As the U.S. economy crumbled around us, the government made a bold (and often criticized) choice to bailout many of the largest banks in hopes to get the economy back on track. Now we’re learning that many of the banks the government lent money to are being sued by the U.S. for fraud. One bank under the most scrutiny is Wells Fargo. With over $36 billion given to the bank to help rebuild the economy, it turns out that the bank wasn’t as forthcoming with information as they should have been.
The nation’s largest mortgage lender was found to have not reported loans that defaulted. In fact, out of an astounding 6,500 defaulted loans, the company only reported 300. The real issue arises in the fact that the company approved more than 100,000 loans that should never have been approved, helping cause the mortgage crisis. These were loans that were government-centered, such as FHA and HUD loans. While it was brought to the attention of the company that their lending practices were questionable, nothing was done to fix the problem. In fact, obtaining more and more government-funded loans became a priority of the bank. When loans defaulted, the government was the one footing the bill. In many cases, home buyers didn’t even qualify for these programs, but the bank approved them anyway.
While this is just the latest case of bank fraud, it’s not the first and probably not the last. Other banks that have come under scrutiny include Bank of America, Flagstar Bancorp, Inc, and more recently Chase. Each company is said to have partaken in similar actions that led to thousands of defaulted loans. However, while Wells Fargo claims that the allegations are false, other banks have reached agreements with the federal government to “fix” the problem.
If found guilty, Wells Fargo will have to pay hundreds of millions back to the federal government. However, prosecutors must be able to prove without a shadow of a doubt that Wells Fargo intended to defraud the government and this may prove tricky.
But, what does all this mean to the population at large? Basically, American taxpayers are footing the bill for all the loans that were accepted and then defaulted. As if many didn’t have hard enough time paying their own mortgage, they are now paying the loans of thousands of defaulted home buyers. These are tax dollars that could have been spent on the growing list of needs of the troubled American people.
Guest post by Amy Brantley, Amy began her freelance writing career in 2006 and has been published with a number of companies, including Woman’s Day and MSNBC.