CHICAGO (Reuters) –
Illinois Attorney General Lisa Madigan filed suit on Friday against Wells Fargo & Co (WFC.N), accusing the second-largest mortgage lender of steering blacks and Latinos into high-cost subprime loans.
"As a result of its discriminatory and illegal mortgage lending practices, Wells Fargo transformed our cities' predominantly African-American and Latino neighborhoods into ground zero for subprime lending," Madigan said in a statement.
High foreclosure rates resulted from the illegal sales practices, the state's attorney general said.
Meanwhile, white borrowers with similar incomes received lower-cost loans from Wells Fargo, the fifth-largest U.S. bank, according to the lawsuit filed in Cook County Circuit Court.
Two black Chicago homeowners sued Wells Fargo on Monday in federal court in the Northern District of California, accusing the San Francisco-based lender of racial discrimination in how it sets rates and fees. Their lawsuit seeks class-action status.
The Illinois suit charged that a subsidiary, Wells Fargo Financial Illinois, misled borrowers in the state about their mortgage terms, misrepresented the benefits of refinancing, repeatedly refinanced or "flipped" loans, and used deceptive mailing and marketing tools to confuse borrowers.
The suit asked the court to rescind all unfair contracts and grant full restitution to affected consumers. It also asked the court to impose civil penalties for violations.
"Wells Fargo is disturbed that the Illinois attorney general has chosen to file a lawsuit based on a complete mischaracterization of our long-standing commitment to fair and responsible lending," the bank's spokesman, Kevin Waetke, wrote in an email.
"The policies, systems, and controls we have in place - including in Illinois - ensure race is not a factor in the pricing or products we offer," Waetke added.
The case is The People of the State of Illinois v Wells Fargo and Company; Wells Fargo Bank, N.A.; and Wells Fargo Financial Illinois Inc., No. 09CH26434.
(Reporting by Andrew Stern, editing by Leslie Gevirtz)
WASHINGTON/DETROIT (Reuters) –
The U.S. Congress moved to triple the funding for the government's successful "Cash for Clunkers" auto rebate program, which has brought car buyers back into showrooms and raised the outlook for an industry beset by abysmal sales, bankruptcies and job cuts.
The program, which gives drivers a rebate to turn in an old car to buy a new one, received a boost on Friday when the U.S. House approved $2 billion for it on top of the initial $1 billion approved in June to stimulate auto sales.
"The downward spiral has been broken," said Mike Jackson, chief executive of U.S. dealership group, AutoNation Inc. "We saw a stabilization in sales in the second quarter, and there will be a recovery in automotive sales."
Ford Motor Co shares closed up 61 cents, or 8.25 percent, to a new 52-week closing high of $8.00, as the rapid success of the program, initially funded with $1 billion, raised the outlook for the embattled auto industry. Ford shares were as low as $1.02 in November.
Automakers are due to report U.S. sales next week.
The speed with which consumers exhausted the clunker fund appeared to have caught the White House and Congress off guard, but President Barack Obama moved swiftly to call the program a boon to the economy.
The incentive program offers consumers up to $4,500 to trade in gas guzzlers for more fuel efficient vehicles. Trade-ins cannot be more than 25 years old or get more than 18 miles per gallon in most cases. The program was approved in June and was expected to last through October.
"The pace of sales has picked up dramatically," Ford's U.S. marketing and sales operations, Ken Czubay, said about business over the past month.
The U.S. Department of Transportation formally started collecting data and approving vouchers this week, but dealers were able to offer incentives beginning July 1.
Government and industry officials estimated that sales of nearly 250,000 vehicles have been made over the past month.
"I wasn't really looking for a new car, but that was a big incentive. That was the driving force to finally get rid of the old car," said Michael Papa, a Detroit-area restaurant owner.
Obama administration officials considered suspending the program on Friday but opted to keep it going at least through the weekend.
"It has succeeded well beyond our expectations and all expectations," Democrat Obama said during remarks on the economy. "We're doing everything possible to continue this program."
Analysts have said they expect the program to give the economy a bit of a lift in the current quarter.
Leaders in the U.S. House of Representatives swiftly pushed through the $2 billion extension of the program through September 30, 2010, despite opposition from some members who objected to new industry subsidies.
"Cash for Clunkers is another example of the government picking winners and losers and enshrines us as a bailout nation," said Representative Jeb Hensarling, a senior Republican on the Budget Committee.
Representative Jeff Flake, another Republican, asked whether lawmakers were losing their minds.
The 316 House votes in favor sent a strong message to the Senate, which is expected to weigh the House bill next week before taking a month-long break. The House recessed on Friday for a month-long vacation.
ON TO THE SENATE
Some senators signaled that approval might not be easy.
One member can block a bill in the Senate and there are different interests that could pose a challenge. For instance, Energy Committee Chairman Jeff Bingaman said he opposes the House proposal because it calls for spending unused Energy Department loan guarantees on the program.
