Wells Fargo, Criminal Enterprise

ct-wells-fargo-settlement-questions-oversight-20160910New Orleans   I’ve never been a fan of Wells Fargo. We fought them endlessly over predatory lending practices in mortgages and subprime products. They don’t listen, they obfuscate, stonewall, and hide behind layers of lawyers in stubborn refusal even when faced with evidence of clear misdeeds. We were able to fight Citicorp, Bank of America, HSBC, and a ton of subprimes, even Countrywide, and succeed in reforming practices and achieving decent settlements, but Wells Fargo, even when they settled did so narrowly and without conviction. I was clear for ACORN and our members, you just can’t trust a bank like that with your money.

It is some relief that now everyone in the United States is getting a crash course in learning that Wells Fargo is not the community banker it has claimed to be, but a criminal enterprise.

Let’s review the facts, now being widely reported. For five years employees of Wells Fargo opened up to 2 million bank and credit card accounts willy-nilly without any permission from anyone. Often the accounts were closed fairly quickly which is why the penalties now being paid by the bank are less than $200 million. It was a penny ante, amateur scam with employees making up email addresses and sometimes virtually opening up the accounts from Wells Fargo internet domains. The bank has now fired 5300 employees who were involved in this fraud. As the New York Times’ columnist, Andrew Sorkin, points out, “that’s not a few bad apples.”

Wells Fargo has taken out ads apologizing and taking responsibility, but they clearly, as usual, have their fingers crossed behind their backs. A couple of months ago before all of this criminality became public, they allowed Carrie Tolstedt, a 27-year veteran and their head of “community banking,” to retire and walk away with over a $120 million going away present. Various banking analysts are calling for a “clawback” since Wells has rules allowing them to recover monies from executives where there were ill-gotten gains. The Wall Street Journal was so grossed out by all of this that they reported the calls for clawbacks and showed a picture of Ms. Tolstedt, but couldn’t bring themselves to mention the $120 million she took away with her office plants for fear that all of us Visigoths would be clamoring at the gates.

What will they learn? Likely nothing.

But, it’s easy to explain how this happens, and it is the same way that it happened when mortgage brokers were writing fictitious so-called, “lair’s loans,” where many observers of the 2008 financial meltdown are still confused and some think it was the borrower fibbing, rather than the underwriter. In the current Wells Fargo case on cards and accounts, as well as their own and many other situations previously on loans, it is crystal clear that once you link pay to simple production, you can guarantee there will be fraud. The only question will be how long it takes you to be caught, and how much money the bank makes in the interim.

For managers there, just like Carrie Tolstedt, there is a disincentive to impose the kind of controls that would weed out these problems. Top dogs get paid on the numbers, just like the runts of the litter. In bank after bank, once you get them across the table for all of their talk about protection using sophisticated algorithms, risk management, and blah, blah, blah, they simply are culturally and systemically unable to tightly manage on performance and standards, once production is all, and pay is linked to such incentives.

They are all smart enough to know this, but it’s the nature of capitalism in some ways to ignore it. You can only conclude that they didn’t care or thought that they wouldn’t be caught. None of which recommends a bank like Wells Fargo as a place to trust your money, since they are clearly committed to themselves first and their customers last, as little more than numbers being crunched in their back rooms somewhere.

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Please enjoy Phish’s Breath and Burning. Thank you KABF.

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Wells Fargo Caught Again in Predatory Lending Scheme

WellsFargocolorFLYERLittle Rock       We need to get rid of the three strikes program for people and institute it for banks, whose criminal conduct continues to rage unabated. Wells Fargo, the West Coast based banking center, is a serial abuser of mortgage borrowers using predatory practices. Cook County, home of Chicago, and 5 million good people, has sued the bank under the Fair Housing Act for racially discriminatory practices targeting African-American and Latino families from the point of origination past the point of payment and even foreclosure to make sure they always get theirs in a practice Cook County called equity stripping.

According to Bloomberg News,

“Equity stripping is an abusive form of ‘asset based lending’ that maximizes lender profits based on the value of the underlying asset and onerous loan terms, while in disregard for a borrower’s ability to repay,” according to the complaint. Aimed also at minority women, the bank’s fee structure and its practice of bundling mortgages to sell as securities allowed the lender to make money off loans even in the event of a foreclosure, the county said.

Who is surprised anymore?

Cook County is asking for $300 million in relief from Wells Fargo. The bank of course denies everything, but they can’t possibly have any credibility left with anyone. As always, they were obnoxious and combative in their response, having a spokesman say that it would be better if Cook County kept wasting its time trying to work with them rather than getting justice for their citizens.

Cook County is not the first metro area to push forward to protect its citizens these days with a Fair Housing claim. Earlier similar suits have been filed in Miami and Los Angeles against banks for similar practices. Miami’s suit was dismissed as untimely and is on appeal, but attempts to throw out the California claim have been unsuccessful.

