The Fed accused the nation's fourth largest bank by assets of steering potential borrowers who could have qualified for prime rates into more expensive subprime loans.
The authorities also claimed that employees of Wells Fargo Financial, a non-bank subsidiary closed last year, doctored income information on mortgage applications to push through borrowers that would not have qualified for based on income.
The fine is the largest the Fed has ever issued under its consumer-protection authority and is the first action taken against a bank for predatory lending practices related to the housing bubble.
The loans in question were made between 2004 and 2008 and are estimated to involve up to 10,000 borrowers.
Finally, banks are getting dinged for their role in Foreclosuregate, robo-signing of mass numbers of bad subprime loans, and conning customers into bad loans they couldn't afford. It's a small fine considering the trillions this activity cost our economy, but it's more than I expected any Republican administration to lay into the banks.
Sadly, there's still a long, long way to go before any semblance of justice is achieved. But it's a start. Meanwhile on Wall Street itself, NYPD cops have busted a major prostitution ring, its clients all Wall Street players.
The ring pulled in more than $7 million over three years, Brooklyn District Attorney Charles Hynes said at a news conference.
"The business of high-end prostitution is enormously profitable," Hynes said.
The prostitution service, named High Class NY, was run 24 hours a day out of an office in Brooklyn and charged from $400 to $3,600 an hour for its services, according to the 144-count indictment. It also provided customers with cocaine and other narcotics, the indictment said.
Hynes said clients often spent in excess of $10,000 in a single night.
They were "all high-end customers coming from the financial markets. People with nothing but money," he said.
Police said the business was extremely sophisticated, running several escort websites and using dummy corporations with misleading names and codes during business-related phone calls.
High Class NY even had a law firm draw up employment contracts for its prostitutes, who described themselves as models and fraudulently agreed to refrain from sexual contact with clients, police said.
"They were on the high-end of sophistication," said Vice Detective Joe Panico.
Remind me to buy Det. Panico a round if I'm ever out that way. And remember, this ring was going on over the last three years...during and after the big financial meltdown. Wall Street certainly wasn't hurting, and the big boys rebounded fast. Hopefully these High Class NY folks will name names, and we can see some of the big boys do the perp walk into Riker's Island.
Not bad work, folks.
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