Tag Archives: financial

Chevron and BP are pulling out of wind and solar

by bukaroso Posted on May 30, 2014

Oily withdrawal

Chevron and BP are pulling out of wind and solar

By

Roo Reynolds

|

futureatlas.com

Beyond Petroleum? More like Bake the Planet.

BP and Chevron, two of the corporations that are doing the most to toast the climate, bleat at us in costly advertisements about their meager efforts to harness renewable energy. But now even their modest renewables programs are being quietly dismantled.

“Renewable energy is vital to our planet,” Chevron helpfully reminded us in one of its insincere “We Agree” ads. “At Chevron, we’re investing millions in solar and biofuel technologies.” (Millions! From a company that made $21.4 billion in profits last year.) Beyond the marketing hype, here’s an injection of reality from Bloomberg’s Businessweek:

In January, employees of Chevron’s renewable power group, whose mission was to launch large, profitable clean-energy projects, dined at San Francisco’s trendy Sens restaurant as managers applauded them for nearly doubling their projected profit in 2013, the group’s first full year of operations. But the mood quickly turned somber. Despite the financial results and the team’s role in helping launch more than a half-dozen solar and geothermal projects capable of powering at least 65,000 homes, managers told the group that funding for the effort would dry up and encouraged staffers to find jobs elsewhere, say four people who attended the dinner. …

“When you have a very successful and profitable core oil and gas business, it can be quite difficult to justify investing in renewables,” says Robert Redlinger, who ran a previous effort at Chevron to develop large renewable-energy projects before he left in 2010. “It requires significant commitment at the most senior levels of management. I didn’t perceive that kind of commitment from Chevron during my time with the firm.”

But it’s not like Chevron is acting as a renegade in an otherwise responsible industry.

At the turn of the century, BP hired consultants who redesigned its logo as a green sun/flower mashup. It also introduced the marketing tagline “Beyond Petroleum.” Not all the money from the rebranding effort flowed to admen, though. In 2005, the company excitedly announced that it would spend $8.3 billion on green energy projects over a decade. (Compare that to the $42 billion the company expects to spend cleaning up the Deepwater Horizon mess.) Well, great news — BP hit that spending target a year early! Depressing news — it’s not going to commit to any more spending on renewable energy other than biofuels. From a March Bloomberg article:

BP has been disposing of assets to pay for the costs of the spill in the U.S. Gulf of Mexico in 2010 and last year put wind farms worth as much as $3.1 billion up for sale. In 2012, it scrapped a four-year old project to spend $300 million on a cellulosic ethanol refinery in Florida, and the year before, it shut its solar power business. It’s keeping biofuel research.

“BP hasn’t made a public commitment on future spending for alternative energy,’’ Phil New, BP’s chief executive officer of alternative energy, said in [a sustainability] report. “The financial commitment we made in 2005 has allowed us to cast a wide net in search of businesses that could be financially self-sustaining, and a good fit for BP. Our biofuels business fits the bill.”

If the reality that oil giants plan to continue blithely wrecking the planet has left you depressed, cheer yourself up with this little Chevron fairy tale:


Source
Chevron Dims the Lights on Green Power, Bloomberg Businessweek
BP Ends Renewables Energy Target After $8.3 Billion Spend, Bloomberg

John Upton is a science fan and green news boffin who tweets, posts articles to Facebook, and blogs about ecology. He welcomes reader questions, tips, and incoherent rants: johnupton@gmail.com.

