No, banks were not forced; They were predators

One of the most constantly whined refrains out of the economic crisis that banks were forced to make bad loans to low income groups because of federal regulations requiring them to loan money to minorities.

That’s hooey, of course. And even this story won’t convince those who really want to believe that the housing crisis was the result of some liberal plot.

Still, here’s the story in today’s (click) Washington Post: A Wells Fargo executive describing in detail how she led the team that eagerly sought out minorities and people with bad credit or no credit and hoodwinked them into loans they couldn’t handle.

She was making loans people couldn’t pay under the certainty that she would make her loan fees while the loans themselves would be sold and resold. She was one cog in a giant machine that was spinning out money as the housing hyper-inflationary bubble inflated. It was a great scam while it lasted, but the result is the mess you see around you.

The bank is denying this lady’s assertions, but they ring too true. One of the editors here at the paper was trying to buy a house at one price and was dealing with mortgage brokers who really tried hard to get him into a much bigger house, assuring him that it would be no problem. Instances of outright falsifying of loan documents are rife.

And yet some people still say it’s the fault of the liberals for forcing banks to make bad loans? 

Cripes, some people will believe anything.

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56 Responses to No, banks were not forced; They were predators

  1. Myth Buster says:

    Bank is derived from Bench or Money Lending Table. Jesus turned them over because Usury always ensures more money is owed than is available to pay the debt; it is called a “Sting”. An example is today there is 5 times more money owed ($50T) than in circulation ($10T).
    To grieve this situation, one approaches another “Bench” beside an “Attorney” meaning “To Twist” the Law in favor of the Corporation holding the Debt ie the World Bank (Bench).
    Look at the Flag sitting beside the Judge’s Bench; it will be surrounded in Gold Braid to indicate the Court is subject to the Maritime Juristidtion of the World Bank (Bench).
    Cool game isn’t it? WASPS and BEES created this STING; Anglo-Saxons and Chaldeans are one in the same BEES which means Word. They Lied.

    • ctrentelman says:

      maritime jurisdiction of the united nations?

      take ur meds, howard.

      • Myth Buster says:

        Admiralty Law is enforce in the US Courts. The Gold Braid surrounding the Flag in Government/State buildings, and Courts signifies the Court is subject to Admiralty Law; the Attorney “To Twist’ is given rights to represent the accused; “Discovery” is accomplished when the accused is told his rights are that everything he says will be used against him in that court and all will be “disclosed” to the prosecutor working on behalf of the Sovereign Judge equivalent to the Captain of a ship at Sea
        LOST “Law of the Sea Treaty” is a UN office which is being given control of the Sea and Seabed upon which royalties of between 1 and 7% will be paid on oil and mineral rights. For the US that is over $7
        Trillion @ 7% rate.
        Could you please do some research before jumping in on the dog pile Charlie?

        http://www.investopedia.com/terms/m/maritime-law.asp
        Maritime Law – Definition of Maritime Law on Investopedia – A body of laws, conventions and treaties that governs international private business or other matters …

  2. Brent Glines says:

    Back in his Community Organizer days, Obama sued Citibank under the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691; the Fair Housing Act, 42 U.S.C. 3601-3619; the Thirteenth Amendment to the U.S. Constitution; and 42 U.S.C. 1981, 1982 in an effort to force them to make bad loans to people who weren’t qualified to repay them.

    So yes, Charles, you blathering notwithstanding, banks were being pressured to make bad loans to poor people, which led to the banking crisis, which resulted in our current economic woes.

