Seattle’s political leaders are looking to shake free of Wells Fargo in protest of the bank’s financing of the Dakota Access Pipeline project that threatens to foul the water supply and sacred lands of North Dakota’s Standing Rock Sioux.
The city will be stuck with the megabank for at least another year. But under legislation introduced Monday by Councilwoman Kshama Sawant, it would take its business elsewhere once Wells Fargo’s current contract to manage $3 billion in city funds expires next December.
Wells Fargo is one of two American banking titans that is directly lending to Dakota Access LLC. It has given the companies involved in the project close to half a billion dollars in funding, much of it in the form of direct project loans for the pipeline. Citibank has chipped in another $527 million, according to Food & Water Watch.
Anti-pipeline protesters have been physically assaulted, attacked by private security guards’ dogs, and rushed by riot cops repeatedly over the past several months. One almost lost her arm after being injured in an explosion activists blame on police during a tense standoff in November, where police turned a water cannon on protesters with temperatures well below freezing. Mass arrests have gained national media attention, while the abusive treatment of imprisoned activists has received less coverage.
The protesters recently won a partial, temporary victory when the Army Corps of Engineers decided not to approve the next phase of the pipeline’s planned route earlier this month. But the fight in North Dakota is ongoing and protesters have not decamped. Seattle and other public institutions should support the protests with their dollars, Sawant said in a blog post announcing the legislation.
“Elected officials nationwide owe it to the activists to stand with them. One clear way this City Council can do that is by divesting the City of Seattle from Wells Fargo,” the outspoken socialist wrote. “The pipeline executives have arrogantly announced they intend to wait until Trump comes to power, with the hope that his new administration will reverse the Army Corps’ decision. By urgently taking steps to divest from Wells Fargo, starting today, our city will have taken an important step against Trump’s agenda.”
While Seattle can’t break the contract by which Wells Fargo manages its operating fund, the bill introduced Monday would prevent the city from giving the bank additional business in the final 12 months of that deal.
It’s not as severe a ding to the bank’s bottom line as California’s decision in September to cut Wells Fargo out of the state’s massive municipal bonds market, which is expected to cost the bank millions in fee income. But where California’s move was spurred by revelations that the bank had serially defrauded retail banking customers thanks to a corner-cutting sales culture, Seattle’s stiff-arm marks the first major attempt to rap the bank’s knuckles over its pipeline financing.
Minneapolis leaders are exploring their options to take similar steps, though no legislation has materialized there yet. Protesters far from the Standing Rock site have sought to pressure the bank to divest from the project, but formal action from cities the size of Seattle and Minneapolis would be harder for the pipeline’s lenders to ignore.
Sawant’s legislation would reform existing rules intended to ensure the city steers its business to banks that are socially responsible. Wells Fargo is the immediate target, but the proposed changes — which a committee will take up after the holiday break, since Sawant’s bill got approved for full consideration by a unanimous vote — could have broader impacts.
Cities of all sizes represent a major line of business for the banking industry. That relationship gives public officials a cudgel on behalf of moral or political causes, but they’re generally shy about swinging it. Divestment campaigns around issues from climate change to the Israeli government’s conduct in the occupied territories have generally targeted private pools of money — college endowments, pension funds, and the like.
The potential power that cities could wield is arguably greater, but harder to tap. As the experiences of Detroit, Birmingham, and other heavily indebted cities illustrate, massive municipal borrowing is a two-edged blade. Cities that try to leverage banks’ investments to force policy changes risk getting flayed.
For over forty years now — since New York City’s fateful 1975 decision to resolve a fiscal crisis by giving a committee of private financiers authority over public spending — large private lenders have tended to control large public borrowers.
But as debt activism stemming from the Occupy Wall Street movement has illustrated on a smaller scale in the health care and student loan debt markets, power can also flow in the other direction. Owe the bank a thousand dollars, and it owns you, the adage goes — but owe it a million, and you own the bank.
Seattle would be taking on an uphill fight if it ultimately approves Sawant’s proposal. Wells Fargo books almost $90 billion in revenue per year, and the millions it gets from managing Seattle’s finances won’t be enough to change the bank’s calculus on projects like Dakota Access. But if cities start banding together to use the leverage their financial services needs offer, sooner or later we’ll be talking about real money — and even the most powerful banks in the world may find it hard to ignore the chatter.