Massachusetts Treasurer Deborah Goldberg said Wells Fargo will be banned from handling the state’s main bond issues for one year, after four members of the state’s Congressional delegation asked her to cut off business with the troubled banking giant.
In a letter released by US Representative Stephen Lynch’s office Monday, the South Boston Democrat and colleagues James McGovern, Michael Capuano, and Katherine Clark said Goldberg should cut off dealings with Wells Fargo because “Massachusetts has a long history of protecting consumers and instilling trust in our financial services sector.”
Chandra Allard, a spokeswoman for Goldberg, said in response the treasurer is removing the bank from the list of approved underwriters for general obligation bond issuances, which the state uses to finance big expenditures.
It is difficult to project how much business the Massachusetts move will cost Wells Fargo. The company was one of more than 20 approved underwriters for general obligation bonds. The underwriters are compensated based on the size of given bond issuances and whether they are the lead underwriter on a deal. The Treasurer’s office estimated the bank could miss out on as much as $1.5 million per deal.
Wells Fargo did not respond to a request for comment Monday night.
The company’s former chief executive, John Stumpf, stepped down from his position last week after it was rocked by revelations that lower-level employees had opened fake accounts for customers in order to hit goals. Wells Fargo was fined $190 million over the incident.
Other states, including California and Illinois, have cut off business with Wells Fargo over the scandal.
The Massachusetts ban only applies to bonds issued by the Treasury’s debt management division, and not the state’s quasi-public agencies, such as the MBTA.
Massachusetts does relatively little business with Wells Fargo, and Goldberg is still in the process of fully reviewing the state’s dealings with the bank, Allard said.
“What we do know is our exposure is extremely limited compared to other states,” she said.
The University of Massachusetts paid Wells Fargo about $2.5 million last fiscal year, according to the state’s Open Checkbook website. UMass spokesman Jeffrey Cournoyer said Wells Fargo is handling lease payments the school is making on a facility.
The MBTA, Massachusetts Port Authority, and MassHousing all have their own relationships with Wells Fargo. The T holds long-term contracts related to bonds issued last decade; Massport pays for vendor vetting and credit card processing services; and MassHousing counts the bank company as part of its bond underwriting team.
Massport has sent a letter to Wells Fargo since the controversy broke, but a spokesman was not able to disclose the letter’s contents late Monday afternoon. MassHousing spokesman Eric Gedstad said the agency would review the members of its underwriting team “in the near future,” because members are appointed for about three years and they last were in 2014.