Find this article interesting? Donate now to support our work.Read more: Business & Technology

,

Climate & Energy

See original article here – 

Chevron and BP are pulling out of wind and solar

Posted in ALPHA, alternative energy, Anchor, Citizen, FF, G & F, GE, green energy, LG, ONA, solar, solar power, Uncategorized | Tagged , , , , , , , , | Comments Off on Chevron and BP are pulling out of wind and solar

Economic View: Buying Insurance Against Climate Change

by Myrna Posted on May 24, 2014

Because efforts to stop global warming may fail, one way to handle the financial losses is to share the long-term risks. More: Economic View: Buying Insurance Against Climate Change Related ArticlesExtreme Weather: How El Niño Might Alter the Political ClimateThe Big Melt AcceleratesIn California, Climate Issues Moved to Fore by Governor

Read more: 

Economic View: Buying Insurance Against Climate Change

Posted in Annies, Citadel, eco-friendly, FF, G & F, GE, Monterey, ONA, solar, solar power, Uncategorized | Tagged , , , , , , , , | Comments Off on Economic View: Buying Insurance Against Climate Change

Chris Giles Challenges Thomas Piketty’s Data Analysis

by ColinEllzey Posted on May 23, 2014

Mother Jones

<!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.0 Transitional//EN” “http://www.w3.org/TR/REC-html40/loose.dtd”>

Chris Giles of the Financial Times has been diving into the source data that underlies Thomas Piketty’s Capital in the 21st Century, and he says he’s found some problems. The details are here. Piketty’s response is here.

Is Giles right? Experts will have to weigh in on this. But Giles’ objections are mostly to the data regarding increases in wealth inequality over the past few decades, and the funny thing is that even Piketty never claims that this has changed dramatically. The end result of Giles’ re-analysis of Piketty’s data is on the right, with Piketty in blue and Giles in red. As you can see, Piketty estimates a very small increase since 1970.

Now, if Giles is right, and there’s been no increase at all, that’s important. But it’s still a surprisingly small correction. The fundamental problem here is that the difficulties of measuring wealth are profound enough that it’s always going to be possible to deploy different statistical treatments to come to slightly different conclusions. There’s just too much noise in the data.

In any case, I’m not taking any sides on this. The data analysis is too arcane for a layman to assess. But it’s worth keeping an eye on.

Taken from – 

Chris Giles Challenges Thomas Piketty’s Data Analysis

Posted in FF, GE, LAI, LG, ONA, Uncategorized, Venta | Tagged , , , , , , , | Comments Off on Chris Giles Challenges Thomas Piketty’s Data Analysis

The Dick Cheney/Rand Paul Feud Continues—And They’re Both Wrong

by ElmerKTEyid Posted on May 19, 2014

Mother Jones

<!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.0 Transitional//EN” “http://www.w3.org/TR/REC-html40/loose.dtd”>

This past weekend, former Vice President Dick Cheney made yet another media appearance to denounce President Barack Obama. But Cheney also used the opportunity to continue his feud with Sen. Rand Paul (R-Kent.), who is mulling a bid for the 2016 GOP presidential nomination. On the friendly turf of Fox News Sunday, Cheney was asked about Paul’s 2009 damning accusation—reported last month by Mother Jones—that Cheney used the 9/11 attacks as an excuse for the Iraq war so that Halliburton, the military contractor Cheney once led, would reap a large profit.

Cheney replied,

Well, before I ever took the job as vice president, I totally severed all my ties with Halliburton, at considerable financial cost. I had no relationship at all with the company throughout the time I was vice president. I didn’t even talk to them. We kept a totally arm’s length relationship. So he obviously is not familiar with the facts.

Paul’s statement was harsh; he essentially had claimed that Cheney had betrayed the nation, exploiting a national horror and causing widespread death and destruction (including the deaths of thousands of Americans) to enrich his corporate cronies. When questioned by ABC News’ Jon Karl about his Cheney comment, Paul insisted, “I’m not questioning Dick Cheney’s motives.” But that’s precisely what Paul had done. And Paul had accomplished what not many could do: he evoked sympathy for the former vice president, who had led the Bush administration’s campaign to rally public support for the Iraq war with false claims about weapons of mass destruction and Saddam Hussein’s ties to al Qaeda.

It’s been easy for Cheney and his defenders to dismiss Paul’s over-the-top, conspiracy-theory-like assertion. But on Fox News, the ex-veep, too, went too far. He maintained that he had no financial ties with Halliburton while he was George W. Bush’s number-two and made a personal sacrifice by trading his CEO badge for a White House job. But that’s not entirely accurate.

