Wells Fargo Spreads Cash Our Communities Lose

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2 Executive Summary California faces big challenges to funding vital services, stemming foreclosures, and regaining its role as a leader among states. Unfortunately, standing in the way of most Californians are powerful corporations and wealthy special interests. Legislation designed to help low and moderate income communities often stalls or dies from inaction while corporations like Wells Fargo spend large sums on campaign contributions and lobbying to advance their interests. eir profits grow while most Californians struggle to find the solid footing they need to strengthen their neighborhoods. Wells Fargo is one of the most active players in the California legislature. eir lobbyists appear at our l- egislators doors on a variety of issues our communities care about with one focus to protect the environment that helps them thrive, including defeating legislation designed to strengthen communities. e formula is simple: Wells Fargo spreads cash through campaign money and lobbying, and low and moderate income communities lose. Among the policies Wells Fargo has opposed, the bank put a focus recently on stopping AB 188 (Ammiano), the change in ownership bill on corporate property tax which would raise tens of millions of dollars for California. Over more than a decade, Wells Fargo has spent over $2 million on California politicians at the state and federal level. Since the 1998 election cycle, Wells Fargo and its executives have spent at least $1.4 million on California state candidates, more than a quarter of the $5.2 million Wells Fargo spent on state candidates across 50 states. Top recipients include State Senator Mimi Walters, a member of the Senate appropriations committee and staunch opponent of the Homeowner Bill of Rights and progressive revenue raising measures. Wells Fargo has boosted the campaign coffers of nearly every single current member in the California Senate and Assembly committees with jurisdiction on the bank s issues, particularly the Senate appropriations, banking, and housing committees. Since 2007, Wells Fargo has paid Knudsen and Associates over $1 million to lobby for or against legislation to protect the bank s interests. Spending on lobbying increased between 2009 and 2012 when the California legislature also saw a spike in foreclosure related legislation (including the Homeowner Bill of Rights) and property tax reform efforts (including change of ownership bills).

3 Wells Fargo's Record of Harm to Communities is report focuses on the political spending of San Francisco-based Wells Fargo bank, one of the most brazen and destructive banks at the center of the ongoing housing crisis. e largest home mortgage servicer in California and in the country, the Wells Fargo mortgage portfolio eclipses $431 billion. 1 Wells has also been a leader in selling bad mortgages, ranked among the top ten originators of subprime home loans by In fact in 2006, Wells originated $74.2 billion in subprime loans, more than any other lender in the country. 2 is means Wells Fargo sits atop a mess they helped create, with foreclosures still pushing too many families out of their homes. But while California families struggle to climb out of the financial crisis, Wells Fargo continues to make record profits. Last year, Wells Fargo enjoyed record profits totaling $18.9 billion 3 and their top executive, John Stumpf, is the highest paid banker in the world, making $22.9 million in e toll of Wells Fargo s foreclosure practices in California is shocking. With over 8,000 homes in Wells Fargo s immediate foreclosure pipeline as of October 2013 those homes that have been issued either a Notice of Default or Notice of Trustee Sale indicating imminent foreclosure Wells is putting more families out of their homes than any other bank in California. And this destruction directly leads to a loss of wealth in communities. In a report from March 2013, Wells Fargo stood responsible for a potential $3.3 billion loss of wealth throughout California. 4 Wells Fargo s foreclosure practices disproportionately affect communities of color. e bank targeted African American and Latino communities with toxic loans carrying higher rates and fees and was forced to settle with the Department of Justice s Civil Rights division. 5 And, while Wells Fargo was a part of the multi-state Attorneys General settlement, recent reports show it severely lagging behind other banks in its relief obligations to California. Rival servicer Bank of America has provided over $1 billion more in principal reduction than Wells Fargo as of the most recent national monitor report. 6 Furthermore, the California monitor of the mortgage settlement recently found Wells Fargo provided insufficient assistance to homeowners in need of loan modifications. 7 In addition to Wells Fargo s foreclosure record, the bank is one of the country s biggest tax dodgers, hoarding billions of tax dollars meant for public services and recovery while doing everything possible to suppress further efforts to bring in revenue to California and the rest of the nation. From 2008 to 2010, Wells Fargo paid an effective federal income tax rate of -1.4%, receiving over $680 million in tax refunds for those years. In that same period, Wells received nearly $18 billion in additional tax subsidies, 8 along with a federal taxpayer bailout of at least $25 billion. Despite this record, Wells Fargo still enjoys a great deal of access in the halls of power here in California. California politicians have been generally reluctant to address widespread community concern about Wells Fargo and to hold the bank accountable for its failures to comply with existing laws and for business practices that harm communities. is report will describe Wells Fargo s political spending and how the causes of consumer protection and progressive tax reform have suffered as a result. 2

