“They need to do a much better job on the basic management and operational side of their firms,” Mr. Barr said. “What we’ve been pushing the servicers to do is improve their infrastructure to make sure their call centers are doing a better job. The level of training is not there yet.”
– Michael S. Barr, the assistant Treasury secretary for financial institutions, as quoted from the New York Times article, ‘Paper Avalanche Buries Plan to Stem Foreclosures’ on 6/28/09, discussing the banks’ loan modification efforts.
Most of us have a family member or friend that has experienced hard times. You help them find a job, buy them a few meals, let them crash at your place for a while, and may even lend them some money. But, at some point you realize two things: (1) Perhaps it was their poor attitude and lack of organization that got them into this situation in the first place; (2) If I keep bailing them out what incentive do they have to clean up their act? Then it dawns on you…you are an enabler.
That is the situation we find ourselves in today with banks like Wells Fargo, Bank of America (formerly Countrywide), and Citigroup. By now you’re probably familiar with the bailout figures, published on Pro Publica’s website, ‘Eye on The Bailout’:
- Bank of America $52 Billion
- Citigroup $50 Billion
- Wells Fargo $25 Billion
Staggering numbers indeed…but, the enabling began long before the bailout took place. This is an excerpt from a HUD urban policy brief written in 1995:
“At the request of President Clinton, the U.S. Department of Housing and Urban Development (HUD) is working with dozens of national leaders in government and the housing industry to implement the National Homeownership Strategy, an unprecedented public-private partnership to increase homeownership to a record-high level over the next 6 years.”
This National Homeownership Strategy initiative gave banks their green light to start lending to anyone with a pulse. And, the incomprehensible part is the amount of greed and corruption that took place in the years that followed.
“Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches, because it figured church leaders had a lot of influence and could convince congregants to take out subprime loans.”
– Beth Jacobson, former loan officer at Wells Fargo Bank discussing marketing practices in ‘Bank Accused of Pushing Mortgage Deals on Blacks’ from the New York Times on 6/6/09
Wells Fargo is now being sued by the city of Baltimore and the N.A.A.C.P. However, they’re not alone. Last month, the SEC filed a lawsuit against the former CEO of Countrywide for civil fraud.
So the notion that the banks and government working together, or against each other, will save us is seriously flawed. They should both be held equally accountable for creating this mess, for sure. But, it’s time to cut ties. Let the banks sink or swim. No more free rides. It’s time to stop the enabling.
And come to think of it…it’s time to kick my brother off the couch.