BreakingNews: Fed fines Wells Fargo $85 million for steering prime borrowers to more costly subprime loans http://1.usa.gov/qivQ1X

And in the other hand the Fed lends WFC hundreds of billions to hide these loans off balance sheet and mark them to fantasy. Ain't regulation great!

85 million, that's like 320 mortgages, lmao, wow, what a killer!

SYSTEM WORKED !

Apparently, the average affected homeowner gets a check for $7000. What WFC did was to push people who were eligible for prime rates into subprime loans. One way they did this was to push people to take cash out. I can hear Mayor Quimby now, people are responsible for knowing what they can afford. But if you are young and naive and you have this sophisticated banker telling you that everybody is doing it, and "sure, you can afford it, no problem, and just think what you can do with that extra money........ use it to remodel the kitchen, then reward your hard work with that honeymoon to Hawaii you never took, and you'll triple your investment!", it's easy to get sucked in. I remember hearing the hard sells, they were good. (But I am terminally frugal, aka cheap, and non-materialistic, so they were wasting their breath.)

So, here are the numbers I ran on the average settlement offer of $7000. With an average mortgage of $180,000 and an average spread between prime/subprime between 1.5-2.0%, if a homeowner held onto his home for 2-3 years before foreclosure, they recoup the amount they were scammed out of. Forget closing costs, moving costs, and all the other associated expenses of buying and moving into a new home, and then moving again, much less the emotional pain of going through foreclosure. In other words, WFC is penalized by only having to reimburse some of the loot that they stole.

And bear in mind that WFC is the lender that has continually claimed that THEY have not participated in any of the unscrupulous practices of other lenders. They have also claimed not to have been involved in robosigning, but were recently named by the county registers of deeds as a prime offender. In addition, I have seen documents from WFC that attest to false statements in relation to title/ownership of mortgage loans.

I don't know why the 50 attorneys general think that the lenders will clean up their act as a result of the settlement when they haven't as a result of any other agreements, including the most recent consent orders signed with the FDIC, OCC, OTS, and FRB, admitting no wrongdoing but "I swear, I promise I won't do it anymore, really, I mean it this time!". They've factored in the fines as a cost of doing business.

Bluffer wrote..

One way they did this was to push people to take cash out. I can hear Mayor Quimby now, people are responsible for knowing what they can afford. But if you are young and naive and you have this sophisticated banker telling you that everybody is doing it...

The banks didn't even have to say a damn thing... when their peers and "wise" elders were telling them, "first off, don't rent, it's like throwing money away. Cash out refinancing? You'd be a fool not to take it. Just look what we did... we took the money and built a nice addition. Now our house is worth a gazillion dollars!"

I know, because I was constantly told the same bull**** by everyone and their dog throughout the bubble. I even built some of them additions. Now all these people and their kids are underwater or about to be foreclosed.

Everyone took finance for granted back then - me included. The only thing that kept me out of trouble is that I'm an old-fashioned guy not in a hurry to get anywhere, because there's nowhere to "get" when you come down to it. Like grasping water: as soon as you try to grab it, it's gone.

Now THAT'S wisdom.

Bluff-

It IS easy to get sucked in.

And I would never argue it isn't. But who should get ****ed because of a MISTAKE?

Taxpayers?

Isn't it by far, more preferable to allow people to fail and by so doing, teach them to succeed?

Once again, you suggest penalizing the prudent to bail out the imprudent which, over the long haul, is how countries and societies are destroyed.

No....the keeling up with the Jones' crowd with HELOCs and Hummers should be left to stnd or fall on their own.

Mayor, no taxpayer should get ****ed over anyone's mistake. We're only arguing about who ****ed more, and degrees of ****ed-ness. I guess it's all trivial when one comes down to it.

The biggest mistake by far was a bunch of clowns who thought they could choose winners and losers and magically make it all go away.

Oh WOW great news and they get to use tax payers money (TARP) to pay that fine. God Bless the USSA. Don't worry the fine is so small we can afford it

The Mayor,
The only sin the borrowers committed was using bad judgment. Wells Fargo was running a scam, taking borrowers who qualified for prime rates and pushing them into a subprime market without disclosing to the consumer that they would be paying interest penalties. Wells Fargo also falsified income information on loan applications to make borrowers appear qualified when they were not. The borrowers were not made aware that they were doing this and believed they had qualified, and the motivation was a compensation structure of WFC that encouraged high volumes and making subprime vs. prime loans. (I also guarantee that management knew this was going on, it was happening at all the lenders, they either looked the other way, or encouraged it.) In the process, they broke laws related deceptive practices and fraud and used "unsafe and unsound" banking practices that ultimately (on a cumulative basis) resulted in loss of wealth for prudent individuals like you and me. Perhaps borrowers need to learn lessons about using better judgment but laws and ethical business practices need to be enforced or this will continue and we will continue to have to pay. Being stupid is not illegal. As Mark Twain said, there is a sucker born every minute.

Big- I disagree but let's forget about that and assume that you are correct.

So your solution is to SCREW INNOCENT TAXPAYERS. I mean - I'm all for breaking up TBTF but if we do not, then SOMEONE HAS TO GET SCREWED here. I would prefer to leave innocent taxpayers 100 pct out of this mess and let the imprudent borrowers take the hit if I HAD to choose.

Wouldn't you?

How are innocent taxpayers getting screwed by WFC having to pay a penalty? I'm not proposing any bailouts, and $85M is hardly going to send WFC into bankruptcy, so I don't your reasoning as to why the homeowners who were defrauded should bear the loss as opposed to WFC. Although honestly, as I have told my state AG, I would much prefer to see prosecutions than fines.