Providence, RI is suing the mortgage company Banco Santander SA. They say Santander is red-lining.
Banco Santander SA’s U.S. unit was sued by the city of Providence, Rhode Island, over claims it stopped issuing mortgages in minority neighborhoods after the housing bubble burst, the latest in a series of discrimination lawsuits against lenders by U.S. cities and counties.
Santander Bank, previously named Sovereign Bank, pulled out of the neighborhoods and focused on white communities after being acquired by the Madrid-based lender in 2009, according to a complaint filed today in Providence federal court. The suit seeks millions of dollars in damages.
Providence’s case basically states that this one bank is not lending to people who want to buy a home in certain neighborhoods, which the city is labeling “minority neighborhoods”. The city says that because this one lender isn’t lending to people who want to buy homes in these neighborhoods, that housing prices are stagnant and their incoming property tax revenue is stagnant, and the city’s tax coffers aren’t filling up the way they’d like them to.
You know, I know that the fed is basically giving away money to mortgage lenders to loan out and make profit from lending fees and interest on, but you would have to be a fool to be in the mortgage business. The sheer amount of regulations and bad loans you have to make would flat-out send me to the funny farm in a week.
I don’t like making small loans to friends and relatives, let alone someone with a credit score under 700.
I’d really like to see their evidence to see if they are telling even a smidgeon of the truth or if they are just lying with statistics and hoping to get an ignorant bench.
Well, I am shocked, shocked to find that a bank has no desire to grant loans to possible bad credit risks.
This is what’s known as “a shakedown.” Threaten lawsuit over somethign that can’t be easily proven OR disproven, but is expensive to litigate, then deposit the settlement check. Lather, rinse, repeat.
The solution is simple. Tell banks they can loan money following the mountain of regulations, and receive bailouts and special low-rate borrowing if needed, or they can simply run it like a business, take the risks, pocket teh profits, and not get bailed out if they goof. Rates and activity will rise, or fall, to the natural price-risk level. The reason we had a bubble in the first place was because banks were forced to make stupid high-risk loans with the implicit bailout guarantee if they went under, so they loaned out money with abandon, figuring it was risk free *to them*. Socialized risk, private profits.
That is pretty much what my father has been saying about the whole mess; nationalized losses and privatized profits.
I need a drink.