4 Campaign Money to California State Politicians A key component of the Wells Fargo s ability to keeps its taxes low and operate with little accountability for its foreclosure practices in California is the long-term strategy of giving campaign money to state politicians. In fact, with its headquarters in San Francisco, Wells Fargo has invested more dollars in California state politics than in any other state. Since the 1998 election cycle, Wells Fargo and its executives have spent at least $1.4 million on California state candidates, more than a quarter of the $5.2 million Wells Fargo spent on state candidates across 50 states. e most recent peak in spending came in the 2006 cycle with about $312,000 spent on politicians. Money follows power and hedges its bets. Wells Fargo has invested more in Democratic candidates than Republican ones over the past decade, giving about 60% of total candidate money to Democrats. Given the Democratic majorities in the legislature, this giving likely leans proportionally on Republican candidates. Wells Fargo also tends to spend more money on winning candidates, giving them three times more money overall than to losing candidates. 9 Total Giving to CA State Candidates and Committees Since 1998 Cycle $ 350,000 $ 300,000 O ther $ 250,000 Repubs Dems $ 200,000 $ 150,000 $ 100,000 $50,000 $ Wells Fargo has covered the state legislative committees with jurisdiction over issues that Wells cares about giving to nearly every single current committee member in the Senate and Assembly committees of importance to their agenda. In particular, they ve given generously to the Senate appropriations, banking, and housing committees, at least $76,108, $40,358, and $47,600 respectively to current members since the 1998 cycle. Top recipients among these committee members include Mimi Walters (who sits on the appropriations committee and, until recently, the banking committee) with at least $17,000 since the 1998 cycle and Ted Gaines on the appropriations and housing committees with $15,500. e Senate appropriations committee is where important bills such as S.B. 391, the California Homes and Jobs Act of 2013, have failed after passing through other committees. e California Homes and Jobs Act would have built more safe affordable single-family homes, created jobs, and helped restart the housing market.

5 Wells Fargo has also given generously to other committees where bills impacting corporate property taxes and foreclosures, opposed by Wells Fargo, have often failed. Members of the Assembly revenue and tax committee have taken at least $20,200 from Wells Fargo, and they have failed, the last three years, to move bills that would have required corporate property tax reassessment when ownership changes hands (A.B. 188 in 2013, A.B in 2012 and A.B. 448 in 2011). State Senator Mimi Walters (R-Irvine) was a staunch opponent of the Homeowner Bill of Rights and the California Homes and Jobs Act. e Senator has also opposed all revenue measures that have appeared before her. Spending as little as $7,000 on Senator Walters, Wells Fargo has invested strategically. Among candidates in recent elections (2010 and 2012 cycles), the top recipients of Wells Fargo campaign money include politicians in the best position to advance Wells Fargo s interests. Recent gubernatorial candidate Meg Whitman, a conservative billionaire and now CEO of Hewlett-Packard, took $41,150 from Wells Fargo during her 2010 run. Whitman said she would eliminate the state capital gains tax 10 and leave more of the budget reliant on property tax. Top 5 State Recipients Among 2010 and 2012 Cycle Candidates (Total amounts include any contributions made since the 1998 cycle.) Recipient Total Candidacy/Position Party-District Meg Whitman $41,150 Gubernatorial candidate R Mimi Walters $17,000 State Senator R-37 Ted Gaines $15,500 State Senator R-01 Roger Niello $14,686 State Assemblyman R-05 Fiona Ma $12,750 Former State Assembly Speaker D-12 4

