Citigroup and Wells Fargo Targeted in L.A. Discrimination Lawsuit
Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) have once again found themselves in the crosshairs of a lawsuit. Reuters reports that Los Angeles has filed a lawsuit against the banks, alleging that they “engaged in a continuous pattern and practice of mortgage discrimination in Los Angeles since at least 2004 by imposing different terms or conditions on a discriminatory and legally prohibited basis.”
That is, the banks issued discriminatory mortgages to minority communities. The end result was elevated foreclosures that reduced home values by an estimated $78 billion. This decline in property values means less city revenue from property taxes.
“When banks engage in such discriminatory conduct, the misconduct has profound financial consequences for the cities in which mortgaged properties exist, and banks should be responsible for those financial consequences. Banks should reimburse such cities for lost tax revenues due to discriminatory lending,” said the lawsuit, according to Reuters.
Next to Congress, Wall Street may be the nation’s favorite punching bag right now. Financial institutions, particularly large mortgage lenders, suffered what may be irreparable harm to their reputations for their role in the financial crisis. Five years after the trough of the Great Recession the damage is still being calculated, and anger and blame for the losses has all been directed in the same general direction: toward Wall Street.
The best evidence of this — outside of protest movements like Occupy Wall Street — is an ongoing legal siege of the nation’s top banks. Bloomberg calculates that the six largest banks in the United States have racked up $103 billion in legal costs since 2008, with as much as 40 percent coming after January 2012. JPMorgan (NYSE:JPM) and Bank of America (NYSE:BAC) have shouldered approximately 75 percent of the legal costs of the six top banks; Citigroup and Wells Fargo fall into that top-six bucket.
Investors mostly appear to be brushing off news of the lawsuit against Citigroup and Wells Fargo. Shares jumped more than 1 percent in early trading on Friday morning following a strong jobs report and simmered down modestly in later trading.
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