As Politifact.com noted a few years ago, when Cheney became vice president, he pocketed a $34 million payout from Halliburton. In fact, because he probably sold stock options at an opportune time, he profited enormously because the stock price was at a high:

It’s not clear when Cheney sold his stock options, but it likely was within weeks of his being named to the ticket — a period when Halliburton shares hit their 2000 peak, in the low-to-mid $50 range. By November 30, 2000, the stock had fallen to $33 a share. If he’d waited until then to sell, his payday would have been one-third lower, or roughly $14 million rather than $22 million.

Moreover, when Cheney was veep, he continued to receive deferred payments from Halliburton. In 2004, the New York Times reported, “Mr. Cheney’s financial disclosure statements from 2001, 2002 and 2003 show that since becoming vice president-elect, he has received $1,997,525 from the company: $1,451,398 in a bonus deferred from 1999, the rest in deferred salary.” And at that time, Cheney still held some stock options in the company.

As vice president, Cheney repeatedly contended he had no continuing relationship with Halliburton. In 2003, he declared, “I’ve severed all my ties with the company, gotten rid of all my financial interest. I have no financial interest in Halliburton of any kind and haven’t had, now, for over three years.” But a report issued that year by the Congressional Research Service undermined Cheney’s claim. It found that if a public official retained unexercised stock options and collected deferred salary—as Cheney did then—the official had “retained ties” to the company.

So when Cheney now says that he had nothing to do with Halliburton while he was vice-president, he is contradicted by the Congressional Research Service. Maybe he wasn’t in contact with his old pals at the firm, but he continued to bank millions of dollars from the company as it obtained Iraq-related contracts from the US government.

In this ongoing scuffle pitting a GOP establishment heavy (who’s a hawk) against a possible insurgent Republican presidential candidate (who’s an intervention skeptic), both are wrong. When Paul assailed Cheney, he went too far and joined the ranks of the tin-foil-hats crowd—and then he tried to claim he had not said what he said. In defending himself, Cheney misrepresented his financial relationship with Halliburton. This mud-wrestling match has yet to produce a winner, but it is showing that each participant has a problem with accuracy.

See original: 

The Dick Cheney/Rand Paul Feud Continues—And They’re Both Wrong

Posted in alo, Anchor, FF, GE, LAI, LG, ONA, PUR, Radius, Uncategorized, Venta | Tagged , , , , , , , , , , , | Comments Off on The Dick Cheney/Rand Paul Feud Continues—And They’re Both Wrong

Elizabeth Warren Pens a Book, Is Still Totally Not Running for President

by Larissaiyb Posted on March 19, 2014

Mother Jones

<!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.0 Transitional//EN” “http://www.w3.org/TR/REC-html40/loose.dtd”>

It’s been a busy first year in the Senate for Elizabeth Warren (D-Mass.). Since she entered the Congress in January 2013, she’s become a liberal hero, a frequent YouTube star who turns dull congressional hearings into viral hits. She’s pushed the government to lower interest rates on student loans. Protected vets from financial scams. Introduced legislation to protect poor people searching for a job. Called on banks to reveal their donations to think tanks.

Somehow she’s also found time to write a 384-page book. Next month Warren will release A Fighting Chance, which, according to the AP, will tell her whole life story, dating back to her early life in Oklahoma to her time setting up the Consumer Financial Protection Bureau and her first year in the Senate. Warren will embark on a brief book tour in Massachusetts after the book’s publication on April 22.

Warren is already a prolific author, having published eight books before she ever ran for office. But those other writing ventures were an outgrowth of her academic career. Her new book appears purely political, the sort of hagiographic biography politicians pen to position themselves for a future run at higher office. Barack Obama published The Audacity of Hope, at around the same point of his career in the Senate. Mitt Romney wrote No Apology: The Case for American Greatness in 2010 to gear up for his 2012 campaign. Hillary Clinton is set to release a book in June.

