Saturday, December 3, 2011

Via ThinkProgress: Former Chase Banker Admits His Bank Pushed Minorities Into Subprime Mortgage Loans

 


One of the most pernicious practices in which the nation’ biggest banks engaged during the lead up to the financial crisis was pushing minority borrowers into subprime loans, even when many of them qualified for prime loans. Wells Fargo had perhaps the most horrifying practices in this department, calling the subprime loans that they pushed in poor, black neighborhoods “ghetto loans.”

This rampant predatory lending helped inflate the housing bubble; a Center for American Progress investigation actually found huge racial disparities in lending at the big banks that wound up getting bailed out, with minority borrowers far more likely to receive high-priced loans.

One former banker for Chase — James Theckston — told the New York Times’ Nick Kristof that not only did his bank push minority borrowers into higher-priced loans, but senior executives then tried to cover up the racial disparity in their banks’ lending:
One memory particularly troubles Theckston. He says that some account executives earned a commission seven times higher from subprime loans, rather than prime mortgages. So they looked for less savvy borrowers — those with less education, without previous mortgage experience, or without fluent English — and nudged them toward subprime loans.
These less savvy borrowers were disproportionately blacks and Latinos, he said, and they ended up paying a higher rate so that they were more likely to lose their homes. Senior executives seemed aware of this racial mismatch, he recalled, and frantically tried to cover it up.
“The bigwigs of the corporations knew this, but they figured we’re going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here, maybe even overseas,” Theckston explained.

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