    • ctrentelman says:

      from YOUR link, sir:

      Plaintiffs filed their class action lawsuit on July 6, 1994, alleging that Citibank had engaged in redlining practices in the Chicago metropolitan area in violation of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691; the Fair Housing Act, 42 U.S.C. 3601-3619; the Thirteenth Amendment to the U.S. Constitution; and 42 U.S.C. 1981, 1982. Plaintiffs alleged that the Defendant-bank rejected loan applications of minority applicants while approving loan applications filed by white applicants with similar financial characteristics and credit histories. Plaintiffs sought injunctive relief, actual damages, and punitive damages.

      redlining is not rejecting people who are unqualified, unless you are saying that all blacks are unqualified.

      what the bank officer did was different — she sought out people who were unqualified, seeking out poor people and, sadly, a lot of blacks are poor but I suspect she’d take anyone — as the “Giant Pool of Money” report makes clear, people of all races, creeds and genders were targeted, some even while dead.

      but I AM glad to hear that this was all obama’s fault. I was kinda worried he’d missed this one.

      • Brent Glines says:

        This was not an isolated case. It is noteworthy that Obama was involved in this case, and now President Obama seeks to punish banks for making risky loans that Community Organizer Obama sued Citibank as a means of pressuring them to make risky loans.

    • Bob Becker says:

      Did you bother to read the link you posted? Here is what the suit alleged: “Plaintiffs alleged that the Defendant-bank rejected loan applications of minority applicants while approving loan applications filed by white applicants with similar financial characteristics and credit histories.”

      It did not seek to force banks to make bad loans. It did seek to force banks to apply the same credit standards to minorities [mostly blacks in this instance] they applied to white applicants. Unless you’re alleging that any black applicant for a loan, because he or she was black, was necessarily a bad credit risk — which I hope you are not. The allegation was that banks were denying home loans to minority applicants who had the same credit history and rating as white applicants who were being given home loans, and that that was illegally discriminatory. The banks settled the case.

    • willbike says:

      Your example is about allowing black people access to the same loans white people were being given.

      So yes, Brent, your blathering notwithstanding, banks were being pressured to make bad loans to poor black people rather than just the white ones, which led in part to the banking crisis, which resulted in part our to current economic woes.

      • Brent Glines says:

        That is your opinion, to which you are entitled, but what facts do have to support that argument?

        • Bob Becker says:

          What evidence? How about the text of the suit you posted? It’s very specific about what it alleged. Did you bother to read the link you postrd?

          • Brent Glines says:

            Both sides of any lawsuit have allegations. An allegation is not proof. Do you have any facts to back up the allegation?

          • Bob Becker says:

            You made the claim that Obama sued the banks to force them to make bad loans to people who couldn’t pay them back. As evidence YOU offered a link to a court case Obama filed, which case did not ask that banks be forced to make bad loans to minorities. It merely asked that banks apply the same credit standards to all applicants, regardless of race. So I ask again what evidence do you have to support YOUR claim that Obama sued banks to force them to issue bad loans?

          • Brent Glines says:

            It is my opinion that the lawsuit was brought to pressure Citibank to make loans that they would not otherwise have made. If the parties bringing the suit could verify that Citibank was in fact violating civil rights in it’s loan practices, then the Justice Department would be filing a criminal suit against Citibank, and a civil suit would be unecessary.

            As things turned out, since the case was settled out of court, the allegations made by the plaintiffs were not proven. Since to my knowledge, the Justice Department never brought charges against CitiBank after the case was settled, I am of the opinion that no discrimination ever existed.

            You may be of a different opinion, and I’m fine with that. Charles has his opinion as well, which he has registered. That is what this thread is for, to allow people to express their opinions. If you think you can prove anything here, as I’ve already advised Charles, good luck with that.

    • Neal Cassidy says:

      I have a question for Brent(Owain)Glines. Does this mean that Obama pressured a bank to make the home loan to Senator Mike Lee? The same home that was sold by the bank in a short sale? The same mortage loan that the lender ended up taking a $400,000 loss on the short sale.

      • ctrentelman says:

        I can answer that for you, neal:
        Absolutely Obama did, because he knew the lee would win his run for Senator (after devining, in the future, that Lee would run) and be unable to pay off the mortgage and so find himself embarassed, and we all know that Obama wants to embarass Sen. Lee because Obama is just that mean.

