U.S. Sues Wells Fargo: Yet Another Bailed-Out Bank Accused of Fraud
The U.S. Attorney in the Southern District of New York brought a case against banking giant seeking 'hundreds of millions of dollars' in damages for what it says is a decade of mortgage market fraud
Earlier this year, Charlie Munger, who is billionaire Warren Buffet's right hand at Berkshire Hathaway and a sort of self-proclaimed mad oracle of Wall Street, made some interesting comments. He bashed people who buy gold, delivering an all-time amazing quote:
Gold is a great thing to sew onto your garments if you're a Jewish family in Vienna in 1939 but civilized people don't buy gold – they invest in productive businesses.
Munger, if you might remember, is the same gazillionaire dickhead who two years ago ripped people experiencing post-crash economic hard times, saying they should "suck it in and cope" and that anyone who wants to complain about the Wall Street bailouts should realize they were "absolutely required to save your civilization" (Munger thinks a lot about "civilization"). He added that even if you didn't like them, "you shouldn't be bitching about a little bailout. You should have been thinking it should have been bigger."
Some of those bailouts we shouldn't have complained about, of course, were directed at one of Munger's favorite companies – banking giant Wells Fargo, in which Munger and Buffett are heavily invested. Wells Fargo got as much as $36 billion in federal aid after the crash and got a massive push from the government to help it buy up the dying crash-era megabank Wachovia for $12.7 billion, a shotgun wedding that created the second-biggest bank in America. Wells Fargo not only got $25 billion in TARP funds just before it bought Wachovia, it got a special tax break from then-Treasury Secretary Hank Paulson, which some reports say was worth as much as $25 billion to WF at that time.
This is all just background for the latest news: Wells Fargo is being sued by the State for vast fraud in the mortgage markets. The U.S. Attorney in the Southern District of New York, Preet Bharara, yesterday brought a case against WF seeking "hundreds of millions of dollars" in damages for what it says is a decade of fraudulent behavior, in which WF wrongfully certified more than 100,000 mortgages as being eligible for federal mortgage insurance. Basically, Wells Fargo screwed the FHA and HUD by mass-approving loans without regard for whether they were defective or not. From the L.A. Times:
When Wells Fargo discovered problems with the loans, it failed to notify HUD, which administers the FHA program, as required, the suit said. The action alleges more than 10 years of misconduct.
"The extremely poor quality of Wells Fargo's loans was a function of management's nearly singular focus on increasing the volume of FHA originations – and the bank's profits – rather than on the quality of the loans being originated," Bharara's office said in a statement.
The action by the U.S. Attorney here in New York comes on the heels of another suit against Chase brought last week by Eric Schneiderman in Obama's Mortgage Fraud Task Force. That action alleges similar mortgage-related scumbaggery by Bear Stearns, which Chase acquired in another government-brokered, market-concentrating shotgun wedding in early 2008.
So in just a week, we've seen two pretty big actions brought against the Coke and the Pepsi of the American commercial banking world. We'll see how they pan out, but it's interesting, if nothing else.
So just to recap Munger's comments: gold is not an investment for civilized people, it's for panicked Jews fleeing the Holocaust. Civilized people, according to Munger, instead invest in productive businesses like Wells Fargo, which according to this new suit spent a decade committing mass fraud and dumping tens of thousands of dicey loans onto the lap of the taxpayer. If we think about it in retrospect, Wells Fargo then got rewarded for years of bad behavior by receiving tens of billions more in bailout money, which it used to buy a dominating market share – artificially inflating its share price for the next generation, to the benefit of wrinkly old greedheads like Charlie Munger. And if you don't like it, you should suck it in and cope.
I wonder what Munger thinks about his investment now. Is it still civilized?
Around the Web
Around the Web
Cracked5 Famous Movies That Were Insane Parties Behind the Scenes
SalonThe 7 Most Offensive TV Shows Of All Time
Diffuser10 Best Album Closing Tracks
Mental Floss20 Things You Didn’t Know About Pulp Fiction
Guitar WorldTop 10 Best (and Worst) Comeback Albums of All Time
SalonSecrets Of The Female Pickup Artist
- The Republicans Are Now Officially the Party of White Paranoia
- The Real 'Dear Prudence' on Meeting Beatles in India
- 500 Greatest Albums of All Time
- Aretha Franklin Bans 'Amazing Grace' Doc Screenings
- Watch U2 Play 'Zooropa' for Syrian Refugees at European Tour Launch
- The Point of No Return: Climate Change Nightmares Are Already Here
- 20 Best TV Shows of 2015 So Far
- Conservative Heads Explode Over Kentucky's Bigoted County Clerk