Warren has said, time and again, that she has no intention of moving into the White House. “I’m not running for president and I plan to serve out my term,” she said at a December press conference. But politicians have a long history of ignoring their previous denials when circumstances change. Barack Obama frequently dismissed the notion that he’d seek the presidency so early in his career, only to ditch those denials and announce a campaign in 2007. It’s unlikely that Warren would challenge Clinton should Clinton, as expected, run in 2016. The Massachusetts politician joined her fellow female senators in signing a letter urging Clinton to run for president again. But, should she pass on another bid, Warren could always change her tune.

Taken from: 

Elizabeth Warren Pens a Book, Is Still Totally Not Running for President

Posted in Anchor, FF, G & F, GE, LG, ONA, PUR, Radius, Uncategorized, Venta | Tagged , , , , , , , , , | Comments Off on Elizabeth Warren Pens a Book, Is Still Totally Not Running for President

Elizabeth Warren to Fed: Stop Delegating on Enforcement

by RayIokkidgk Posted on February 12, 2014

Mother Jones

<!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.0 Transitional//EN” “http://www.w3.org/TR/REC-html40/loose.dtd”>

On Tuesday, Sen. Elizabeth Warren (D-Mass.) and Rep. Elijah Cummings (D-Md.) called on the heads of the Federal Reserve, the US central bank that sets monetary policy and helps regulate Wall Street, to take a more active role in bank oversight.

The Fed metes out dozens of penalties against banks each year, for infractions including faulty foreclosure practices and inadequate money laundering protections. But the seven board members—including newly-minted Fed chair Janet Yellen—who head the Federal Reserve rarely vote on penalty and enforcement decisions. Of the roughly 1,000 formal enforcement actions taken by the Federal Reserve over the past 10 years, only 11 were voted on by the board. The rest were delegated to Fed staff, sometimes even mid-level employees. Warren, who sits on the Senate banking committee, and Cummings, the ranking member of the House oversight and government reform committee, have been critical of this arrangement, arguing that the delegation of authority results in penalties that are too lenient. On Tuesday, the two Democrats sent a letter to Yellen asking her to tighten the Fed’s rules governing when the Board of Governors may delegate regulatory decisions, and when they must take important supervisory duties into their own hands.

“We respectfully request that the Fed…require that the Board retain greater authority over the Fed’s enforcement and supervisory activities,” Warren and Cummings wrote. “We believe that increasing the Board’s direct role in overseeing enforcement and supervision would strengthen the Fed’s efforts to reduce systemic risk in our financial system.”

The two note that the Fed Board gives more attention to monetary policy decisions than to its other mandate, bank oversight: “While the Board votes on every important decision the Fed makes on monetary policy, the board rarely votes on the Fed’s important supervisory and enforcement policy decisions.” Other Wall Street regulators, such as the Securities and Exchange Commission (SEC), require that all bank penalties be approved by their head panels.

In their letter, Warren and Cummings ask Yellen to require the Fed board to vote on any penalty agreement that exceeds $1 million or that involves changes in bank management. They also urge that all board members be notified before staff members enter into an enforcement action against a bank.

Read the article: 

Elizabeth Warren to Fed: Stop Delegating on Enforcement

Posted in Anchor, FF, GE, LG, ONA, Radius, Uncategorized, Venta | Tagged , , , , , , , , , , | Comments Off on Elizabeth Warren to Fed: Stop Delegating on Enforcement

Study: Health Care Reform Likely to Reduce Bankruptcy and Catastrophic Debt

by CaridadBollinge Posted on February 11, 2014

Mother Jones

<!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.0 Transitional//EN” “http://www.w3.org/TR/REC-html40/loose.dtd”>

Today’s email brings word of an interesting new paper from Bhashkar Mazumder of the Chicago Fed and Sarah Miller of Notre Dame. They set out to measure the effect of the Massachusetts health care reform on bankruptcy and personal debt, a subject that’s topical for a number of reasons:

The Massachusetts plan is quite similar to Obamacare, so results from this study are suggestive of the impact that Obamacare will eventually have.
One of the primary purposes of universal health insurance is to relieve the financial stress of large unpaid medical bills.
Massachusetts is a good case study because its reform affected everyone, not just those below the poverty line.