6 Where Wells Fargo has been less successful in influencing policymakers, the bank finds other ways to flex its financial muscles. In the city of Richmond where the city council moved forward recently with a mortgage principal reduction program to help homeowners with underwater loans, Wells Fargo is among the handful of banks suing the city. Lobbying Against Our Communities In addition to campaign money, Wells Fargo pays lobbyists to advance the bank s legislative interests. Knudsen and Associates has been a Wells Fargo lobbying firm since at least the 2000 election cycle. In the past 4 legislative cycles, dating back to 2007, Wells Fargo has paid Knudsen and Associates over $1 million to lobby for or against legislation to protect its interests. Between 2009 and 2012, when the California legislature saw a spike in foreclosure related legislation (including the Homeowner Bill of Rights) and property tax reform efforts (including change of ownership bills) a concurrent spike in lobby spending occurred for Wells Fargo. Wells Fargo Lobbying Totals Legislative Cycle Lobbyist Compensation 2007/2008 $277, /2010 $314, /2012 $350, /2014 (to date) $92,125 So far in the current legislative cycle ( ), Wells Fargo has paid Knudsen and Associates over $92,000 to lobby on a range of bills. Below are some of the bills Wells Fargo lobbied against in this legislative cycle: A.B. 188 Change of ownership bill that would bring much needed revenue from commercial property taxes by closing a loophole in the current law. A.B. 880 Health care law that would remove a loophole that big corporations are exploiting in the Affordable Care Act, which allows them to reduce hours and wages to push employees into Medi-Cal to avoid paying the employer share of health insurance. S.B. 391 California Homes and Jobs Act, designed to build more safe, affordable single-family homes, create jobs, and help restart the housing market. A.B. 233 Designed to restrict student loan servicers (like Wells Fargo) from recouping unpaid student loans through wage garnishments.

7 Campaign Money to California s Federal Politicians Wells Fargo also builds relationships with California s federal politicians, spending more than $800,000 on candidates since the 1998 cycle. While this amounts to a smaller share of the campaign money Wells Fargo s PAC and executives have given to all federal candidates and party committees over this period ($11.5 million), political contributions to California federal candidates has grown over the last two decades, peaking in the 2012 cycle at about $170,000. Total Giving to California Federal Candidates Since 1998 Cycle $180,000 $160,000 Indep/3rdPty Repubs $140,000 Dems $12 20,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ Among sitting California members of Congress and 2012 cycle candidates, the top ten recipients of Wells Fargo campaign money include the most powerful members of the California delegation. Senator Dianne Feinstein tops the list with $78,000 and House Minority Leader Nancy Pelosi is the second biggest recipient with $66,500. 6

