Wells Fargo’s Master Spin Job
If you still don’t believe our brethren on Wall Street have planet-sized cojones, check out this story.
All over the country, Wells Fargo is making headlines for launching a multimillion-dollar homeowner assistance program called HomeLIFT, which among other things offers $15,000 down payment grants to prospective home-buyers.
Local mayors in big cities from one end of the country to the other are showing up at ribbon-cuttings and throwing rose petals at the bank for its generosity. Newspapers in turn are running breathless profiles of the low-income homeowners who will now get to buy dream homes thanks to the bank’s beneficence.
Some knew, some didn’t, but all are leaving out one key detail: Wells Fargo was forced to launch HomeLIFT.
To understand the background, we have to go back to July 25th of last year, when a federal judge in the Northern District of California approved a settlement in a case called City of Westland Police and Fire Retirement System v. Stumpf. The suit was brought on behalf of shareholders by Robbins Geller, the same firm featured in a story I wrote two years ago about the ratings agencies.
For those who are fortunate enough to have forgotten, robo-signing was a common practice that devastated families during the foreclosure crisis. People all over the country found themselves booted out of their homes thanks to bogus affidavits signed by “vice presidents” and “regional managers,” who were often scraggly kids just out of college blindly signing hundreds of documents a day, if not more.
It was a kind of systematic perjury, and most of the major banks eventually copped to doing it.
Wells Fargo was one of those banks, joining JPMorgan Chase, Bank of America, Ally Financial, Citigroup and others in a sweeping $25 billion settlement with state and federal regulators finalized in 2012.
However, the road to that settlement was not smooth. According to some stockholders, the company’s board of directors failed to cooperate with investigators throughout the process. A court later found that the Wells board “opposed discovery requests, filed motions to quash, and refused to provide details concerning the Company’s policies,” which made it hard for investors and shareholders to know what to do about the scandal.
So those shareholders sued Wells, essentially for failing to cooperate with the government over its robosigning practices. After a long battle, the bank finally agreed to settle last year.
The terms mandated that the bank spend $67 million on a series of measures to repair its reputation in communities hit the hardest by foreclosures and robosigning. Enter HomeLIFT.
Wells Fargo’s Master Spin Job, Page 1 of 3