The national foreclosure crisis was encapsulated in a warm, windowless room serving this week as the venue of the San Francisco Employees' Retirement System's board meeting, where Wells Fargo's lending and foreclosure record was the focus of debate.
During almost three hours of public comment and board-member discussion, the board considered whether to use their holdings in Wells Fargo and other big banks to influence the banking industry's behavior. The board was considering the use of its proxy vote and heightened scrutiny of the bank's loan modification and foreclosure practices in light of how those practices affected the pension fund's investments or fit with the retirement system's socially responsible investment policies.
In the end, the board decided to do nothing.
An earlier initiative among activists to have the San Francisco city employees' pension fund divest itself of Wells Fargo and other large lenders were apparently rebuffed. The stakes would have been high in that fight, given the optics of San Francisco city government leading a divestiture movement against the hometown bank.
At a protest taking place outside 30 Van Ness Ave. before Wednesday's meeting, I asked activist Buck Bagot whether he was disappointed the retirement board wasn't considering divestiture.
"I have to work at the place idealism and reality meet," he said.
And it's reality, or at least the activists' version of reality, that Wells Fargo challenges.
The San Francisco bank said activists with the Alliance for Californians for Community Empowerment have provided the retirement board with "misleading and inaccurate information about Wells Fargo in an effort to advance a proposal that leads to the board divesting all holdings of Wells Fargo stock," Joseph Ohayon, senior vice president of Wells Fargo Home Mortgage wrote in a letter to the board and that was shared with me during the meeting. Ohayon and Brad Blackwell, Wells Fargo's executive vice president of Wells Fargo Home Mortgage, spoke at the meeting during the public comment period.
Jim Lazarus, a senior vice president of the San Francisco Chamber of Commerce, told the board that the real offenders of the mortgage crisis are no longer around, namely Washington Mutual, Countrywide and Wachovia, acquired by J.P. Morgan Chase, (NYSE: JPM) Bank of America (NYSE: BAC) and Wells Fargo, (NYSE: WFC) respectively. Lazarus said today's big banks should be getting credit for helping to clean up the mess.
Wells Fargo employees, San Francisco nonprofit leaders, the Committee on Jobs and other bank supporters were the first 18 people or so to address board during public comment period.
Wells Fargo's Ohayon's said in his five-page letter to the board, "When customers choose to work with us, we help seven of 10 avoid foreclosure."
Some activists at the meeting held signs saying, "Stop racist lending," — an issue Ohayon addressed head-on in his letter.
"In 2011 — the most recent year for which comparative Home Mortgage Disclosure Act data is available — we were the No. 1 originator overall, and in lending to all racial and ethnic groups, to lower-income consumers, and in lower-income neighborhoods," Ohayon wrote.
Several activists cited Wells Fargo's $175 million settlement with the Justice Department over claims that some African-American and Hispanic borrowers got high-priced loans even though they would have qualified for less expensive prime mortgages.
"While we vigorously deny these claims, Wells Fargo settled in this matter because we believe it was in the best interest of our team members, customers, communities and investors to avoid a long and costly legal fight," Ohayon said in his letter.
This week's meeting was far more contentious than an earlier meeting of the retirement board that I attended in January, where activists sought divestiture. At that meeting, Wells Fargo had no representatives. Even retirement system board member Brenda Wright, who is also a regional manager for community development at Wells Fargo, missed the January meeting due to a schedule conflict.
Emotions ran high on both sides of the debate Wednesday.
Two members of the board recused themselves from the meeting and vote and SupervisorMalia Cohen missed the meeting due to illness. Board President Wendy Paskin-Jordan, CEO of Paskin Capital Advisors, recused herself, saying that she owned bank stock but declined to indentify the banks. Wright also recused herself. To boos and hisses from the audience, Wright said she didn't appreciate the activists recently picketing her home.
"You have your rights, and I have my rights," she said before leaving the meeting. An activist cried out, "At least you have a home."
The exchange captured the tenor of much of the meeting.
Board member Victor Makras, president of Makras Real Estate, told Joseph Driscoll, a fire department captain who led the meeting in Paskin-Jordan's absence, that he had an interest in Bank of America securities but didn't feel it was necessary to recuse himself.
Herb Meiberger made a motion supporting the use of the retirement system's influence in proxy voting and greater scrutiny of lenders' foreclosure practices, but he did not call for divestiture. His motion was not seconded. Makras moved that the board not take such action, which Meiberger seconded "for the sake of discussion."
Meilberger said at the meeting that he wanted to see more remorse from the big banks.
"If there's no remorse, it will happen again," he said.
The next clash between activists and Wells Fargo is likely to be at the bank's annual meeting, to be led by Chairman and CEO John Stumpf, in Salt Lake City April 23.
Grace Martinez with the Alliance for Californians for Community Empowerment, said she's among the activists planning to be in Utah.
"We want to be sure our voices are heard," Martinez said.
Mark Calvey
Senior Reporter-
San Francisco Business Times
