Secret Loans and Loyalty
Reed Takes Out $63M New Loan with Wells Fargo Amid 2017 Divestment Protest
Students occupied Eliot Hall for nearly two months in 2017, starting on October 23, in protest of Wells Fargo, Reed’s operating bank. The student group Reedies Against Racism (RAR) organized student protesters who risked sanctions in order to decry Wells Fargo’s extensive role in financing private prison industries and the infamous Dakota Access Pipeline. With this protest underway, Reed quietly doubled down on its financial ties to the bank, further entrenching their relationship through a massive 30-year loan. The loan designated $28 million for construction of a new dorm and helped pay off older debts to Wells Fargo. At the time, the college moved forward with a proposed $63,385,000 loan in bonds backed by Wells Fargo, funneled through a “conduit issuer,” the Oregon Facilities Authority, an agency that helped make the bonds tax exempt.
On October 25, a major bond rating service, Moody’s Investors Service, issued a press release detailing its new rating for the value of the bonds to be issued (Aa2, meaning “very stable” and “low risk”). The press release described an expected “sale date” of November 11, 2017. This means that the college likely negotiated with Wells Fargo to finalize interest rates for the loan (given the positive new credit rating) and sealed the deal in the time period between October 25 and November 11 — at the very height of the protests — and before late November, when Reed’s Investment Policy Committee was scheduled to begin discussing students’ ardent calls for divestment.
This timeline could also help explain why student protestors, upon first occupying then-president John Kroger’s office on November 17, found a Wells Fargo emblazoned mug on the desk.
Weeks earlier, on October 27, Kroger distributed an email condemning the sit-ins and expressed concerned that RAR was occupying rooms with “sensitive documents [that] had to be secured or removed in order to protect confidentiality,” as reported in the Quest. At the time, the concern about documents seemed bizarre, and RAR maintained that they had no intention of searching for any documents. Also strange was the administrative response to student protesters entering the office of treasurer Lorraine Arvin on October 26. RAR was accused of “breaking and entering” into the office, during normal hours and while the door was open. While in the lobby of that office, a Reedies Against Racism organizer asked Dean of Faculty, Nigel Nicholson, if he was “‘[W]orried that we’re going to go through the materials?’ [And] Nicholson respond[ed], ‘That’s why we have locked offices.’” (This transcript was published in the same issue of the Quest on November 3, 2017). Documents related to finalization of the new loan could easily have been present in the treasurer’s office, and perhaps other offices. The presence of a critical time window for finalizing the new loan, from October 25 to November 11, helps explain why response to the protest was especially bizarre and severe during that period.
On December 19, 2017, the Reed Investment Policy Committee issued its negative decision on the calls for divestment. The committee sent out a letter to the Reed Community. Under the heading “What is Reed’s connection to Wells Fargo?” the letter mentioned that the college had loans with the bank issued in 2008. However, the letter failed to mention the new loans from 2017, or others issued in 2011. The letter acknowledged that Wells Fargo provided a credit line of $120 million to finance the Dakota Access Pipeline, and held “small” passive funds containing investments of $11.3 million and $9.3 million in GEO Group and CoreCivic, respectively, the two biggest players in the private prison industry. However, the letter didn’t mention Wells Fargo issuing CoreCivic a “$132.5 million line of revolving credit, of which [CoreCivic] borrowed $65 million” and financed “at least $144 million of [CoreCivic’s] and GEO Group’s bonds,” according to a 2016 report on Wells Fargo from In the Public Interest.
The Investment Policy Committee declined to divest, stating, “[We] must reject the request because of our obligation to adhere to the Investment Responsibility Policy.” The Reed Investment Responsibility Policy states, “[Reed] has sought to limit the political role of the institution or the enlistment of the institution’s name in political causes ... the College does not buy securities for purposes that are not financial ... traditions require [the college] to act only where the issue at hand is of a compelling social or moral character and where the action taken reflects widely-held, perhaps almost universally-held social or moral character positions ... share ownership does not constitute College approval of all of the policies of any complex shareheld corporation, or ... of all the policies of the dozens of corporations whose shares it may hold ... To own is not necessarily entirely to endorse.”
Reed Senate has filed an appeal of the committee’s decision, which is currently pending. As it stands, however, Reed’s close ties with Wells Fargo mean that the college’s new $63 million loan, and average daily operating balance of $8.9 million in the bank, will continue to fuel for-profit private prison industries. CoreCivic and GEO Group are both major profiteers of Trump’s zero tolerance and family separation policies, massively capitalizing on the ongoing confinement of immigrants and the undocumented. According to the New York Times, CoreCivic stock rose 43 percent on the day after Trump won the election, while Geo Group stock rose 21 percent, doubling its value by February 2017. In the ten-week period following Trump’s April 6, 2018 announcement of his zero tolerance policy on immigration, “GEO Group and CoreCivic stock rose 23 percent and 13 percent, respectively.” These groups were in fact major contributors to the Trump campaign. As detailed in the Quest on September 7, 2018, a major “Prison Strike” also took place in the weeks leading up to September 9 of this year. Prisoners risked severe consequences in order to protest their common lack of livable conditions, lack of voting rights, and wages as low as $1 or $2 per day. The Thirteenth Amendment of the U.S. Constitution prohibits slavery “except as a punishment for a crime whereof the party shall have been duly convicted.”
The Reed Investment Policy Committee used the Investment Responsibility Policy to justify their refusal to divest in December 2017, as they used the same policy to refuse divestment from fossil fuels in 2014 and from Apartheid in South Africa in the 1980s. Last year, the leaked Paradise Papers revealed that the college has money in offshore fossil fuel tax havens including the company Encap. However, Reed’s Political Neutrality policy did not stop the college from trying to push through a major national repeal of student worker labor rights last semester, partly in order to bust the House Advisor union. From this history, it appears that the college has used the Political Neutrality policy almost exclusively to shut down left-leaning and student-led reforms, while not consistently applying the policy to the college’s right-aligned financial investments and conservative legal behavior.
While RAR and other student movements have not always been successful in every endeavor, they have been very successful in exposing the college’s underlying motivations and inconsistent policy. We should remember that RAR not only directed the longest sit-in Reed’s history, but also historically pushed the college to become a sanctuary college, to accelerate Hum 110 review and revision, to accelerate development of the Critical Race and Ethnic Studies major, to create more paid positions for students of color, and to ratify an anti-racism statement, among other substantial victories, according to the RAR website. This past Wednesday, September 26, 2018 marks two years since the emergence of Reedies Against Racism, when they hosted a well-attended and impactful day of protest, and delivered a first list of demands to the Reed administration. The power of their legacy lives on, while many issues that initially instigated their formation remain.