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During this year’s State of the Union speech in January, President Obama announced the creation of a special unit of prosecutors and state attorney generals which would investigate abusive lending and packaging of risky mortgages. President Obama stated: “This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.” Yet no significant results have been announced by the task force and no criminal charges have been filed against any top financial institution executive.
Two of Americans’ most important banks, Wells Fargo and Bank of America, have already agreed to pay large amounts of money to compensate for their discriminatory practices, but these damages do not seem to be enough to convince them to discontinue these practices.
In a speech in September 2008, when Barack Obama was only a presidential candidate, he declared: “The era of greed and irresponsibility on Wall Street and in Washington has led us to a financial crisis as serious as any since the Great Depression. The lack of oversight in Washington and on Wall Street is exactly what got us into this mess in the first place.” Some thought this meant the government could enforce a more aggressive policy against Wall Street.
Bank of America acquired Countrywide Financial in 2008, but this acquisition had a negative impact. The New York Times explains that, “In December 2011, the Justice Department announced that Bank of America had agreed to pay $335 million to settle allegations that Countrywide discriminated against black and Hispanic borrowers during the housing boom. This was the largest residential fair-lending settlement in history.” But no criminal charges were filed against any executive of the company.
US Attorney General Eric Holder stated: “The settlement provides $335 million in compensation to victims of Countrywide’s discrimination during a period when Countrywide served as one of the nation’s largest single-family mortgage lenders and originated more than 4 million residential mortgage loans.”
Bank of America denied their responsibility in this issue, one of their spokesman’s Dan Frahm said that “we reached this settlement to resolve issues about Countrywide’s alleged historic practices that occurred before Bank of America acquired the company. Bank of America’s practices are not at issue.”
Angelo Mozilo, Former Chief executive of Countrywide Financial, had been investigated in Los Angeles by federal prosecutors, who, after two years of investigation, dropped the case after concluding that Mr. Mozilo did not engage in criminal conduct while directing Country Wide Financial.
Just a few weeks ago the Department of Justice announced that Wells Fargo had agreed to pay $175 million to settle allegations that it discriminated against minority borrowers (Hispanic and African-Americans). The economic compensation the bank has agreed to give does not seem like a lot of money compared to their second quarter profits which are $4.6 billion.
The Department of Justice accused Wells Fargo for charging higher mortgage rates and fees against African-American and Latino customers, and the bank agreed to pay $175 million to settle allegations. But like Bank of America, Wells Fargo denied any wrongdoing and no executive from the company was taken to Court.
Assistant Attorney General for the Civil Rights Division Thomas Perez declared that “this is a case about real people – African American and Latino – who suffered real harm as a result of Wells Fargo’s discriminatory lending practices.” The Assistant Attorney General explained that “”if you were African-American or Latino, you were more likely to be placed in a subprime loan or pay more for your mortgage loan, even though you were qualified and deserved better treatment.”
Mike Heid, president of Wells Fargo Home Mortgage, said in a statement that “Wells Fargo is settling this matter because we believe it is in the best interest of our team members, customers, communities and investors to avoid a long and costly legal fight, and to instead devote our resources to continuing to contribute to the country’s housing recovery.”
So would seem hope is fading for those who believed that President Obama would be the one to finally end discriminatory practices in the banking industry. None of the banks accused have accepted any wrongdoing and they only accepted the economic compensation to avoid contested litigation, but no criminal charges have been filed.