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Wells Fargo settled a lawsuit brought for by the Justice Department for pitiful sum of $175 million dollars yesterday.  Why do I describe the sum of $175 million dollars pitiful?  Well first, this is Wells Fargo, one of the megalithic banking organizations that dominate the financial sector in our country. $175 million is a slap on the wrist for the, merely the cost of doing business.  

However, the primary reason is what they did.  Wells Fargo deliberately and illegally put minority home buyers in more costly sub-prime mortgages than other home buyers.  In short, they used the race of their mortgage customers as the determining factor in how much they would charge them for these crap mortgages they peddled, which is outright racial discrimination on a mass scale.

WASHINGTON — Wells Fargo Bank, the nation’s largest originator of mortgages, agreed Thursday to a $175 million settlement with the Justice Department, which alleged the bank steered minorities into more expensive subprime loans with higher interest rates when they qualified for lower ones. [...]

In a consent order unveiled Thursday, the government alleged that bank regulators in 2009 determined that “there was reason to believe that Wells Fargo placed African-American applicants in the subprime mortgage lending channel . . . more frequently than similarly situated white applicants during the period from 2004 to 2008.”

Republicans love to blame poor people who took out the sub-prime mortgages (by which they mean poor minorities who received sub-prime mortgages) for the financial crisis that  nearly took down the World's economy.  Anyone who has investigated the actions of the banks during the last decade knows that that sub prime mortgages were one piece in the problem the banks created in their overweening greed, much less sub-prime mortgages to poor minorities.  Most sub-prime mortgages went to white people.  Yet, the worst of these mortgages, the most costly and most likely to default were peddled to thousands of African Americans who paid a racially motivated surcharge for having darker skin that their fellow white mortgage customers.
A $175 million price tag is attached to one part of the national settlement, compensating more than 34,000 Wells’ customers nationally whose loans were originated by non-bank mortgage brokers.

Another undetermined sum, expected to be many more millions of dollars, will be used to compensate victims who received bad mortgages directly from Wells Fargo employees. The bank still has to review its records to identify those customers.

In Illinois, the known part of the settlement includes $8 million in cash payments that will be made to 3,300 customers. It will be divided into average cash payments of  $15,000 each to borrowers who were wrongly steered into subprime loans by mortgage brokers between 2004 and 2009, and an average of $1,500 to $2,000 each to minority borrowers who were wrongly charged higher fees on their mortgages.

Wells Fargo settled for far less than Countrywide who paid $335 million for their racial bias in the promotion and sale of their sub-prime "mortgage products back in December.  What is startling (well what should be startling) is that no single individual in charge of Wells Fargo or Countrywide (now a subdivision of Bank of America) has been prosecuted for these numerous incidents of racial discrimination that I know of.  Yet it is a federal crime to violate laws that prohibit discrimination on the basis of race in lending.

Yet so long as senior bank executives, mid-level officials and employees, and mortgage originators suffer no personal penalty for these racist acts, they will continue.  After all, its been an ongoing problem for a very long time, one the federal government has known about and studied, as demonstrate by this HUD publication examining racial discrimination in sub prime lending back in the 90's.

In 1993, the subprime share of the overall mortgage market represented $20 billion. In five years, this volume multiplied more than seven times to $150 billion. By providing loans to borrowers who do not meet the credit standards for borrowers in the prime market, subprime lending can and does serve a critical role in the Nation's economy. These borrowers may have blemishes in their credit record, insufficient credit history or non-traditional credit sources. Through the subprime loan market, they can buy a new home, improve their existing home, or refinance their mortgage to increase their cash on hand.

But there are two sides to this story. Since subprime lending often operates outside of the federal regulatory structure, it is a fertile ground for predatory lending activities, such as excessive fees, the imposition of single premium credit life insurance and prepayment penalties. The recent acceleration in predatory lending activity has accompanied the growth in subprime lending over the past decade. And predatory lending can have disastrous consequences for the unknowing borrower. At the very least, equity is stripped from the home. In more egregious cases, homeowners may lose their home altogether.

Corporations, despite the Supreme Court considering them "persons," cannot go to jail.  Banks in particular are so awash in money, either their own, their depositors or what they can borrow freely from the Federal Reserve that fines such as the one imposed on Wells Fargo will have little if any impact.  Only when bank employees at all levels are made to pay for these crimes will we see a change in these predatory and racially discriminatory practices.

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Comment Preferences

  •  Have to run to hearing aid appt. (0+ / 0-)

    Will be back later to respond to any comments.

    Thanks for your patience.

