Too Big To Jail
It's been a bumpy couple of months for banks. For Wells Fargo and HSBC, it also looks to be a bit expensive.
Wells Fargo is the target of a couple of law suits. The first is a "private" law suit which claims the bank has failed to live up to the settlement agreement of a class-action suit.
Legal filings last week claimed Wells Fargo failed to provide wide-ranging reductions of loan balances to delinquent borrowers as it had promised two years ago when it settled a combined national class-action suit. A bank spokeswoman strongly disputed the claim, saying it was riddled with errors.
The litigation illustrates how lawsuits continue to dog major home lenders more than five years after the mortgage industry imploded, including recent challenges to certain cases the banks thought had been put to rest.
The second suit has been filed by a U.S. Attorney and looks to be even more serious.
The U.S. attorney in Manhattan has accused Wells Fargo of defrauding a government-backed mortgage insurance program, in another major civil case brought in the wake of the housing bust and financial crisis.
The mortgage-fraud suit, filed by U.S. attorney Preet Bharara, seeks "hundreds of millions of dollars" in damages for claims the U.S. Department of Housing and Urban Development has paid for defaulted loans "wrongfully certified" by Wells Fargo.
The suit alleges the San Francisco banking giant falsely certified loans insured by the government's Federal Housing Administration.
“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," Bharara said in a statement.
Adding "accelerant to a fire," Bharara said, was Wells Fargo's bonus system that rewarded employees based on the number of loans it approved.
This case, like the first, was brought in civil court, even though it appears the US attorney has some decent facts to prove the fraud.
Unlike the cases against Wells Fargo, HSBC was nailed in a criminal investigation.
British banking giant HSBC will pay $1.92 billion to settle a wide-ranging investigation by U.S. authorities into money laundering at the bank.
In a deferred prosecution agreement, confirmed by the bank Tuesday, HSBC will undergo independent monitoring for five years as it puts in place safeguards to make sure it does not again become a conduit for illicit transactions. ...
A deferred prosecution agreement is a less severe punishment than criminal charges.
In other words, nobody at HSBC and nobody at Well Fargo is going to jail for their malfeasance. I find that a bit discomfiting. Bernie Madoff went to jail. And Ken Lay was convicted but died before he could be imprisoned. Why not someone (or someones) from either bank? Can banks hide behind their corporate shield even in criminal matters?
If so, than contrary to Mitt Romney's opinion, at least some corporations are not people, especially if they're big enough and rich enough.