During a March 21st Council of the District of Columbia meeting, Councilmember David Grosso introduced a non-binding resolution urging the city to reassess its existing relationship with Wells Fargo and consider full divestment. Why? Grosso cited a number of different reasons for the review, but most notably, he said the bank’s status as a lender to the Dakota Access Pipeline project make it unfit to handle the city’s finances.
This should come as no surprise to those familiar with Washington, D.C.’s city government, which made the politically motivated decision last summer to divest its public retirement pension fund from fossil fuel companies. The ill-advised move proved a victory for a vocal minority, but a direct threat the long-term health of a fund heavily relied on by the city’s past and present employees. Some Protect our Pensions’ leaders aired early warnings about the financial repercussions about divestment dating back to 2014 when the City Council first considered divestment measures.
Over the past year, activists around the country have engaged a national divestment campaign to protest the nearly complete Dakota Access Pipeline, which will safely transport domestically-produced energy resources from North Dakota to refining markets in Illinois. However, those seeking divestment of this fully-approved and permitted project have run into mounting resistance from a growing choir of voices.
Last month, the Los Angeles Times editorial board forcefully denounced an effort in the California Legislature to divest the state’s two largest public pensions funds from companies involved in building the pipeline. The proposed bill would “blow a multibillion-dollar hole in the pension funds,” the editorial board wrote, adding that the legislation was both “flawed and dangerous.”
Meanwhile, Michael Lynch, president of Strategic Energy & Economic Research, noted in Investor’s Business Daily that divesting from banks financing the project is “both unwise and unlikely to have any impact.”
Unwise indeed. San Francisco Treasurer José Cisneros recently warned divestment hawks that their political rhetoric could interfere with the city’s obligation to make sure investments are secure and yield a profit. “First and foremost, my responsibility is to keep the City’s money safe,” he said in statement.
Furthermore, severing a city’s ties with a major financial institution like Wells Fargo could cost taxpayers millions in asset management fees and potential penalties for prematurely terminating a contract.
Our nation’s capital has overcome great economic hardship in the past two decades as a result of disciplined financial stewardship. It would be a step backwards to allow prudent decision-making to be sidelined in favor of political convenience.