A Progressive View:The Conservative Mindset-The Wells Fargo Affair

I read a recent article from the Wall Street Journal with the banner headline that Wells Fargo Settles Lending Bias Cases. Wells Fargo, the nation's largest mortgage lender, will pay at least $175 million to settle allegations that the company discriminated against black and Hispanic borrowers. For those of you who doubt my veracity on this check out

http://online.wsj.com/article/SB10001424052702304373804577522740578702890.html?mod=WSJ_business_whatsNews#articleTabs%3Darticle

For all the rightwingers out there, we all know that the Wall Street Journal is hardly a left wing rag. The fact is that Wells Fargo and Bank of America have been guilty of targeting minorities for sub prime loans even when their credit would qualify them for a conventional loan. We have major institutions like this taking advantage and conservatives tell me that there is too much regulation. Now that is bovine excrement if there ever was such.

I have to listen to all this nonsense from them blaming Barney Frank, the liberal media and saying that the government compelled these ‘poor banks’ to lend to unqualified minorities at a loss to themselves. These silly people actually want to blame the Attorney General and the Department of Justice for beating up on these bankers. I never knew a banker that was in business to lose money. Why target blacks and Hispanics for any other reason outside of their race or ethnicity? Wells Fargo says that it was not involved in wrong doing, but they are paying a pretty penny, someone must be guilty of something. What bank is going to lend me money for a mortgage if I could not afford it, unless they have some scam going on the backside? It is the responsibility of the bank, protecting itself and its shareholders to properly vet applications and fairly and consistently apply a standard to determine eligibility. All this talk about personal responsibility and such is just so much BS. These people used their superior knowledge to take advantage and for this they must pay the penalty. Of course, I want the house, but it is the banker’s job to insure that I am qualified to buy it.

Conservatives say that Well Fargo paid to avoid litigation that they were afraid that they would lose, rather than accept the more logical and rational premise that these institutions are guilty of discrimination as it conflicts with their trumpeting of a post-racial society. The conservative lies like a rug every single time they open their mouths. Conservatives spend so much time trying to spin away from what is so obvious to most of us. That is why I don’t trust them and when they say yin, I reflexively say, yang. That basic distrust extends to everything they advocate. If it appears reasonable on the surface, I am naturally disbelieving and want to read the fine print. I see this as an attack from those at the commercial apex of our society, unwarranted and unjustified. For the rightwinger that continues to make excuses for the abuses by corporate America and financial community we are going to be eternally at odds. That is why it is easier for the right to try to disenfranchise those that will not play along, rather then to try to win on the merit of their ideas.

I am most disappointed.

More by this Author


Comments 12 comments

GA Anderson profile image

GA Anderson 4 years ago from USA

Greetings Cred - While the gist of your article concerning the Wells Fargo settlement is probably "spot-on," I do think you are a bit off on the following quote:.

"I have to listen to all this nonsense from them blaming Barney Frank, the liberal media and saying that the government compelled these ‘poor banks’ to lend to unqualified minorities at a loss to themselves. ..."

The explanation would be hub-length but here's the thumbnail version.

The Community reinvestment Act (1977) was designed for two main purposes; 1) stop mortgage "redlining" practices which closed the credit doors to folks in areas the banks felt were risky, 2) encourage banks to be "a little more flexible" in loan approvals for border-line applicants applying for mortgages for property in areas that needed redevelopment involvement.

That's all well and good, and needed - but, it brought politics into the picture.

The CRA was changed/expanded/reformed 7 or 8 times since. Clinton changed it to further incentivize BANKS to "work with" border-line applicants. (ps. Bush also expanded the CRA - so that wasn't Clinton-bashing)

Still all well and good, because even though the government was gently urging the banks to lend more to risky applicants - the banks were still liable for those loans - so they still made sure they weren't throwing money out the window.

But, and here's where Barney Frank comes into the picture - in 1999 Glass-Steagal was repealed - (Clinton signed the repeal into law), and now BANKS COULD DO investments, securities, and Insurance - bingo!

Now banks did not have to hold onto their loans - they could loan to anybody they wanted - Hell, they even started doing "no-doc" loans - no proof of income or any proof of ability to repay. Why? Because now they could package all those risky "sub-prime" loans into mortgage securities and sell them, relieving them of all risk and concern for default costs.

Guess who bought those securities? Freddie Mac and Fannie Mae! I won't go into the litany of Frank's actions with those agencies and the process - but if you doubt my veracity look it up - even the most-liberal of liberals can't hide his legislative assistance and Freddie and Fannie complicity in the "risky loans to good securities" transactions that Frank's monolith's gobbled up from anybody.

The repeal of G-S, and the FED's involvement in the mortgage market via Freddie and Fannie are what caused the implosion.

I'm not letting the banks off the hook - they were just as culpable and responsible - but the process was a Tango, and we all know it takes two to Tango.

Frank and the Gov., Clinton and Bush, are just as responsible as the banks, maybe more, after all, the greedy banks, (not sarcasm) were only doing what the government allowed, and wanted them to do.

