San Antonio City Council drops Wells Fargo as bond underwriter

Citing concerns about a long history of unethical business practices, members of the San Antonio City Council on Thursday kicked Wells Fargo off a list of financial institutions selected to serve as underwriters for the city’s bond transactions for the next five years.

The decision pitted the council’s progressives, who said the city should bar the company over its history of predatory business practices, against some of its more business-friendly members, who suggested doing so would be unfair to Wells Fargo’s roughly 4,500 local employees.

Seven council members voted Thursday in favor of removing Wells Fargo, while Mayor Ron Nirenberg, Melissa Cabello Havrda (D6), Manny Pelaez (D8) and Marc Whyte (D10) voted against the move.

The list of more than a dozen financial institutions approved Thursday includes J.P. Morgan Securities, Raymond James & Associates, and Morgan Stanley. Wells Fargo had been on the list of underwriters since 2017.

Wells Fargo has been mired in scandal and regulatory issues for most of the last decade.

In December, the federal government’s Consumer Financial Protection Bureau ordered the company to pay more than $2 billion in redress to consumers and a $1.7 billion civil penalty. It said the company illegally assessed fees and interest charges on auto and mortgage loans, had customers’ cars wrongly repossessed, charged consumers “unlawful surprise overdraft fees” and applied other incorrect charges to checking and savings accounts.

The list of underwriters compiled by city staff is designed to help San Antonio price its bonds. The financial institutions have relationships with investors and help the city facilitate transactions in the market, said Deputy Chief Financial Officer Troy Elliott.

Presented with the list last week, Councilman John Courage (D9) proposed an amendment to remove Wells Fargo. Doing so would not impact the city’s ability to sell bonds, according to Elliott.

“I remain concerned about the continuing lack of institutional integrity demonstrated by Wells Fargo Bank and its affiliates,” Courage said at the time.

Other council members contended that most big banks have been penalized over their business practices at some point, so it would be unfair to single out Wells Fargo. The council ultimately decided to wait a week to explore the records of other banks on the list.

Pelaez, who balked at Courage’s amendment, called Houston-based Wells Fargo executive John Young up to the dais last week to defend the company.

Young, a director at Wells Fargo Securities, told the council that many of the recent penalties being discussed date back to regulatory issues that surfaced in 2016 and 2017. Under new leadership, he said, the company has cleaned house and sought to rehabilitate its image.

“We’ve instituted many more oversight and compliance procedures to make sure things like this would never happen again,” Young said.

Havrda, whose district includes Wells Fargo’s local headquarters, came to the defense of local employees.

“To say that they don’t care about their community, I have to dispute that because they are actively involved in the things that we do in my district,” Havrda said last week.

Councilwoman Rosie Castro (D7) contended that, for better or worse, Wells Fargo’s local employees don’t have the power to influence the type of decisions the company is being punished for.

Of the San Antonio employees, Castro agreed, “I’ve worked with them. I know they’re good people.

“But that’s very different from your corporate level, from administrators that make decisions that you cannot go against,” she said. “I think it behooves the council to make a show of the fact that we’re not going to be willing to play this game as usual, that we’re not going to reward bad behavior, and then we are going to look at integrity when we make our decisions.”