1. Wells Fargo's Fakery
(WFC - Get Report)
? Just shut up and pay the fine like everybody else.
Wells Fargo was the big loser among the largest U.S. financial companies on Tuesday, falling 2% to $35 per share, after the government announced it was suing the nation's fourth largest bank -- and Warren Buffett's favorite one to boot -- for hundreds of millions of dollars in a civil fraud lawsuit. The Feds are targeting Wells over its underwriting of Federal Housing Administration-backed (FHA) mortgages issued over a decade that eventually defaulted.
According to the complaint, Wells certified more than 100,000 loans for FHA insurance between May 2001 and October 2005, even though the bank was aware its underwriters barely lifted a finger to qualify its borrowers. And here's another fun fact from the government's allegation: During a 7-month stretch in 2002, at least 42% of the bank's FHA loans failed to qualify for the insurance they were submitted for, even though the bank's benchmark for such violations was 5%.
Put plainly, holy crap that's a lot of crappy loans!
"As the complaint alleges, yet another major bank has engaged in a longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance," Manhattan U.S. Attorney Preet Bharara said in a statement.
Yeah, and like the rest of its buddies in the banking business, Wells paid big bonuses to its employees during the housing boom to underwrite bogus government-backed loans and now the government wants its money back.
Sorry, we meant to say
Unfortunately, the folks at Wells don't see things Uncle Sam's way. In a statement responding to the suit, Wells denied the allegations, professing "it acted in good faith and in compliance" with both the FHA and the Department of Housing and Urban Development. Wells added that it plans to "vigorously defend itself against this action".
Listen Wells, it took the government this long to get around to making its case, so stop the charade and just pay the damn fine, ok? We all have better things to do and we all know how this is going to end.
settled for $158 million.
remunerated $202 million.
Bank of America
paid $1 billion for Countrywide's subprime sins.
So hop on your stagecoach, ride over to Preet's office and cut him a check. It's your turn to pony up.
Written by Gregg Greenberg in New York