Lawsuit: Wells Fargo Targeted Blacks For Subprime Loans

Zachary Roth | June 9, 2009, 5:08PM

In the wake of the subprime mortgage crisis, the unsavory and sometimes illegal business practices of the mortgage lenders at the vanguard of the subprime trend have slowly been coming to light. But new claims in a lawsuit filed against Wells Fargo by the city of Baltimore -- and reported in the last week by the Baltimore Sun and New York Times -- are pretty shocking nonetheless.

The suit accuses Wells Fargo of using a range of deceptive practices to push high-interest, subprime loans onto African-Americans in Baltimore and the Maryland suburbs, leading hundreds into foreclosure. The claims come largely from two former Wells Fargo loan officers, who submitted signed affidavits filed last week.

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Topics: Financial Crisis, Racism, Wells Fargo

Wall Street

Wells Fargo's Rise From The Dead Redeems Sins Of All Banks, Says TIME Columnist

Moe Tkacik | April 10, 2009, 2:04PM

"More Quickly Than It Began, The Banking Crisis Is Over" declares longtime financial journalist Douglas McIntyre in a column posted this morning on the TIME website. Well miracles of miracles! Noting yesterday's news from Wells Fargo that the bank made more than twice analysts' projections during the first quarter and the positive buzz about the progress of the Treasury Department "stress tests" being run to assess banks' abilities to withstand further economic downturns, he wonders why the heck they're bothering to run "stress tests" at all. Isn't it obvious we're out of the woods?

Oddly absent from the discussion of how well Wells Fargo did is why the government was in the midst of testing bank balance sheets at all. The experts at the Treasury had been thrown off the scent and consequently had missed the fact that there was not need to test what is already working well. The same holds true for the Geithner plan to take toxic assets off bank balance sheets. It is academic now. What banks are earning from the difference between the cost of capital and the income from lending is now great enough for the banking system to be self-sustaining again.

Hallelujah, but: zombie banks don't rise from the dead every day. On CNBC this morning CEO Howard Atkins credited Wachovia, the bank it hastily acquired in the thick of the panic of '08, for bringing the good news. And indeed, an analyst tells Forbes the Wachovia deal has been much more auspicious than experts initially expected, when Wells told analysts it anticipated writing down $10 billion in bad and "non-performing" loans held by Wachovia; thus far, they've only had to write down $77 million.

There's probably a very good reason for that, according to mortgage blogger Ken Watson -- the Financial Accounting Standards Board just relaxed mark-to-market accounting restrictions, meaning Wells can value those loans a bit more creatively than before.