Reporters and politicians are lining up to congratulate Wells Fargo for its multimillion-dollar neighborhood grant program – but they’re leaving out one small detail…
By Matt Taibbi
Rolling Stone (10/3/15)
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.
Resisting at every step
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.
Under the settlement, Wells had to dedicate $36 million in homeowner assistance to cities like Fresno, Bakersfield, Detroit, Albuquerque, Virginia Beach and New Haven. It also mandated $6 million in spending for credit counseling.
The settlement made the news last year. It may not have been on the front page, but it was out there. “Wells Fargo settles remaining ‘robo-signing’ litigation,” reported the LA Times, in one example.
Patting themselves on the back
Fast forward to this month. Wells Fargo, fulfilling the terms of the settlement it fought against bitterly in the lawsuit, launched down payment assistance programs in cities all over America.
In city after city, Wells executives announced their plans, then patted themselves on the back for their generosity, always neglecting to mention the Westland suit.
In the Detroit area, for instance, a Wells spokesman spoke proudly of the $5.25 million it will be spending on HomeLIFT:
“While the Wayne County economy is showing signs of improvement, many families have yet to re-enter the housing market because they struggle with making a down payment,” said a seemingly empathetic Russ Cross, a Wells senior vice president.
“Combined with financial education,” Cross went on, “these down payment assistance grants can make a tremendous difference for people who want to own a home in one of these five Wayne County cities.”
Cross never mentioned that Wells launched HomeLIFT because it had to. The $5.25 million it spent on HomeLIFT in Detroit was exactly the number mandated by the Westland settlement.
Detroit Mayor Mike Duggan slobbered all over Wells in a statement about the program.
“This innovative public-private partnership will make a significant difference for eligible homebuyers,” said Duggan.
Press failing to tell the whole story … again
It was bad enough that Wells bragged about its court-mandated penance, and maybe a little worse that local pols helped out with the verbal ribbon-cutting. But how about the local reporters who chimed in with positive stories about these altruistic programs?
“Wells Fargo Offers $15K down payment to help home buyers,” wrote the Detroit Free Press.“Potential home buyers in Detroit and other communities will soon have a new source of down payment assistance…”
“Wells Fargo Program Aims to Boost Home Ownership in Wayne County Cities,” piped in Crain’s Detroit Business.
This same pattern repeated itself in virtually every one of the communities where Wells was forced to make an investment.
“Local Companies Join Forces For Home Ownership,” wrote KMOX.com in St. Louis. The CBS affiliate’s story featured a pic of St. Louis Mayor Francis Slay proudly announcing the $4.75 million HomeLIFT grant. Again, this was exactly the amount specified in the court settlement.
“New Haven Neighborhood Gets Boost from Wells Fargo Program that Helps Homebuyers,”announced the New Haven Register. The formula was the same as in St. Louis: Wells Fargo in the headline, plus a photo of the opportunistic local pol handing out the goodies.
“We know home owners are more inclined to protect their investment and take care of their property, and they take pride in the result,” said Mayor Toni Harp.
“Wells Fargo to help Fresno homebuyers with $15,000 down payment grant,” was the headline in the Fresno Bee. Same format as all the other cities: Wells in the headline, and a photo featuring proud Fresno Mayor Ashley Swearengin. The $7.5 million Fresno program was, again, exactly the amount mandated by theWestland settlement.
A very few news outlets in some of the cities got it right. The Riverfront Times in St. Louis, for instance, nailed it. “Wells Fargo is not simply trying to look good; it is required to try to look good,” the paper reported.
But in most of the cities, the program was presented like a charitable endeavor, and the local pols seemed to have no problem basking in the ink.
When I contacted Wells about this story, the bank initially seemed offended at the suggestion it had not been forthright about the impetus behind HomeLIFT. The new program, its spokesperson Tom Goyda explained, was “part of several Wells Fargo LIFT programs developed to create positive outcomes for people and communities recovering from the financial crisis.”
A similar program called NeighborhoodLIFT, which Goyda described as a philanthropic endeavor, had been created years before the Westland suit. HomeLIFT, he said, was just an extension of that program.
Goyda added that the fact that HomeLIFT and other programs were part of settlement agreements had “already been covered in the news media” and was “mentioned in press releases.”
That was a surprise to me, since I hadn’t seen anything like that in press releases. When I pressed Goyda for an example of a Wells Fargo press release admitting that HomeLIFT was part of a court settlement, he replied:
“Our CityLIFT program within the LIFT family was part of a 2012 settlement with the DOJ and that fact has been included in all CityLIFT releases and background is provided on the program Website and, as we discussed, HomeLIFT’s ties to the Westland settlement is discussed with city officials and has been covered by several media outlets previously.”
This is confusing, but funny. To deflect attention from one lawsuit, Wells directed me to a different and worse one.
Back in 2012, Wells Fargo was forced to cough up mega-millions in yet another settlement, this time with the U.S. Department of Justice.
In that settlement, the department’s Civil Rights Division accused the bank of systematically discriminating against tens of thousands of Hispanic and African-American homeowners.
Among other things, the Justice Department said Wells charged minority applicants more – “hundreds of dollars more,” on average – for loans than white borrowers paid.
Poster child for discriminatory lending
The DOJ suit was one of many reasons Wells became a poster child for discriminatory lending. Infamously, one of its loan officers told the New York Times in 2009 that employees at the company referred to black borrowers as “mud people” and called subprime lending “ghetto loans.”
Anyway, to resolve the government’s discrimination charges, Wells in 2012 agreed to $184 million in compensation to borrowers, plus another $50 million in down payment assistance.
The bank’s CityLIFT program was created to satisfy the terms of this settlement. To its credit, Wells Fargo did, at least, publicly admit this when the program was launched.
But this year, the bank never mentioned anything about this new HomeLIFT program being part of a court settlement when it sent out releases. The bank says it did tell all of the mayors who praised the program, but nobody else was informed that HomeLIFT was penance for robosigning.
And when I called them to ask about this, they pointed to press releases from their CityLIFT programs years ago – which, if you’re keeping score, was the tab they paid for the other wrong thing they did, the systematic racial discrimination.
The offices of several of the mayors who participated in this program declined to comment. But the office of New Haven Mayor Toni Harp was surprised to learn that the HomeLIFT event to which the city was invited by Wells Fargo to participate had anything to do with a court settlement.
“Wells Fargo did not make any of that information available to us,” said Laurence Grotheer, a spokesman for Harp.
Grotheer said the mayor was only too happy to participate in the program, since homeownership, owner occupancy and neighborhood stabilization are objectives of her administration. “But I had no awareness that its program was the result of a court order.”
“So the city was a full and willing participant,” he said. “But I had no awareness that its program was the result of a court order.”
It’s hard to get offended, exactly, when a bloodless too-big-to-fail corporation tries to take credit for something it was forced to do. But that doesn’t mean we shouldn’t call them on it.