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Even as Elon Musk calls philanthropy ‘very hard,’ everyday Americans gave a record $617 billion—despite feeling the squeeze over the cost of living

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Egg companies made $1.22 billion in profit off a $6 carton — now they’re buying their way out of a price-fixing case with 53 million donated eggs

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Meet the Zillennials: The luckiest micro-generation in the workforce, born between 1993 and 1998
FinanceWells Fargo

Wells Fargo Just Got Hit With Another Penalty for the Financial Crisis. This Time, It’s $2.1 Billion

Lucinda Shen
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Lucinda Shen
Lucinda Shen
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Lucinda Shen
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Lucinda Shen
Lucinda Shen
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August 1, 2018, 4:31 PM ET
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In its continuing string of settlements and scandals, Wells Fargo has agreed to pay $2.09 billion for actions that allegedly contributed to the 2008 Financial Crisis, the Department of Justice said Wednesday.

That new penalty comes on top of a $1.2 billion fine Wells Fargo agreed to pay in April 2016 in relation to the Financial Crisis. The Department of Justice alleged at the time that Wells had deceived the Federal Housing Administration into insuring risky mortgages that were ineligible for federal support between the years of 2001 and 2008.

Wells Fargo has paid several fines upward of a billion in the past two years, with the succession of scandals starting in 2016, when regulators said the bank had opened millions of fake accounts—resulting in millions of unwarranted fees levied on consumers.

On Wednesday, the DoJ alleged that Wells Fargo had issued residential mortgages to creditors they knew to have overstated their income, or failed to meet the bank’s internal risk threshold.

“Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans,” said Alex Tse, acting U.S. attorney for the Northern District of California in a statement. “Today’s agreement holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted.”

Still, Wells Fargo made no admission of liability as part of the settlement, with CEO Tim Sloan saying in a statement: “We are pleased to put behind us these legacy issues regarding claims related to residential mortgage-backed securities activities that occurred more than a decade ago.”

Shares of the company also remained relatively unmoved, with investors having anticipated the Department of Justice settlement. On Wednesday, Wells Fargo also revealed that it had already set aside the amount needed to make the payment.

In line with what came to light in 2016 about the company’s history of aggressive sales tactics, the Justice Department’s investigation alleged that Wells Fargo sought to double its production of subprime and Alt-A loans (which typically fall on borrowers with lower credit scores) between 2005 and 2006, even creating a campaign dubbed “Courageous Underwriting” that pushed employees to approve potentially riskier loans.

Specifically, the bank sought to bolster a risky mortgage known as the so-called stated income loans. Rather than depending of credit scores, the stated income loan depends on the borrower to report their own wages, and did not require documented proof of said income, the department said.

But in subsequent investigations between 2005 to 2007, the bank discovered that about 70% of borrowers were overstating their income by at least 20% in that time frame, after acquiring tax transcripts from the Internal Revenue Services, Justice Department said. And those investigations, which were spread monthly among Wells Fargo employees, revealed that borrowers who over-reported their earnings on average said they were pulling in 65% more than their actual wages, the DoJ alleged.

Despite the report’s wide monthly dissemination however, the company continued to expand those businesses, the DoJ alleged.

The bank also “took steps” to protect itself, government investigators said, alleging that Wells Fargo moved many of the income mortgages outside of its own loan portfolio which it held for investment.

As a result, Wells Fargo sold at least 73,539 stated income loans between 2005 and 2007. Half of those have since defaulted.

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