8 Top 5 Federal California Recipients Among Current Members and 2012 Cycle Candidates Recipient Total Dianne Feinstein (D) $78,000 Nancy Pelosi (D) $66,500 Ed Royce (R) $56,800 George Miller (D) $35,000 Xavier Becerra (D) $26,000 Note: Since totals in this chart only include contributions back to the 1998 cycle, career totals can be higher for federal politicians with long careers. For example, Sen. Feinstein s career total from Wells Fargo is at least $100,250. Federal influence remains key to Wells Fargo. With government bailouts, national mortgage settlements, and federal taxes all being decided on a national level, Wells Fargo continues to spend strategic cash federally to protect its profits. Conclusion With the power of its checkbook, Wells Fargo chooses to spend millions to buy political influence and ensure its key interests reducing housing regulation and low taxes remain protected. In California, where corporations can give directly to candidates from their treasuries and where contribution limits are higher than federal levels, its particularly easy for Wells Fargo to make these influence investments, using the profit garnered from California communities. e reach of Wells Fargo s influence spending is broad and includes amounts spent on membership in a variety of lobbying groups. 12 Given the dire need for new revenue in the state and the ongoing foreclosure crisis, California needs Wells Fargo to invest instead in restarting the economy by alleviating the housing crisis and paying its fair share to increase revenue. Unfortunately, Wells Fargo can continue to manipulate California politics to suit its needs until there is systemic change in California and at the national level to reduce the oversized influence of moneyed interests in our democracy. We need to address the political inequality built into our elections by moving proposals like the Fair Elections Now Act or Grassroots Democracy Act systems that would raise the voices of everyday people through small dollar matching and reduce the role of big campaign money. When we have government bodies that are accountable to everyday people and not deep-pocketed donors, we can make progress in strengthening our neighborhoods and financial future. Methodology Campaign finance information is based on analysis of state contribution data provided by the National Institute on Money in Politics and federal data provided by the Center for Responsive Politics. All contribution data were accessed and downloaded in bulk through the Sunlight Foundation s Influence Explorer site on August 1, State contribution data were available from the 1998 to 2012 cycles. Federal contribution data were available from the 1990 to 2012 cycle. Totals include contributions made to candidate and party committees. Lobbying information is based on lobbying report forms (California Form 625) filed by Wells Fargo lobbyist Knudsen and associates from 2007 through 2013 with the California Secretary of State. e information was accessed through the California Secretary of State s website on October 15,

9 About Us ACCE Institute is a statewide organization with a mission to improve the lives of low income and working families in California by carrying out and supporting work that fosters community improvement and civic participation. e ACCE Institute conducts research on critical issues of concern to low- and moderate-income communities, educates the public and policy-makers about these issues, and provides capacity-building trainings to individuals and organizations. Additionally, the ACCE Institute works to increase the civic engagement of low and moderate income communities by helping local organizations develop non-partisan civic engagement efforts that encourage active public citizenship and voting in low and moderate income communities. Public Campaign is a national nonpartisan organization that fights to raise the voices of everyday people in our democracy through changing our campaign finance laws and through holding elected officials accountable. Learn more at 8

10 Endnotes 1. Hopkins, Megan. "Wells Fargo Tops in Mortgage Servicing." HousingWire.com, 08 Aug Web. 23 Oct Department of Justice, Case 1:12-cv Document 1, Filed 7 July Web 22 Oct Wells Fargo 4th Quarter 2012 Year end Earnings Report: 4. ACCCE/Center for Popular Democracy. California in Crisis: How Wells Fargo s Foreclosure Pipeline is Damaging Local Communities. March 2013, default/files/ca%20in%20crisis%20-%20wells%20fargo%20report.web_.pdf 5. Reckard, E. Scott. "Wells Fargo to Pay $175 Million to Settle Lending Bias Allegations." Los Angeles Times. Los Angeles Times, 13 July Web. 14 Oct National Mortgage Settlement Monitor Report, May 2013, 7. National Mortgage Settlement Compliance Report, Jun 19th 2013: 8. Citizens for Tax Justice, and Institute on Taxation and Economic Policy. Corporate Taxpayers & Corporate Tax Dodgers Nov is analysis is based on the election result for a candidate in any given cycle (as opposed to whether he or she ultimately won office). 10. Kelly, Chris. "Meg Whitman's Tax Plan: She Stops Paying Hers." e Huffington Post. ehuffingtonpost.com, 16 July Web. 23 Oct Vekshin, Alison. "Richmond, California, Advances Mortgage Reduction Plan."Bloomberg.com. Bloomberg, 11 Sept Web. 24 Oct A partial list of Wells Fargo s trade associations is available at

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