Are banks being discouraged from wrongdoing?
Inside Story discusses Wells Fargo and the effects of discriminatory lending practices in the banking industry.
Joining Inside Americas to discuss this are guests: Jordan Estevao, the director of the Bank Accountability Program at National People's Action, a community direct action group; Edward Wyckoff Williams, a political analyst and former investment banker; and Richard Wolff, a professor of economics at the University of Massachusetts-Amherst.
One of the biggest banks in the US has agreed to pay a $175m to settle allegations it charged higher mortgage rates and fees to black and Latino customers in violation of fair-lending laws.
The payment by Wells Fargo is part of US President Barack Obama's effort to end discriminatory lending practices in the banking industry - practices that left minority neighbourhoods blighted by foreclosures after the housing bubble burst.
A government investigation found tens of thousands of cases of African Americans and Hispanics being charged more than white customers with similar credit profiles.
The settlement is the second-biggest of its kind; the Bank of America paid $335m over similar charges. But in both cases, the banks were allowed to deny any wrongdoing.
And to add insult to injury, just a day after the settlement, Wells Fargo on Friday announced second quarter profits of $4.6bn, which is 26 times the amount it agreed to pay out.
What the US Justice Department found when they investigated mortgage mis-selling by Wells Fargo:
· They found 34,000 instances of Wells Fargo charging African Americans and Hispanics higher fees and rates on mortgages compared with white borrowers who posed a similar credit risk
· Wells Fargo also steered 4,000 of these customers into sub-prime loans even though they qualified for cheaper mortgages
· In 2007, customers in the Chicago area who borrowed $300,000 from Wells Fargo paid an average of $2,937 more if African-American and $2,187 more if Hispanic compared to similarly qualified white borrowers
· Wells Fargo has agreed to pay compensation in eight areas: Baltimore, the Bay area, Chicago, Cleveland, Los Angeles, New York, Philadelphia, Washington DC
· The bank also resolved a lawsuit filed by the city of Baltimore that the bank had engaged in 'reverse redlining', intentionally targeting minority areas of the city for predatory loans
· Historically US banks have practiced 'redlining' where they had deliberately refrained from offering loans in certain minority neighborhoods
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