Banks have been paying billions to settle mortgage abuse suits in record fines, yet little seems to have led them to stop such predatory practices. Suits have also been brought recently in other cities under the Community Reinvestment Act for direct discrimination in lending.

The New York Times and others continue to argue that the only proven path to citizen wealth is home ownership, and there is some merit to the claim, but with prices outstripping any possibility of ownership in many cities, and banks, like Wells Fargo, arguably targeting the very working people trying to create income security through home ownership, there seems to be a giant “L” for loser on the foreheads of low-and-moderate income families throughout the country. Recently Massachusetts Senator Elizabeth Warren announced her refusal to vote for approval of an undersecretary in the Treasury Department saying that the President and others needed to get the message that Wall Street should no longer be allowed to set the economic policy for the United States.

As long as banking and its allies play “throw the rock and hide the hand” in a persistent criminal conspiracy, working families can’t build wealth, and Warren and Cook County are right that we need more protection from these crooks.

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Banks Shirking Responsibility for Foreclosed Property Maintenance

bank-owned-foreclosures-12New Orleans  I woke up to headlines indicating that the National Fair Housing Alliance has accused Minneapolis-based U.S. Bank of effectively “red lining” blight into largely African-American and Latino neighborhoods in 35 different cities in 15 metropolitan areas.  Recently the alliance added New Orleans, Dallas, New Haven, and Hampton Roads, Virginia to an amended complaint charging that US Bank had not maintained foreclosed properties in minority neighborhoods compared to what it does in white areas.  Similar complaints have been filed against Bank of America and Wells Fargo, though reportedly Wells Fargo settled with the group.

            So, what says U.S. Bank?  Their defense is that they are simply the corporate trustee for a security pool of investors and claim that they have no legal right to maintain the properties.   Well, I’ve been there and heard that, so at best U.S. Bank and the rest of these banks are hiding behind half-truths.   They are the legal trustee for the properties though and it’s their name on the property titles.  In reality at best U.S. Bank is trying to have its cake and eat it too.  They get paid to be the holder of the investment pool and the named owner of the mortgage properties, but they are essentially trying to sing a verse with the old rock group, Dire Straits, and “get money for nothing and get their chicks for free.” 

ACORN struggled with this problem for years and interestingly in negotiating with Deutsche Bank, which at the time in 2007-2008 was a trustee for a huge number of mortgage security pools, we learned quite a bit about how it really works. The bottom line is that the banks know the owners, and in a wink-and-nod in those days, Deutsche agreed to give us the information on specific properties that were problems in our neighborhoods when they became issues.  My point in that U.S. Bank and the other bankers are in effect earning their money by allowing the real owners and their lack of maintenance to hide behind their corporate veil, so they deserve to go down.

And, their problem just gets bigger when the fair housing alliance and others do the ground work around the country and bust them for not lifting a finger to take care of properties that are foreclosed in black and brown neighborhoods, while in fact making sure that properties are maintained in white areas. 

Call it redlining or just flat out racial discrimination, U. S. Bank and the boys can keep whining about it, but they are just shucking and jiving for the real owners and it is past time for them to do right and stop ruining our neighborhoods with callous disregard, while they count their money for doing nothing.  They can either name out the real owners or take the weight and step up.

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How About a Better Deal for Philippines Disaster Relief from US Banks & MTOs?

Q113_Wu_Com_Typhoon_V1_Facebook_1200x627_EN_USNew Orleans  The typhoon that devastated large parts of the Philippines, in a Hurricane Katrina like disaster many are seeing as part of what we can expect regularly in the future from climate change,  is inspiring protests by poor countries at the UN Climate Change Conference and some corporate social responsibility, but, sadly nowhere near enough, especially in the United States.  

            Some banks have stepped up to do the right thing and have waived all transfer fees, most for a month from mid-November until mid-December.   There may be more on the honor roll, but from what I’ve found so far, it includes two banks in Canada, the BMO Bank of Montreal and the Royal Bank of Scotland, there and presumably elsewhere, Wells Fargo is the only bank in the US that has stepped up, and the Noor Islamic Bank in Dubai, United Arab Emirates.   That’s all ACORN International has been able to locate.

Of the scores of money transfer organizations, Western Union has been the surprising hero here, though with exceptions.   In Canada, they are doing transfers to the Philippines for $1.00.   Interestingly, the Western Union website in the US seems to have waived fees completely, though it’s a mystery to me why they are charging a loony in Canada and nada in the States.  Regardless, cheers to them for doing what they are doing since MoneyGram, the other huge MTO, is charging $5 for a $100 transfer, which is hardly a bargain, and shows little heart in this crisis.

But, what’s up with US-based banks?  Why is Wells Fargo the only one of the big boys standing tall in the face of this tragedy?  Where are Chase, Bank of America, Citi, and the rest?

And, even more puzzling, especially in wake of the $1 charge by Western Union in Canada, are we starting to find out the real cost for these folks to do transfers?  