The authors take advantage of the fact that health care reform had bigger effects on some groups than others. Most middle-aged people, for example, were already insured, so the Massachusetts reform affected them only modestly. Conversely, young people had relatively low insurance rates, so they were more heavily affected. Ditto for counties, some of which had higher initial rates of uninsurance than others.

The study exploits a very large data set of consumer finance based on reporting from credit bureaus, which provided a sample of nearly 400,000 individuals to look at. Its conclusion is unsurprising:

We find that the reform significantly improved credit scores, reduced the total amount past due, reduced the fraction of debt past due, and reduced the probability of personal bankruptcy. We find particularly pronounced reductions in the probability of having a large delinquency of over $5,000. These effects tend to be larger among individuals whose credit scores were low at the time of the reform, suggesting that the greatest gains in financial security occurred among those who were already struggling financially.

The charts below, excerpted from the study, illustrate the effect of health care reform, which was implemented in the period shown by the yellow bars. Despite the severe recession that followed, the amount of current debt stayed pretty flat while the amount of debt more than $10,000 past due declined sharply. Obamacare is not as universal as the Massachusetts reform, so its effects will probably be less pronounced. Nonetheless, it will not only provide routine health care for millions of Americans who aren’t currently getting it, it will also make their lives far less financially precarious. That sounds like a win to me.

More: 

Study: Health Care Reform Likely to Reduce Bankruptcy and Catastrophic Debt

Posted in FF, GE, LG, ONA, PUR, Uncategorized, Venta | Tagged , , , , , , , , , , , | Comments Off on Study: Health Care Reform Likely to Reduce Bankruptcy and Catastrophic Debt

JPMorgan Paid $20 Billion in Fines Last Year—So Its Board Is Giving Jamie Dimon a Raise

by TerryQnhtwe Posted on January 24, 2014

Mother Jones

<!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.0 Transitional//EN” “http://www.w3.org/TR/REC-html40/loose.dtd”>

The New York Times reported Friday that Jamie Dimon, the silver-haired CEO of JPMorgan Chase, the nation’s largest bank by assets, is getting a raise. Dimon is poised to add a few million to the $11.5 million compensation package he took home in 2013.

If you so much as glanced at the news last year, this bit of news may puzzle you. JPMorgan, in many ways, had a miserable 2013. JPMorgan paid $1 billion in fines in the wake of the “London Whale” scandal, in which the bank lost $6 billion on a market-rattling blunder by a trader named Bruno Iksil. The bank also paid $13 billion to settle charges that it’d peddled risky mortgage-backed securities. And it forked over another $2 billion to settle charges for failing to spot Bernie Madoff’s ponzi scheme, which Madoff perpetrated largely using JPMorgan accounts. All told, the bank paid out roughly $20 billion in penalties to federal regulators over a slew of screw-ups and failures.

2013 was a rough year for JPMorgan. So why is Dimon getting a raise? The answer, in part, will make your blood boil. Here’s the money quote in the Times:

Mr. Dimon’s defenders point to his active role in negotiating a string of government settlements that helped JPMorgan move beyond some of its biggest legal problems. He has also solidified his support among board members, according to the people briefed on the matter, by acting as a chief negotiator as JPMorgan worked out a string of banner government settlements this year.

…

Mr. Dimon’s star has risen more recently as he took on a critical role in negotiating both the bank’s $13 billion settlement with government authorities over its sale of mortgage-backed securities in the years before the financial crisis and the $2 billion settlement over accusations that the bank turned a blind eye to signs of fraud surrounding Bernard L. Madoff.

Just hours before the Justice Department was planning to announce civil charges against JPMorgan over its sales of shaky mortgage investments in September, Mr. Dimon personally reached out to Attorney General Eric H. Holder Jr.—a move that averted a lawsuit and ultimately resulted in the brokered deal. Just a few months later, Mr. Dimon acted as an emissary again, this time, meeting with Preet Bharara, the United States attorney in Manhattan leading the investigation into the Madoff Ponzi scheme.

