure any institution was adequately capitalized to handle the city’s business. That might rule out smaller institutions, he said. According to Arreguín, the Peralta Community College District is also considering switching its accounts from Wells Fargo.

Arreguín said any decision would clearly depend on the report from city staff. “But I hope we do end up moving our money,” he said.

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Lance Knobel (Berkeleyside co-founder) has been a journalist for nearly 40 years. Much of his career was in business journalism. He was editor-in-chief of both Management Today, the leading business magazine...