    "If you tell the truth, you'll eventually be found out." Mark Twain

    by Steven D on Fri Jul 13, 2012 at 06:53:53 AM PDT

  •  $175 million (1+ / 0-)
    Recommended by:
    Steven D

    I'm sure the profit from overcharging minorities was far more than that.  to the bank fraudsters, fines are just the cost of doing business.

    I shall die, but that is all that I shall do for Death; I am not on his payroll. - Edna St. Vincent Millay

    by Tara the Antisocial Social Worker on Fri Jul 13, 2012 at 07:17:12 AM PDT

  •  Memphis Mayor AC Wharton announced the city was (2+ / 0-)
    Recommended by:
    Floyd Blue, Steven D

    getting something like $7.5M from the settlement.

    On the topic of predatory lending correct me if I am wrong but I believe the largest underwriter for those ridiculous pay day loans and the like is Wells Fargo.  I always found it interesting that they never wanted to hand out home or business loans in the same communities where they had wall-to-wall payday loan centers.

    •  I find that interesting also... (2+ / 0-)
      Recommended by:
      Steven D, Linda Wood

      ......because they know damn well that payday loans put you on the road to financial ruin.  They turn you into a slave.  They are disgusting, and the fact that they are legal is an embarrassment to this country.

      The only good thing that legal payday loans accomplished was driving the mafia loan sharks out of business (and into other forms of crime, of course).

      My take on this in Aldus Shrugged:

      "...People wonder where the old scary world of organized crime went; you know, the kind of stuff they show in the movies.  Of course it’s not totally gone.  But it’s pretty marginalized.  If every dirty business you had your hands on was now deemed legitimate and legal, you would have to struggle to find other ways to make your money.  That’s why the old school mafia guys have gotten into internet crime, identity theft; things like that.  All of their old moneymaking enterprises, from gambling to drugs, have been taken over by great American corporations, who do things by the book, and apply their own brand of pressure, and ruin you on paper – bleed you out slowly and legally - instead of snapping a femur or sticking you directly into the ground.  I mean, how can a loan shark possibly compete with licensed, tax-paying-though-often-based-in-The-Bahamas payday loan outfits and their 600% interest rates and direct legal access to your bank accounts?  

      The advantages of paying sales tax and doing business with a legit, established company, used to be that you had some sort of recourse.  Aren’t we entitled to some form of recourse, some form of redress, when we transact business with a company that is supposedly legit?..."

      Aldus Shrugged : The Antidote to Ayn Rand. @floydbluealdus1

      by Floyd Blue on Fri Jul 13, 2012 at 08:07:34 AM PDT

      [ Parent ]

  •  My take on the subprime loan bs... (2+ / 0-)
    Recommended by:
    Steven D, Linda Wood

    In my novel, a bunch of Tea Party folks are commiseratin' and blamin' the poor for the banking my hero, who can't fucking take it any more finally lets loose on one of them...

    "...The government didn’t force anybody to lend money, to make mortgages with people who couldn’t afford them.  You really believe the banks were forced to do that?  Like they didn’t open up whole divisions within their companies to make these loans?’  I was talking really fast; I almost couldn’t keep up with myself.  I took a deep breath and dove in again, ‘Like they didn’t realize a whole new profit center, an untapped lucrative market opened up for them, a goddamned golden goose!  Oh, and who do you think lobbied congress to change the law and require this expanded lending?  The poor lobby?  Those powerful poor folks, right?  Bagger please.’
    ‘What the fuck did you just say to me?’  Romulo looked pissed off.  He puffed his bird chest at me and set his jaw, loaded for bear; and I was the goddamned grizzly in the crosshairs.  ‘They shoulda just let the marketplace drive the whole damn mortgage process.  The answer is always the market, a good American free market.  That solves everything…the right way, too!  The American way.  And you know it too, motherfucker.’  He was pointing right at me, just the old flimsy counter and lots of ideology separating us.
    I felt bad.  I knew Rom, and I knew deep down he was like a rooster now, puffing up just to crow.  ‘Look, I’m sorry, Rom, but come on…do you really believe the market will solve all our problems?  What the fuck does that even mean?  First of all, the marketplace is what made the banks froth up and just approve everybody.  You think they made those loans for free?  Pro-bono?  Outta the goodness of their bleeding fucking hearts?  You know how many executives made fortunes just along that chain, that one little slice of an industry?  One fucking tiny tranche?’  I wasn’t waiting for an answer.  ‘One bank competes against another, and one makes the loans and makes a nice short-term profit, and so their competitor does the same, and so on and so on…and thus, our great American marketplace, with all its competition, drove the process into a frenzy.’..."

    Aldus Shrugged : The Antidote to Ayn Rand. @floydbluealdus1

    by Floyd Blue on Fri Jul 13, 2012 at 08:10:33 AM PDT

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