In other words, as big as those multibillion-dollar settlements were, JPMorgan board members believe the bank’s legal problems could’ve been worse. Blast-a-hole-in-our-balance-sheet worse. And so Dimon’s pay bump is a reward for locking horns with bank regulators and federal authorities and hashing out settlement deals that were favorable to the bank. He’s getting a raise because he beat the regulators, played them so well, JPMorgan board members seem to be saying, that he deserves to be rewarded for the deals he helped engineer.

There are other factors, too. Despite its legal headaches, JPMorgan’s stock price climbed 22 percent over the past year, and the bank recorded profits of $17.9 billion in 2013. But to read that Dimon’s savvy negotiating has won him a raise—and don’t forget that no top bank executives have gone to jail for actions related to the 2008 financial meltdown—brings to mind the old Dick Durbin quote about banks and Washington: “They frankly own the place.”

Continued here:

JPMorgan Paid $20 Billion in Fines Last Year—So Its Board Is Giving Jamie Dimon a Raise

Posted in FF, GE, LG, ONA, Uncategorized, Venta | Tagged , , , , , , , , , , , | Comments Off on JPMorgan Paid $20 Billion in Fines Last Year—So Its Board Is Giving Jamie Dimon a Raise

It’s Time to Fix the Housing Finance Market

by SergioBPFL Posted on January 15, 2014

Mother Jones

<!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.0 Transitional//EN” “http://www.w3.org/TR/REC-html40/loose.dtd”>

Yesterday I mentioned Brad DeLong’s belief that the biggest problem with the economy right now is the weak housing market:

I find it very hard to escape the conclusion that the big bad thing going on in the third millennium is not the excess construction of the mid-2000s housing bubble–a sum of 7.5% points of annual GDP….but rather the additional 20% points of annual GDP of residences not built since 2007 because of the financial crisis, resulting depression, and breaking of housing finance.

The chart above shows what DeLong is talking about. Housing was overbuilt in the aughts, but we’ve more than made up for that. The shortfall in new housing starts since 2008 is far larger than the excess between 2002 and 2007.

So what’s the problem? Felix Salmon, keying off a New York Times piece today, writes that a big reason for the continuing weakness of the housing market is the inability of even people with good credit to get mortgages.

Anecdotally, it’s much harder to get a mortgage now than it used to be. In the NYT article, the Center for American Progress’s Julia Gordon says that “a typical American family” with a credit score in the low 700s is “being left out”: that’s a very long way from subprime, which is what you’re considered to be when your credit score is below 620.

Meanwhile, here in Manhattan, no one in my condo building has been able to sell or refinance for the past couple of years, thanks to an ever-shifting series of rules at various different banks, all of which are clearly designed to just give them a reason to say no.

The chart below shows this dramatically:

Needless to say, mortgages were too easy to get in 2006, and we don’t want to go back to that level. But neither do we want to be where we are now. Salmon believes the problem is fairly simple: it’s not because of new rules about qualified mortgages or anything else regulatory, it’s simply because 30-year fixed mortgage rates are currently running at about 4.5 percent. “Would you lend money fixed for the next 30 years at a rate of less than 5%?” he asks.

The 30-year fixed mortgage is mostly a creature of Fannie Mae and Freddie Mac, who have historically bought up and securitized 30-year fixed mortgages so that banks didn’t have to keep them on their books. They aren’t doing that as energetically as they used to, and this has depressed the entire mortgage market. So what to do? DeLong suggests the answer lies with the government: “Have Mel Watt’s FHFA end policy uncertainty about housing finance and rebalance the construction sector to fill in our current 20%-point of annual GDP housing capital deficit.” Salmon suggests the answer might be the opposite: “Phase out the 30-year fixed-rate mortgage entirely, since it’s a product no private-sector financial institution would ever offer.” But both agree that the mortgage market is a crucial part of getting the economy back on its feet. Here’s Salmon:

One thing is clear: for all that the Fed has been pumping billions of dollars into mortgage securities as part of its quantitative easing campaign, all that liquidity has failed to find its way to new homebuyers. I’m in general a believer in renting rather than buying, but the US is a nation of homeowners, and in such a country, a liquid housing market is a necessary precondition for economic vitality. Right now, we don’t have one — and we don’t have much hope of getting one in the foreseeable future, either.

