My (ever readable) pal Kevin Funnell of Bank Lawyer's Blog, who openly confesses to consorting with the financial industry for a living, hails the ruling. He also takes potshots at other U.S. cities pursuing similar predatory lending cases. Yet the decision doesn't completely exonerate Wells -- quite the opposite.
U.S. District judge Frederick Motz, who presided over the Baltimore suit, said lawyers for the city failed to prove that Wells's lending practices increased the number of abandoned and vacant homes in inner city neighborhoods and otherwise contributed to their decline. But in his ruling he all but states that Wells did, in fact, improperly target minorities:
It may be entirely reasonable to posit -- as the City's allegations amply support -- that unscrupulous lenders took advantage of inner city residents living in a dysfunctional environment to induce them to make loans they could not afford.That clause, pointedly set off by dashes, speaks volumes. It strongly suggests that Wells's lending record in Baltimore may in fact have been "unscrupulous." It just doesn't mean the company is chiefly responsible for the city's urban decay. That, as Motz and Mr. Funnell correctly argue, is a complex economic and sociological phenomenon that extends far beyond a bank's lending schemes.
Motz also expressly invited Baltimore officials, or other law firms, to sue Wells on narrower grounds, such as that the company's lending activities drove individual borrowers from their homes. That's not what you'd expect if the judge thought there was no case.
Perhaps it's a nod to the evidence that Wells did target minorities. That includes a sworn statement by Elizabeth Jacobson, the former top subprime loan office at Wells. Here's what she said in a June 2009 affidavit detailing the company's tactics:
I know that Wells Fargo Home Mortgage tried to market subprime loans to African-Americans in Baltimore. I am aware from my own personal experience that one strategy used to target African-American customers was to focus on African-American churches. The Emerging Markets unit specifically targeted black churches. Wells Fargo had a program that provided a donation of $350 to the nonprofit of the borrower's choice for every loan the borrower took out with Wells Fargo. Wells Fargo hoped to sell the African-American pastor or church leader on the program because Wells Fargo believed that African-American church leaders had a lot of influence over their ministry, and in this way would convince the congregation to take out subprime loans with Wells Fargo.ï»¿ï»¿