      • Brent Glines says:

        According to this article in the Trib, the circumstances behind Senator Lee’s short sale arose from the decrease in salary he experienced when transitioning from private practice to taking a seat in the Senate. Had he remained in private practice, no sale would have been necessary. I guess that’s the price he’s willing to pay to accept public service.

        So under the circumstances, he sold the home in the middle of a huge real estate market downturn. As the article states, banks are increasingly accepting short sales over foreclosures in order to avoid being stuck with properties they cannot sell. It’s better for the bank to accept a smaller loss by accepting a short sale than it is for them to eat over a million dollar loss for the whole mortgage.

        Both the bank and Senator Lee took a loss on the sale. That’s business. However, to my knowledge (and to their credit), neither the bank nor Senator Lee relied on a government bailout to get out of the situation.

        • Neal Cassidy says:

          He voluntereed to seek a job at a lower pay rate. How did he think he was gpoing to afford the monthly payment on a reduced salary? Many people have, through no fault of their own, had their income reduced. I will bet that not many of them had the bank or lender accept a short sale to settle their debt. There is a cost for short sales. The shareholders in the bank cover the loss of value when sold at a reeduced price. JPMorgan Chase accepted $25 Million in bailout oney. So yes Senator Lee and the lender did take federal bailout oney

          • Neal Cassidy says:

            I apologize for the incorrect amount listed for JPMorgan Chase. They received a total of $94.7 billion dollars in bailouts. So the approximately $400,000 loss theyt took on Senator Lees home short sale is realitively minor. But from the point of view of JPMorgan Chase that is a very cheap price to pay for their own US Sebator.

          • Brent Glines says:

            He didn’t expect to be able to make that mortgage, so he sold the property at a loss. That’s what you do when you realize you can’t make the monthy payment. This isn’t all that complicated…

          • Neal Cassidy says:

            Brent Glines-Are you trying to say that Mike Lee took out a mortage on a home he kinew he could not afford? What is his reasoning for failing to fulfil his legal obligation to pay his mortage? JPMorgan Chase has not given other homeowners who had a reduction in income the opportunity for a short sale to forgive then of their moral duty to pay their bills. He is now just another deadbeat who escaped his obligations. Why did he seek out a lower paying job? did he feel that the rules did not apply to him? He has failed to do the right thing.

          • Brent Glines says:

            No, he took out a mortgage based on his earnings in private practice. If he had stayed in private practice, he could have continued to make that mortgage payment. When he was elected to the Senate, he took a salary cut, and he elected to sell the home, since he could no longer afford it. Working with his mortgage holder, he sold the house short, and both he and the mortgage holder accepted a loss on the sale. That was a business transaction between him and the mortgage holder. As mentioned in the Tribune article I linked, banks are accepting short sales on homes more and more during the current down housing market, so this is an option that is probably available to anyone, but you would have to check with your mortgage holder on that.

            All the above is based on the article I linked, and assumptions on my part, which may or may not be correct. If you have further questions, I suggest you direct them to Senator Lee’s office.

        • Neal Cassidy says:

          “both the bank and Senator Lee took a loss on the sale”. That is not correct. Only the bank,JPMorgan Chase took a loss on the sale. Senator lee had his obligation for the remaining balance of $400,000 forgiven. Only the taxpayers and shareholders of the bank absorbed the loss. Senator lee was forgiven the reaining balance due($400,000). He will not have a lein placed on his future oincome to pay the balance. He walked away from his mortage.

          • Brent Glines says:

            No, he did not walk away from his mortgage. That is a lie, and you should apologise for it.

            At any time, both parties to a contract can mutually agree to make changes to the conditions of a contract, and that is what Senator Lee and his mortgage holder did. Senator Lee and the mortgage holder changed the conditions of their contract, and Senator Lee satisfied those conditions as agreed upon between him and the mortgage holder.