Environmental champions in the Senate have urged members to strengthen requirements in the bill for fuel efficiency and pollution control.
Energy analysts played down the impact the program would have on reducing gasoline consumption.
Conservative budget hawks could also draw the line on more help for an industry that has already received tens of billions in federal assistance.
"It still potentially will be a lot of work to get it passed in the Senate," said Democratic Senator Debbie Stabenow, a staunch auto industry ally and co-author of the original "clunker" proposal in the spring that sought $4 billion.
But White House spokesman Robert Gibbs said the administration was confident "we'll have a solution."
In addition to stimulating overall sales, the clunkers program was aimed at boosting sales of vehicles manufactured by General Motors Corp and Chrysler Group, both of which restructured under bankruptcy protection this year.
Very early indications showed that cars were selling better than pickups or sport utilities. But it was unclear how the program had affected Toyota Motor Corp and Honda Motor Co, which make the most fuel efficient passenger cars.
Ford sales analyst George Pipas said consumers have traded larger vehicles for smaller ones. "It is pretty dramatic," he said.
Analysts expect the program, if fully utilized, to push U.S. sales above 10 million units for 2009, higher than the annual rate so far this year. Sales totaled 13.2 million units last year.
Himanshu Patel, a J.P. Morgan analyst, said the program revealed pent up sales demand and believes it is likely that carmakers will consider raising their own incentives if the government program is not renewed.
(Reporting by John Crawley; Additional reporting by Rick Cowan, Steve Holland and Tom Doggett in Washington and David Bailey and Soyoung Kim in Detroit; Richard Valdmanis in New York; Editing by Toni Reinhold)
LONDON/RIYADH (Reuters) –
A Cayman Islands court has frozen $9.2 billion of assets belonging to Saad Group, the Saudi Arabian investment firm at the center of a financial storm, including some of its equity stakes outside the Gulf.
In a related development, bank creditors of one of the main Saad Group companies, Saad Investments Company Limited (SICL), filed a petition to the same court seeking immediate repayment by the company of a more than $2.8 billion loan and accrued interest.
The assets freeze ruling by the Grand Court of the Cayman Islands followed a complaint filed by Ahmad Hamad Algosaibi and Brothers Company (AHAB), which is locked in a legal tussle in the United States with Maan al-Sanea, the billionaire owner of Saad Group.
The two heavily indebted family-owned conglomerates are both in restructuring talks with their creditors, negotiations complicated by court cases filed by different parties.
The Saad Group said the Cayman Islands court assets freeze ruling was part of a "baseless" campaign against it by AHAB.
AHAB was not immediately available to comment.
The July 24 assets freeze ruling named 43 defendants including Cayman-registered SICL, owner of many of Saad's equity stakes outside the Gulf.
"An injunction is granted against the ... defendants prohibiting disposal of assets worldwide, for the appointment of receivers, and the ancillary and collateral relief set out in the form of the draft order," the ruling said.
LENDERS PETITION COURT FOR REPAYMENT
In a separate filing to the Cayman Islands Grand Court on July 30, creditors of SICL presented a Winding Up Petition, citing several instances of default by the company and saying it was "insolvent and unable to pay its debts".
The petition, a copy of which was obtained by Reuters, said Grand Cayman-based SICL owed total debts consisting of more than $2.8 billion of principal and more than $31 million in unpaid accrued interest. It said lenders were demanding "immediate payment" of the loans and interest.
"In the circumstances, it is just and equitable that the company should be wound up," said the petition brought by three banks, Barclays Bank PLC (BARC.L), Calyon, and The Royal Bank of Scotland (RBS.L).
Saad Group said in a statement late on Thursday the claims made by AHAB in its application to the Cayman court had no foundation, and were made before a full investigation had taken place and without full information.
"AHAB's application for the Cayman orders represents a continuation of the baseless, yet public, campaign it has chosen to wage," Saad Group said.
"Saad itself is working hard with its creditors to determine a fair resolution across the board of all current difficulties," the statement said.
The court order -- which can be enforced only in the Cayman Islands, England and Wales, the United Arab Emirates and Saudi Arabia -- was made at a hearing without notice to the defendants, with each given the right to respond.
The companies affected include the group's airline, Saad Air, as well as Singularis Holdings, which bought a 3 percent stake in HSBC (HSBA.L) in 2007.
Saad's stake now totals about 2 percent, analysts at Cazenove said in June, with a current value of about 2 billion pounds ($3.31 billion).
Saad has also bought stakes in Petra Diamonds (PDL.L), Imagination Tech (IMG.L), Accsys Technologies (ACCS.L), Reneuron Group (RQE.L) and Eatonfield Group (EATN.L).
Lenders to the Saad Group are owed as much as $15 billion in total.
Bahrain's central bank said on Thursday it has seized two banks belonging to AHAB and Saad Group, in the latest move to manage the fallout from their financial troubles.
(Additional reporting by Alan Markoff in the Cayman Islands, Editing by Pascal Fletcher and Bernard Orr)