Bailout

AIG was even sleazier than you thought

By Felix Salmon

I knew that AIG was technically a thrift, but I thought that was just a piece of nimble-footed regulatory arbitrage in an attempt to get itself regulated by the pointless Office of Thrift Supervision. It turns out, however, that AIG was actually a pretty substantial mortgage lender, through its AIG Federal Savings Bank and Wilmington Finance subsidiaries. And a racist one, too. From the complaint:

From July 2003 to May 2006 black borrowers nationwide were charged total broker fees 20 basis points higher! as a percentage of the loan amount, on average, than the total broker fees charged to white borrowers for WFI and AlG FSB’s loans. These disparities extended to at least the following 19 metropolitan areas in which AlG FSB and WFI made a substantial number of brokered-loans-to black-and white-borrowers: Atlanta, Baltimore, Birmingham, Cincinnati, Chicago, Cleveland, Detroit, Hartford, Kansas City, Las Vegas, Memphis, Nassau County, New York, Orlando, Philadelphia, Phoenix, Portland OR, St. Louis, and Tampa. In these MSAs black borrowers paid total broker fees ranging from 25 to 75 basis points higher, on average, than the total broker fees paid by white borrowers. All of these disparities are statistically significant.

AIG has now settled the case, paying a minimum of $6.1 million in fines. But there’s no hint of the case in its newsroom as yet.

Full post as published by Macroprudential on March 04, 2010 (boomark / email).