          • Neal Cassidy says:

            Sorry Owain. Senator Lee was able to negotiate a $400,000 gift from his mortage holder. How many other people did JPMorgan Chase let walk away without penalty? He received a settlement because he is a US Senator. He failed to live up to his original contract. The settlement from JPMorgan Chase is just a disguised campaign contributio9n. Has he made any agreement to eventually repay the $400,000 dollars? Did he have any adverse/negative action filed on his credit report? No, he was affored special treatment because he elected to take a job that he fully knew would not permit him to honor his original committment. Spin it how you wish but he did not keep his word to repay the originalmortage loan.

          • Brent Glines says:

            “He received a settlement because he is a US Senator.”

            And you know this how? Do you have data to back that up? I didn’t see anything to reflect that in the article I linked, nor in any of the other sources I found on the subject, so unless you can substantiate that, I think that is just your bias talking.

    • Bill Wade says:

      People don’t seem to understand the difference between traditional”Banks” and “Investment Banks”. After the depression of ’29, banks were limited to what they could invest based on the amount of deposits on hand. Over time, those regulations were gutted and the term “investment banking” became the norm. These “investment banks” bought up the smaller traditional banks and used their assets as collateral to “sell” products as they called them. These products became, over time, as “derivitives” or “hedges” against such things as recessions. In other words they bought insurance, with the investment funds, against the price of the investments going down. They bundeled high risk mortgages along with low risk mortages and sold them as derivatives. They then sold products that bet on the interest rate swing on those investments. Insurance companies like AIG sold those policies and overextended themselves because they didn’t believe they were exposed to significant downturn. The banks knew what they were doing and were making money hand over fist in the process. Nobody forced them to do anything. They just made money and more money and more money because they thought they had no limit to what they could do. Then when the crap hit the fan, they ran to the government, saying that if they failed, the economy would fail. They had the best of both worlds. Hugh returns on high risk investmens both domestic and foreign and then had the audasity to force the US government to cover their backs. What a country.

  3. Brent Glines says:

    You can allege anything you want in a lawsuit. I can allege that the sun rises in the west, but that doesn’t make it so.

    The fact remains that, contrary to Charles’ thesis, banks were being pressured to make loans that we now know were ill advised.

    • ctrentelman says:

      … even thought that is exactly not what yur own example, and the many thousands of other examples extant, two of which I cited, clearly say?

      OK then. Glad we could clear that up.

      • Brent Glines says:

        Care to rephrase than in English?

        Out of curiosity, from the Washington Post article you cite in your original post, why on earth would the loan officer ‘hoodwink’ people into loans they couldn’t repay? I’m trying to figure out under what business model that makes sense.

        Would you think it is somehow to your advantage to give large amounts of money to people with the expectation of never getting a return on that loan? Why would they do that if they were NOT under pressure to make those bad loans?

        • ctrentelman says:

          not sure why I am wasting my time since you obviously don’t want to know the answer because it doesn’t fit in with your world view that obama caused it, but, since someone else might be reading this and might think your question has a basis in reality:

          If you would read the article, and accompanying links, you will see that that bank officer at Wells Fargo had the best reason in the world to sell loans to people who could not pay them off: SHE MADE A COMMISSION ON THE LOAN BEING COMPLETED, and once the loan was completed the bank tranched it and sold it SO THEY DIDN’T CARE, BECAUSE THEY MADE A COMMISSION SELLING THE LOAN not on whether it got paid off.

          They made money making loans to anyone, and since the loans were immediately sold up the line to investors, the bank didn’t care if they ever got paid off, nobody cared if they got paid off, the securitized mortgate investments were rated AAA and that was all that mattered.

          So their motive was they were getting rich, which is the universal motive in capitalism. There was pressure, but it was from the bank, not politicians, the bank wanted to generate commissions so it pressured bank officers and loan officers to move those loans out, no matter what. Mortgage brokers in Nevada (read “the giant pool of money) were pressuring their bosses to let them use looser and looser standard because other mortgage brokes were using looser and looser standards and getting all the deals and commissions and none of those officers cared because loans were being turned over to banks the same day.

          And the banks didn’t care because the banks were getting rich moving the mortgages farther up the line and someone else, some invester in china or malaysa or ireland was ultimately stuck with worrying about whether those loans paid off, which they did not, which is why the economy crashed and something like 30 trillion dollars went “poof!”

          so, yeah, I see now, it’s all obama’s fault. Him and his lawsuit against red lining.

