According to an announcement issued by the United States Justice Department, agreement for the payment of a fine of $2.09 billion has been reached with lender Wells Fargo allegedly because the firm was aware that some of the mortgage loans that it had issued had incorrect income information.
According to the US government, this very activity by the firm was responsible for the onset of the financial crisis in the country in 2007-08 which later spread throughout the world impacting the global economy. it has only bene recently that the global economy is showing some signs ot returning back on the growth path.
“Today’s agreement holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted,” Alex Tse, acting US Attorney for the Northern District of California, said in a statement.
But as a part of the settlement with the Justice Department, Wells Fargo is not admitting any liability for the outcome.
It “remains focused on [its] important role as one of the nation’s leading providers of mortgage financing” said Wells Fargo 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,” Wells Fargo CEO Tim Sloan said.
According to the argument of the bank, settlement agreements with other banks over similar issues had been reached by the Justice Department on previous occasions and that “importantly, there were no claims that individual customers were harmed as a result of the alleged conduct.”
According to the allegations levelled against Wells Fargo, there was knowledge with the bank that many of the house loans that it issued between 2005 and 2007 were based in on income details that were misstated and therefore the quality of the loans was misrepresented.
According to the Justice Department, billions of dollars were lost in lieu of investments made by investors which included federally-insured financial institutions, in securities that were backed by mortgage which also had Wells Fargo loans.
Wells Fargo has recently had a spate of bad publicity and the fine is the latest in that list.
The reputation of the bank has been dented by a series of controversies that has started off with the fake accounts scandal. The scandals have also increased the legal expenses for the bank and attracted scrutiny from regulators.
Large investments are being made by the bank to win back consumer confidence. An expensive ad campaign on television, radio and online was recently launched by the bank.
The bottom line of Wells Fargo has bene hit by al the controversies.
The bank said last month, the there has been a reduction in profit, loans, deposits and revenue last quarter.
(Adapted from Money.CNN.com)