Here’s a quick quiz on banking history. Which of the following banks came through the housing crisis with a squeaky-clean balance sheet? Take your time. I promise this is not a trick question.
Ready? Wells Fargo. Yet today brings the news that Wells Fargo has settled a discrimination lawsuit brought by the Justice Department for discrimination during the housing crisis. As reported in the Wall Street Journal July 12,
“In settling, Wells Fargo said it “not only denies that it discriminated unlawfully, but affirmatively asserts that it has treated all of its customers without regard to race or national origin,” according to the consent order. The company is entering the settlement “solely for the purpose of avoiding contested litigation with the Department of Justice,” the order said. Wells Fargo first disclosed the Justice Department investigation in a securities filing in May.
In a statement, Wells Fargo said it will stop working with mortgage brokers. Mortgages sold by brokers currently represent 5% of the Wells Fargo’s home loan volume, according to the company. The company stopped all subprime home lending in 2008.
Wells Fargo was responsible for one-third of mortgage originations in the first quarter of 2012, according to Inside Mortgage Finance, an industry newsletter.”
Next time someone asks you why banks aren’t lending, point to this story.