          • Brent Glines says:

            Your explanation is equivalent to saying, “Charles Trentelman writes articles for SE because they pay him to do so, even though print journalism across the country is steadily declining, and newspapers are going out of business. Trentleman doesn’t care about this as long as he’s getting paid for the drivel he writes. BAD Charles Trentelman! His only motive for doing so is getting rich (good luck with that).”

            Banks were being pressured to make unwise loans to poor people who were ill equipped to pay those loans off, as the lawsuit illustrates. If the banks were making unsound loans as a result of this pressure, it is understandable that they would try to unload them as soon as possible. If investers were foolish enough to buy bundles of such worthless paper, then they should have been forced to pay for their foolishness by being forces to absorb the losses instead of having the Government bail them out.

  4. Dean Moriarty says:

    Technically the sun doesn’t rise. The Earth “sinks” in orbit making the sun appear to rise.

    • ctrentelman says:

      The earth sinks?

      Well, obviously, this also is Obama’s fault. Man, the power of that guy: Terrorize the entire banking system into throwing money away, changing the orbit of the planet, on and on.

    • Myth Buster says:

      Re-write the Bible if you know better than God Charlie. The bible says Earth is fixed, set on a foundation that shall not be moved. The Sun rises Charlie; just ask Joshua
      Don’t you get taught this in Catechism?

  5. hawg says:

    “…and hoodwinked them into loans they couldn’t handle”

    seems like a strange way to make money. if they can’t make the payment, they can’t cover the interest, no return for banks. the bank possibly re-acquires the property, probably sells it to cover some costs which I’d bet isn’t even the original loan amount more often than not.
    so teach me some economics here charles, how does this practice benefit banks?

    • ctrentelman says:

      i told you. Several times. the bank didn’t collect the loans. They sold them to someone else, who sold them to someone else, and so on. the money was in selling loans to someone else, not waiting for them to be paid off.

      If you are not going to read my answer, don’t ask questions about it.

      • hawg says:

        ooops, sorry. (liberals are sooooo touchy)

        • Neal Cassidy says:

          It is nice to see that Trentleman is being touchy in his factual explanation. That is a lot better explanation than admitting you didn’t read or understand what really happened.

  6. tom says:

    Great comments and explanations Mr. “T”.

    Too bad these mindless and stupid Obama haters aren’t bright enough to actually understand and respond instead of just simply sticking with their stupid “Obama” did it mantra. Hawg and Glines, a real pair of dumb asses to draw to fer sure.

    The real scary part is that there are millions of pretty dumb people that believe this tripe the two are spreading, and some of them are even half bright enough to find their way to the polls to vote!

    • hawg says:

      and if tommyboy wasn’t such a crybaby handpuppet, he could actually point to the word “obama” in my post. but he can’t

  7. Bill says:

    So which is it, Charles?

    Comparing this article with another of your articles from March 2012 (http://www.standard.net/stories/2012/03/07/housing-market-better-learn-lesson-bust) I’m not sure if the problem is due to home buyers believing “…houses could triple in value every two years but never go down. Everyone had a goose in the basement laying golden eggs, home equity loans soared, far too many people filled their debt-burdened homes with toys…” or to predatory lending.

    • ctrentelman says:

      both — it was a perfect storm of belief in fantasy and people willing to make money off it.

      • laytonian says:

        ….and HGTV shows like “House Flippers” showing how an unemployed person could buy a house, put $5,000 into it, and sell it for $25,000 more before the first payment was due.

        HGTV. They even lie on “House Hunters”.

  8. Bill Wade says:

    It’s called default hedge funds. They knew the loans were bad but bought insurance just incase they went into default. Can anybody spell AIG?

    • Brent Glines says:

      If they were insured, why did they need a U.S. Government bailout?

