What do you have to do to get slapped with the Federal Reserve's biggest-ever consumer-protection fine?
You have to rip off mortgage borrowers by the thousand. The Fed alleges Wells Fargo (WFC) did just that during the housing boom, bilking "possibly more than 10,000" out of sums reaching as high as $20,000 by slapping them with high-cost loans when they would have qualified for cheaper ones.
The Fed fined Wells $85 million Wednesday for fraud, deceptive claims and unsafe banking practices for its mortgage lending practices between 2004 and 2008. It also told the bank to compensate wronged customers. Those sums could run into the millions of dollars, going by Fed figures.
What did Wells do? Commission-hungry salespeople at Wells Fargo Financial, a subprime loan shop the bank shut down last year after the mortgage market cratered, "altered or falsified income documents and inflated prospective borrowers' incomes to qualify those borrowers for loans that they would not otherwise have been qualified to receive," the Fed said. In a familiar tale, the bank also sold people who would have qualified for low-cost loans costlier ones.
Wells, of course, neither admitted nor denied anything – except for having a culture of fairness. Of some 300,000 loans it made over the relevant period, just 4% or so were abusive, the bank estimates. A spokesman says Wells doesn't have any estimates of the ultimate cost of making customers whole, because it must first identify those wronged in a Fed-supervised process.
"The alleged actions committed by a relatively small group of team members are not what we stand for at Wells Fargo," said CEO John Stumpf. Thank goodness for small favors.
That's what most companies do when they buy their own shares. But you can avoid the trap.
FORTUNE -- In 2006 and 2007 timber giant Weyerhaeuser (WY) conducted one of the biggest share buybacks in its history. It unleashed $800 million to purchase its shares, which were dancing near an all-time high of $80. In 2009, with the stock at $30, the company spent a mere $2 million on its own MOREScott Cendrowski, writer - Jul 11, 2011 5:00 AM ET
Are the wheels coming off the Wells Fargo stagecoach?
Shares of Warren Buffett's favorite bank fell 4% Wednesday to its lowest level since December after Wells (WFC) posted a mediocre first quarter and dodged persistent questions about the eyebrow-raising departure of its longtime financial chief.
Wednesday's quarterly report is Wells' first since Howard Atkins announced his retirement Feb. 8. Wells' failure to fully explain his reasons for leaving continues to chafe investors.
CEO John MOREColin Barr - Apr 20, 2011 11:20 AM ET
What the administration seems to have giveth, the courts may yet taketh away.
Shares of the biggest banks tumbled Friday after a Massachussetts court ruled units of Wells Fargo (WFC) and U.S. Bancorp (USB) improperly foreclosed on two houses in a closely watched 2007 case.
The court ruled the banks failed to show they held the mortgages at the time of the foreclosures. The case has been viewed as an important test MOREColin Barr - Jan 7, 2011 12:02 PM ET
Hell hath no fury like a Citigroup scorned. Oh, scratch that.
Citi (C) agreed Friday to take $100 million from Wells Fargo (WFC) to settle lawsuits tied to the fall 2008 battle for the remains of the failed Wachovia bank.
Obviously, $100 million is not exactly chump change. But it's hard to say it really constitutes real money to these banks, which together have more than $3 trillion in assets – particularly MOREColin Barr - Nov 19, 2010 4:39 PM ET
The foreclosure follies are turning into quite a headache for Freddie Mac, the taxpayer-owned mortgage investor.
So says a look at Freddie's (FMCC) quarterly report filed Wednesday with regulators.
The entire "risk factors" section of the report comprises a 1,351-word explanation of how "deficiencies in foreclosure documentation" could raise costs, make business harder to plan and otherwise throw a wrench into what already is far from a smooth-running machine.
Last quarter, if you MOREColin Barr - Nov 3, 2010 12:59 PM ET
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