But, I digress.   The important thing now is for all of us to ask our banks to waive all transfer fees to the Philippines so that there can be real resources and financial help for typhoon victims.   Raise your voice for lowering the fees!

 

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Banks Creating Unbanked Millions

money-under-bedLittle Rock       I hate to say “I told you so,” but of course, I in fact did tell you so, when I recently warned that banks for any reason or no reason at all can refuse to continue to allow you to have a checking account or bounce you out of their customer line.  A recent article in the Times confirms that in fact the level of what used to be called the “unbanked” has risen by 10% since 2009 according to the Federal Deposit Insurance Commission (FDIC).

            And, yes, “unbanked” does sound like the “undead.”  You may be walking and talking, but you are also doing a lot more of it and paying a premium to pay your bills, transfer money, and handle daily affairs because banks won’t let you have an account.   This is actually a fairly new phenomenon.  Only a couple of years ago if we were meeting with bankers and said that we needed to continue to reduce the level of the unbanked among lower income Americans, all of the bankers at the table would reflectively nod in agreement.

            No more it seems.  Big data is dunning the poor.  Minor mistakes, like a one off overdraft can lead to people being blacklisted.   According to the Times:

The largest database, founded in the 1970s, is run by ChexSystems, a subsidiary of FIS, a financial services company in Jacksonville, Fla. Subscribers — Bank of America, JPMorgan Chase, Citibank and Wells Fargo among them — “regularly contribute information on mishandled checking and savings accounts,” ChexSystems says on its Web site. “A consumer may dispute any information in their file and ChexSystems will facilitate the resolution of the dispute on the consumer’s behalf,” the company said in a statement. A rival, Early Warning, which is owned by Bank of America, BB&T, Capital One, JPMorgan Chase and Wells Fargo, says roughly 80 percent of the 50 largest American banks pay a fee to subscribe to its deposit-check service.

The banks claim this all began as an attempt to stop fraud, but that’s not really true.   Bankers have been honest with us for years that the old school checking account part of their business was a money loser and in fact a loss leader.  Here comes big data that can collect every misstep by a poor Joe or Jane along the road, and wham, that’s all it takes to push them into all of the financial predators lying in wait for the poor. 

Good luck with resolving the disputes as well, that is if you know there is one.

The article claims that, “Banks are required to provide a reason for rejecting an applicant,” but I’ve read some of the documents that banks put out, and I’m not sure that is really true, and if true, it’s certainly not enforced.”

But all of these financial institutions are federally or state chartered.  The FDIC insures each account for a hundreds of thousands of dollars.  There is huge governmental leverage here that should be reminding banks that they are in the service business not just the get-rich-quick-business.   If they want to stop fraud, good on them, though they might spend more energy supervising some of their own practices, and trying to hard handle someone whose check clears faster than the bank gets around to recording their deposit.

 

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Another Billion in Subprime Losses for Wells Fargo and Ocwen

New Orleans   A billion here, a billion there, and the next thing you know, you’re talking about real money.  This is another line on the headstone of the subprime mortgage industry that was such a key player in the Great Recession.  News that investors took another unexpected loss of a billion bucks in these tranches of ill begotten, broker finagled, often predatory loans batched together in toxic stews for suckers, was such nothing news that it hardly made the C-section of the Wall Street Journal.   For me it was old home week from five and six years ago and a blast from the past.

Of course Wells Fargo, now the country’s largest mortgage lender, and Ocwen Financial from West Palm Beach, now the nation’s largest servicer of subprime loans are finger pointing at each other for who blew billion of course, but it is such déjà vu all over again, that it brought smiles to my face since it was such a “man bites dog” story.  These investment pools are part of what banks have been hiding behind for years to avoid real loan modification programs that would prevent home foreclosures, and this new billion bust is an argument between the devils about how they stirred the brew and treated loans that were modified and altered the payment schedule to reduce the monthly payments while trying to hold on to the pretend value of the home.

Where did the Wall Street garbage come from?  Well, a bunch of it was from Irving, Texas-based American Home Mortgage that would never really agree to meet with us during that period, and then capsized in 2007 after New Century fell, and ironically was picked up by IndyMac bank, which also is little more than a bad memory.  The rest of the mess came from Option One Mortgage which was one of the Orange, California subprimes in the heyday and was owned then by H& R Block, and brought down its CEO along with other mayhem.  They met with us frequently, but were the corporate equivalent of the teenager in the family who was out of control by the parents.

Seeing Ocwen and Wells Fargo fighting over responsibility for a billion dollar loss is also juicy because these two have become the twin faces of the current problems for homeowners.  Ocwen is reportedly under current investigations by a host of regulators for how it is dealing with beleaguered borrowers and Wells Fargo seems to be settling one suit after another proving discrimination in its lending, maintenance, and general business involving African-Americans and Latinos.

None of this is funny, but at least when investors finally get burned by these boys the same way that homeowners have been continually burned, we can be reminded again that the arc of justice is long, but true.

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