      • Decider says:

        Glines:
        Bill Wades Post at 9:43 (Friday the 15th) this morning explains the Government bailout of AIG; et al, very well — why not read it and ‘get schooled’ . . . again.

        • Brent Glines says:

          Decider – I don’t need to read it again. I understand his point.

          My point was, why should the taxpayers have been on the hook for the bailouts? If the banks made bad loans, the banks should have taken the loss. If AIG provided insurance coverage for bad loans and overextended themselves, THEY should have taken a loss as well.

          In either case, it should have been the companies that made the poor business decisions who should have taken the loss, not the US taxpayer. As it is now, companies have no incentive to make good decisions, because they have the expectation that if they get in trouble, the tax payer will bail them out.

          That is a bad precident to have set.

          • Decider says:

            Hey, I am no fan of AIG or “too big to fail” conglo-monsters of any kind — believe me , it is not intuitive with Democrats/Progressives to offer bailouts to such ilk. However, when the economy plane is going down fast, and the controls don’t work anymore, the tendency is to do what’s necessary to get more air under the wings and buy enough time to troubleshoot and repair.

            When markets start falling like dominoes, NO ONE knows what will make them stop, or even IF they will stop.

            Bush then Obama pulled the bailout ripcord in order to prevent crashing the economy.

            We can Barcolounger quarterback the decision from partisan ideologies three and a half years later all we want. However, bickering over ‘things could have been worse’, or, ‘things could have been better’ seems like anticlimactic piffle to what SHOULD be done to PREVENT the same scenario from happening in the future.

          • Brent Glines says:

            Decider, if you are serious about “what SHOULD be done to PREVENT the same scenario from happening in the future” then perhaps you should be concerned about this:

            Contrary to what Charles thinks, liberals are still pushing making bad loans based upon race.

            “The two largest cities this week approved laws requiring banks doing business with them to meet race-based quotas for mortgage and small-business lending.”

            Loans should be granted based upon the ability to repay the loan, and nothing else. This kind of nonsense is begging for a repeat of the same collapse to happen all over again.

  9. laytonian says:

    It is noteworthy, Glines, that you twist facts to suit your purposes.

    Are we Democrats paying you enough to make the Republicans look silly?

  10. Decider says:

    Goldman Sachs has been facing a number of lawsuits related to mortgage backed securities. In 2010 also, Goldman settled a charge by paying $550 million for not disclosing the role of a hedge fund while formulating the CDO’s to the buyers, taking a short position AS WELL AS BETTING ON THEM TO PERFORM POORLY IN THE OPEN MARKET.

    The same is happening among other banks, Citigroup Inc., J.P. Morgan Chase & Co., HSBC holdings Pfc, and M&T Bank have been legally accused for MISREPRESENTING DOCUMENTS RELATED TO MORTGAGE-BACKED SECURITIES AND OTHER 2011 LOSSES.

    Romney wants to repeal Dodd/Frank and do away with regulations that would help prevent another market collapse.

    “Loans should be granted based upon the ability to repay” is spitting into a tonado of credit default swap malice, if the country again is held hostage to the Romney deregulation insanity !

  11. Myth Buster says:

    Goldman Sachs took $13B from taxpayers; like Rio Tinto and Kennecott it is a Rothschild foreign bank.
    http://www.usatoday.com/…/2010-07-24-goldman-bailout-cash_N.htm
    Jul 24, 2010 – Goldman Sachs received a $12.9 billion payout from the government’s bailout of AIG, which was at one time the world’s largest insurance …
    Isn’t it time we all woke up?

  12. Michael Trujillo says:

    I know it’s a week later, but I thoroughly enjoyed reading this thread of comments as intelligent and knowledgeable people tried in vain to school Glines. Though it is humorous to read his obfuscations, it’s also sad that he represents so many people in this country who just refuse to believe that there are people in the banking industry – in the very banks where they “believe” they’ve developed a friendly relationship with- who didn’t/don’t give a $&!% about the long term consequences of their own short term profit making. It’ just easier/lazier/ego-satisfying to say that (insert your favorite political demon) did it.

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