Should Wells Fargo Lose the Latest DOJ Lawsuit - Research Paper Example

? Wells Fargo Wells Fargo Wells Fargo & Co. is mostly known for offering financial services to s in the United s, andcountless countries in the world. The presence of the company is welcome in most regions as people get to enjoy the services and products offered, for example; insurance, banking, mortgage, and even investment options. The development of the financial giant over the years has made it gain some popularity, and at the same time, get its fair share of storms. There have been lawsuits filed against the company for what may be considered inappropriate use of their financial power. Recently, the company has been facing a lawsuit that requires them to pay for damages, because of acting unethically toward offering substandard mortgage loans, which might have powered the financial crisis in the region (Raindi & Timiraos, 2012). This paper will examine the lawsuit, and if the company is justified in claiming they acted within their financial ethical boundaries. In October 2012, the Department of Justice was at the forefront in trying to prove that Wells Fargo & Co. acted unethically by providing shoddy mortgage deals to insurance programs in the U.S., hence; creating a loss of millions of dollars. An Act enacted in 1989 allows the government to sue any financial institution if the affected party is insured by the federal government. The Department of Housing and Urban Development in US is accusing Wells Fargo & Co. of offering shoddy loans to first-time buyers (Raindi & Timiraos, 2012). According to the Department of Housing, this was done with complete disregard as to whether the parties being given loans had the ability to pay or not. The probability of Wells Fargo losing the lawsuit There is a likelihood that Wells Fargo & Co. might lose the lawsuit. This is because under the various laws that govern the operations and functions of financial institutions, the company may have gone against the law in their undertakings. The law of restrictions under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), is still a factor to consider, where the company is still liable for prosecution by the state even after the period that has elapsed. The company can also be prosecuted under the federal False Claims Act. The refusal of the banking institution to report the defective loans has played a vital role in the escalation of the financial crisis (Raindi & Timiraos, 2012), which still rocks the U.S. and countless other regions to this day. The company claims that since it was the only institution affected by its actions, there is no possible reason why it should be prosecuted for unethical practices within the organization. This claim was thrown out of court as the judge presiding over the case indicated that even if the only party affected by such actions was the one under prosecution, it still had to face the charges leveled against it. It is the belief of countless individuals that the simple act of choosing not to report these defective loans meant that the company knew about the issues they faced, but did not bring them to the HUD’s attention. This is tantamount to fraud, according to the court, and that is probably why the company may lose the suit by the U.S. Department of Justice. It is unethical for any financial institution to hold out on information (Jennings, 2011), which may be done to save money and disregard the integrity of the organization they serve. The ethical nature of the company’s lending practices There were some unethical undertakings by the company during the lending of loans to people. It is the task and duty of a financial institution to properly vet the people it is meant to serve, especially when dealing with loans. This is so as to see the chances of the loans being paid by the parties offered loans. In the company’s case, they were sure that any failure by the parties to pay would be bailed out by the Federal Housing Administration, which often bailed out first time buyers (Raindi & Timiraos, 2012). Many at times, those with low income also got bailed-out by the FHA. This time, the government sought to bring all the parties responsible for acting recklessly to book. Wells Fargo & Co. was added to the list of defendants, which prompted reactions from the company as to why the government waited for a year before it brought charges to its vice president (Bloomberg News, 2013). The probability of being sued by the people the company offered bad loans The extent of damages on the people offered bad loans can also be a factor to look at in the transpiring lawsuit against the bank. The foreclosure and eviction of countless families that came after the financial crisis may be reason enough for some families to seek compensation. The banking institution was banking on the FHA to back some of the insured parties (Jennings, 2011), which did not happen. The FHA defaulted on the insurance claims after it realized that the means of paying these loans would be after the bank dealt recklessly in handling the provision of loans. According to the FHA, the banking institution thought it could hand out loans to parties that might not have had the ability to pay, and that it would come to bail out all the parties involved. Families or parties that were duped into taking bad loans by the mortgage servicer may be compensated for some of the hardships they faced after losing their homes. In conclusion, the year-old lawsuit against Wells Fargo & Co. may be starting point of making financial institutions take responsibility for some of their actions. It has been a while since any financial institution has taken responsibility for its actions without forcing the government to come to its aid (Jennings, 2011). Wells Fargo & Co. is a banking institution that needs to remain at the top since countless people depend on it for some of their banking and financial needs. The current lawsuit that it faces from the Department of Justice means that it is in a position to lose a lot of money if the situation goes on the way it is. In this case, the government and the institution stand to lose a lot of money dragging each other to court and back. The problem with such a situation is that all the people who lost quite a lot before and after the financial crisis may still not get what they deserve. References Bloomberg News. (2013). Wells Fargo: Government taking revenge by adding executive to lawsuit. Financial Advisor. Retrieved from http://www.fa-mag.com/news/wells-fargo--government-taking-revenge-by-adding-executive-to-lawsuit-16205.html Jennings, M. M. (2011). Business, Its legal, ethical, and global environment. New York: Cengage Learning. Raindi, S., & Timiraos, N. (2012). U.S. Sues Wells Fargo for Faulty Mortgages. Wall Stree Journal. Retrieved from http://online.wsj.com/news/articles/SB10000872396390444024204578046823657285356 Read More