With household deleveraging having now run its course, this is a good time to start thinking more seriously about the housing market. It’s not a silver bullet, but there are plenty of families out there willing to fund more residential construction if only they could get a mortgage. Not a go-go-no-doc-no-down bubble mortgage, just a normal mortgage for normal people. This is something that President Obama should probably be thinking pretty hard about.

See the original post: 

It’s Time to Fix the Housing Finance Market

Posted in FF, GE, LG, ONA, Uncategorized, Venta | Tagged , , , , , , , , , | Comments Off on It’s Time to Fix the Housing Finance Market

Miami and Los Angeles Sue Banking Giants Over the Sub-Prime Mortgage Debacle

by Traci B. Jackson Posted on December 23, 2013

Mother Jones

Some of the cities hardest hit by the sub-prime mortgage crisis are fighting back with lawsuits against the banks whose lending fueled the collapse of the housing market. Most recently, the city of Miami filed three separate suits against Wells Fargo, Bank of America, and Citigroup, claiming their lending practices violated the federal Fair Housing Act and cost the city millions in tax revenue.

The cases, all of which were filed in the Southern District of Florida, focus on the banks’ treatment of minority borrowers. According to the city, minority residents were routinely charged higher interest rates and fees than white loan applicants, regardless of their credit history. They were also stuck with other onerous terms—such as prepayment penalties, adjustable interest rates, and balloon payments—that increased their odds of falling into foreclosure.

It’s no secret that some big banks discriminated against minority borrowers during the housing bubble. Racial bias ran so deep inside Wells Fargo’s mortgage division that employees regularly referred to subprime mortgages as “ghetto loans” and African American borrowers as “mud people,” according to testimony from former bank officials. In 2011, Bank of America paid $355 million to settle a Justice Department lawsuit, charging that its Countrywide Financial unit steered hundreds of thousands of minority borrowers into predatory mortgages.

Lawyers for the city of Miami, which is roughly 60 percent Latino and 20 percent African American, argue that these discriminatory practices are one key reason that the fallout from the sub-prime lending frenzy hit the city so hard. “The State of Florida in general, and the City of Miami in particular have been devastated by the foreclosure crisis,” reads the city’s complaint. “As of October 2013, the State of Florida has the country’s highest foreclosure rate, and Miami has the highest foreclosure rate among the 20 largest metropolitan statistical areas in the country.” The city is seeking compensation for the drop in real estate tax revenue due to foreclosures, which have further depressed property values, and for the cost of providing municipal services to abandoned homes.

In a written statement to the Miami Herald, Wells Fargo called the discrimination claims “unfounded allegations that don’t reflect our corporate values,” while Citigroup insisted that it “considers each applicant by the same objective criteria.” Bank of America also defended its lending practices as fair and said it had “responded urgently” to assist customers during the financial crisis.

Miami isn’t the first city to take on the banking giants. Earlier this month, Los Angeles—which claims to have lost more than $78 billion in home value due to foreclosures—sued Citigroup, Bank of America, and Wells Fargo on the same grounds. Richmond, California, a working-class Bay Area suburb, plans to rescue borrowers whose mortgages are underwater by seizing their properties using eminent domain. Homeowners will remain in their homes and be given new loans for amounts that reflect current values. And the city will have a fighting chance of shoring up its dwindling tax revenue. It’s a good deal for everyone—except the bankers behind the housing implosion.

Continued:

Miami and Los Angeles Sue Banking Giants Over the Sub-Prime Mortgage Debacle

Posted in Anker, FF, GE, LAI, LG, ONA, Radius, Uncategorized, Venta | Tagged , , , , , , , , | Comments Off on Miami and Los Angeles Sue Banking Giants Over the Sub-Prime Mortgage Debacle