More Bank Malfeasance - Ghetto Loans

A former Chase banker has told The New York Times that Chase pushed most unsophisticated borrowers into more expensive Sub Prime loans which were far more profitable for the bank. At Wells Fargo, they were called Ghetto Loans.

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.

The full NT Times article here.