So, yes, you are probably right about Wells, BOA and the other mega-banks, and also about many right-wingers trying to blame it all on someone else, but don't try to give Frank and the government a pass. It could not have happened on such a massive scale if the government had not been encouraging the banks to lend to riskier applicants, and if G-S had not been repealed. (ps. I did do an article about the G-S repeal, maybe you should check it out - it outlines plenty of Repub and Dem involvement - to the detriment of us all, as we can see now

GA


Credence2 profile image

Credence2 4 years ago from Florida (Space Coast) Author

GA, it is nice to hear from you again after my leave of absence. Thanks for your observation. I did take the time to read the Act and get the gist of it. The Act did have a great purpose to eliminate redlining and housing discrimination and to encourage not mandate that banks be more flexible in lending. I certainly would not as a banker interpret that as a mandate from the government to start making risky loans.

Yes, indeed, the repeal of Glass Steagal was the first mistake, dangerous deregulation from the start. Even though Clinton signed it, which party in Congress was its biggest promoter? I will have to check it out.

The banks did see this repeal as an opportunity to loan to anyone, including the high risk customers. Did they not do this because they could bundle these loans, find a sucker to buy them and not be concerned as to the previous fear of default. So, now, there is no reason for the bank to be responsible in its lending practices. Glass- Steagal repeal was an enabler, opening up the floodgates of unethical activity and behavior on the part of banking and finance industry.

The banks took their new found license as a way to screw the little guy, promoting mortgage products to them which the banks knew he or she could not afford. But of course they no longer needed to be concerned. As they say it was the poor people that used poor judgment, I think that it was the banks that were laying a snare. Is that what you are basically saying; am I still with you so far?

GA, why would the Freddie Mac and Fannie Mae (quasi Government entities) buy these tainted products? If I try to answer my own question, could it be that they themselves did not know the nature of what it was that they were buying. I have heard criticism that federal regulators were out classed and out gunned. The banks were working with calculus while the feds were dealing with business arithmetic and had no idea what was going on. Is the fact that Freddie and Fannies purchase of these security make them complicit in this massive scam? How so, or were they just another ‘deer in the headlights”?

Yes the Government was an enabler by allowing what was once illegal behavior to now be just unethical. We certainly need a fix. You know, GA, I think that the banks used the Government as a cover, to create the financial Frankenstein that virtually brought the house down 4years ago. Without the proper set of manacles it is naïve of me to think that the free-market or limitless greed will ever be restrained. It has been shown that it is futile to expect ethical behavior and that these financial institutions would properly police itself.

GA, as for your article, I look forward to reading and commenting. Thanks for helping to get through this thicket.


GA Anderson profile image

GA Anderson 4 years ago from USA

@Cred - you are almost there...

[i]"GA, why would the Freddie Mac and Fannie Mae (quasi Government entities) buy these tainted products? If I try to answer my own question, could it be that they themselves did not know the nature of what it was that they were buying. I have heard criticism that federal regulators were out classed and out gunned. .."[/i]

The impetus for the G-S repeal was primarily the BIG MONEY INTERESTS, (read BIG BANKS), in the financial market.

Just a little back-story...

In the 1980's the big banks were becoming more and more involved in the Global Financial market, and the foreign big banks did not have the G-S act restrictions that U.S. banks had - so the big players began pushing for repeal - claiming they could not fairly compete in the Global market.

Then, little by little, the act was chipped away at until it's repeal in 1999.

The government, Freddie, and Fannie were not misled! The repeal was a good business, (political business) for everyone. The Repub big money interests got what they wanted - removal of restrictions, and the Dems got what they wanted too - more mortgage loans to lower income VOTERS (read democrat voters). Both sides of the isle were happy. Each could say to their base - "See what I can do for you."

Frank, Freddie, and Fannie played their part because somebody had to buy the mortgage-backed securities, - to free-up more capital to be loaned in the mortgage market. Investors were not dumb - they weren't going to to buy these toxic assets alone - so the M-B securities market would have been clogged. But... if these securities came with a guarantee - ie. like the government guarantee Freddie and Fannie provided - then the game goes on.

Banks make the loans - their investment houses package them as securities - Freddie and Fannie buy them - then Investors buy them from Freddie and Fannie, but now with a government guarantee of value.

Frank was responsible for over-seeing and directing the government's involvement in Freddie and Fannie. I believe him to be a very smart political operator. I do not believe he was unaware of the problems with this scenario, (and it has been documented that he did know of the dangers), but it was good politics - keep your constituents happy and you will get their vote.

The ONLY people misled and blind-sided by this arrangement was the American people. Everyone else knew exactly what was going on - in my opinion. Both parties, and the government, (no, they were not as "deer in the headlights"), were complicit! The Repubs for being bought and paid for, and the Dems for helping drive the car.

ps. there were red flags and warnings from regulators, they were not dumb or out-classed, (this was documented in the 2008 investigation of Fannie and Freddie's participation and actions), but the political powers-to-be, (read Barney Frank), covered-up these reports because they threatened the "Golden Goose" that was enriching both parties - one mainly with profits, and the other with votes.

pss. Frank was publicly castigated for his early 2007 speech that said Fannie and Freddie were in great shape - reassuring a nervous public and investment community- when he knew better and when less than 9 months later the market imploded, and there was documentation that proved Frank knew his speech was baloney

GA


Credence2 profile image

Credence2 4 years ago from Florida (Space Coast) Author

GA, you are good, A well written and very clear explanation of some pretty cryptic stuff.

What you have said here answered my question as to how Freddie and Fannie got involved and the corrupt bargain between the two political parties. You know, I do recall that warnings were forthcoming from the regulators at least as far back as ’06, during GW Bush’s reign.

This all makes perfect sense; the only thing that bothered me is all the pundits on the right saying that this crisis was triggered by people trying to buy homes that they could not afford. The bank as part of its sinister plan made home ownership possible for everybody The consumer was the victim not the cause, somebody ought to tell Rush Limbaugh that sometime.


phdast7 profile image

phdast7 4 years ago from Atlanta, Georgia

Hello Credence - Great Hub. And I even understood more or your erudite conversation with the intelligent Mr. Anderson. It is such a pleasure to read an exchange between two adult men who can confine their differences and discussion to the facts and feel no need for character assassination. I applaud your efforts. Sharing. Theresa


JayeWisdom profile image

JayeWisdom 4 years ago from Deep South, USA

There was a lot of duplicity in this situation, beginning with the "greedy banks", but there is much "enabling" fault to be spread around. I learned, too, from the civil discussion between you, Credence, and GA Anderson, and appreciate that you both stuck to facts.


GA Anderson profile image

GA Anderson 4 years ago from USA

@et al... lots of good comments, but....

@Credence - "...The bank as part of its sinister plan made home ownership possible for everybody The consumer was the victim not the cause, somebody ought to tell Rush Limbaugh that sometime...."

I'm not sure I would categorize the banks actions as "sinister" or "Greedy" (@JayeWisdom) Nor would I completely exonerate many of the mortgage consumers. I think the majority of mortgage consumers knew whether or not they could afford the loans they were getting - maybe they were led into believing they could (by the banks), but I certainly don't think they were misled or coerced.

As for the banks being sinister or greedy, perhaps it's a matter of perspective.

1) the banks were only selling a product to make a profit, as any other business does. And they were doing it within the rules of the game - government-mandated rules

2)They were also pursuing a path that the government and FED were urging them to tread - remember it was the government that massaged the legislation that guided and influenced their portfolio ratios - ie. AAA+ loans to borderline loans

3)It was also the government (read politicians) that repealed Glass/Steagall and changed the rules. To everyone's benefit except the honest consumer.

Don't misunderstand, I do believe the banks were aware and complicit, but sinister sounds a little strong for the situation. But they, (sinister and greedy) would be good descriptors for the BIG MONEY players in the financial market. And I mean the ones even bigger than the banks.

GA


Credence2 profile image

Credence2 4 years ago from Florida (Space Coast) Author

Theresa, thanks for the comment and your attention.

GA is good and takes difficult issues in this realm and makes them palatable to those that were not blessed with a MBA. I am most pleased that the article and subsequent discourse met with your approval.


Credence2 profile image

Credence2 4 years ago from Florida (Space Coast) Author

Jaye, thanks for dropping by. Yes, it true that there is blame to be spread around but the most of it belongs to the banks and its enablers (govt) with the consumer a victim.


Credence2 profile image

Credence2 4 years ago from Florida (Space Coast) Author

GA, You said,

“ Nor would I completely exonerate many of the mortgage consumers. I think the majority of mortgage consumers knew whether or not they could afford the loans they were getting - maybe they were led into believing they could (by the banks), but I certainly don't think they were misled or coerced.

I believe that:

Yes, the majority of the mortgage consumers knew whether or not they could afford the loans, but if the banks set up a package taking into consideration the fact that they did their due diligence in determining whether a customer could qualify based on income and expenses, which is the lenders responsibility and, if they said “ok” why would I not buy the house? That was the way the mortgage servicing experience was for me, was it any different for anyone else? As you said the bank did not do what it was supposed to because it did not care whether the client defaulted or not, they did not need to care. Under normal circumstances, these loans should never have happened.

I concur with your reply, otherwise…

Thanks again for your participation and the subsequent enlightenment.


junko profile image

junko 4 years ago

All Government financially backed programs are and were targeted by the Private Sector Housing, Education, Healthcare, and any financially garanteed Government program were like Corporate Welware for the Private sector. The people are like casino chips, worth thousands dollars a peace and played by the private sector on the Government. With all financial risk on the Government, the private sector can't loose for winning.


Credence2 profile image

Credence2 4 years ago from Florida (Space Coast) Author

Thanks, Junko, for weighin in.I still primarely blame the private sector for taking advantage by introducing financial products of criminal nature. While there is complicity on all sides, I still blame the banks the most as I know that if they did not come out of this way ahead of the game they would have never made such concessions to their customers.

    Sign in or sign up and post using a HubPages Network account.

    0 of 8192 characters used
    Post Comment

    No HTML is allowed in comments, but URLs will be hyperlinked. Comments are not for promoting your articles or other sites.


    Click to Rate This Article
    working