So is Wells Fargo the next WaMu?

[upi402]

Citigroup and Bank of America are givens, if the question is who will fall. But I read that Wells Fargo is a sound big bank, then I read that they're teetering. Any ideas if they'll survive through summer or even this year?

[Dover]

1. Financial Info

WF's financial page:

http://www.advfn.com/p.php?pid=financials&symbol=NYSE%3AWFC


Large US Banks on Edge of Insolvency, Experts Say
http://www.commondreams.org/headline/2009/02/13-5


Zombie Banks - Deadman Walking

http://thebankwatch.com/2009/03/02/enter-the-zombie-banks-liquidity-fixes-for-banks-will-not-solve-their-solvency-problem/




Wells Fargo, BofA Loan Values Are a Scary Sight
Commentary by Jonathan Weil

March 5 (Bloomberg) -- The more the big banks lift their skirts, the scarier their dwindling capital starts to look.

Perhaps never before have so many banks’ balance sheets been so patently full of hot air. Bank of America Corp. last week disclosed that its loans at the end of 2008 were worth $44.6 billion less than what its balance sheet said. Wells Fargo & Co. said its loans were worth $14.2 billion less than their book value. The spread at SunTrust Banks Inc. was $13.7 billion.

Keep in mind: These are the banks’ own numbers. If there’s any bias in them, it’s bound to be on the side of optimism.

Those gaps underscore how investors may be placing too much faith in a metric called tangible common equity when evaluating banks’ financial strength and their ability to cope with losses. This measure is supposed to give a bare-bones look at a company’s net worth. The problem is that the figures in the calculation come straight from banks’ balance sheets, which often bear little resemblance to reality.

Loans, for instance, typically are carried at historical cost, reduced only by management’s estimate of how much money the bank will lose on the loans it has made. Meanwhile, market values for many loans have tanked, along with the collateral backing them (if any), as more borrowers miss their payments and investors worry that the banks’ loss forecasts are too low...>

http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_weil&sid=aqf2tyZHBcgw

[stopbush]

2. Today's news:

Wells Fargo stock rises on Buffett endorsement
March 9th, 2009, 1:03 pm by Mathew Padilla, Reporter

Stock of Wells Fargo closed 15% higher today after investor Warren Buffett said the fourth-largest bank will emerge “better-than-ever” from the credit crisis. The stock ended at $9.97, up $1.36 from yesterday, but still only a fraction of its Sept. 19 peak of $39.79.

Speaking on CNBC television, Buffett said Wells Fargo is able to borrow at low cost amid low benchmark interest rates. His comments were picked up by news service Reuters:

Berkshire Hathaway Inc, Buffett’s insurance and investment company, was Wells Fargo’s largest investor at year end, owning a 7.2 percent stake. Buffett suggested that the greatest risk might be the prospect that banks sell more common stock, diluting existing shareholders.

“These are a couple of tough years for losses in the banking business, but you expect a couple tough years every now and then,” Buffett said. “The earning power is going to be greater by far than it has ever been when you get all through with it. The only worry in that is the government will force you to sell shares at some terribly low price.”

I haven’t looked closely at the books of Wells Fargo, but it clearly assumed a lot of bad loans with its acquisition of Wachovia. Wells on Friday slashed its dividend 85 percent to help save $5 billion a year.

http://mortgage.freedomblogging.com/http://mortgage.freedomblogging.com/

[CoffeeCat]

3. I find some tidbits about Wells intriguing...

Did you see PBS's "Frontline" that focused on the bank bailouts?

Long story short, Paulsen called in all of the large bank CEOs and demanded that they sign
a statement--which, in effect, gave them billions in bailout funds. The "Frontline" narrator did not
mince words. They were "forced" to sign. Most of the banks were relieved to sign. However,
it was mentioned that one bank CEO said he didn't want the money, and shouting ensued.

It had been reported before the bailout that Wells didn't want the bailout money, so this
was obviously the Wells CEO who was strongly resisting in that room.

If Wells was resisting bailout funds--can't we assume that they didn't need help and
that Wells was a healthy bank? Judging from their reputation and operations in my
state--they are solid.

I find that absolutely fascinating...don't you? I don't understand Well's role in all
of this...and why they would be forced to take the money.

Wells has always had a very sound reputation. I'm in the Midwest and Wells has been
credited with keeping the housing crisis contained in our area--due to the fact that
they didn't do a lot of irresponsible lending. They did some subprime loans, but not
many.

It's possible that Wells did do enough subprime activity and created enough toxic assets
to cause solvency problems. I'm just not sure.

I find this to be a real mystery.

It almost felt as if Paulsen knew which banks he wanted to sink his talons into. So,
he forced them to play along and take the loan--similar to how Tony Soprano would force
organizations to take money from him. To ensure control.

I remember reading during the bailout situation that the Wells CEO said that Paulsen
told him that if he didn't take the money--that the government wouldn't be there for
Wells when they did need help. Was that a threat that Wells could be sunk and they
would not get bailed out then--so climb aboard now?

It's just all very surreal. Wish I could connect the dots.

[upi402]

4. That's interesting, didn't know that. I stopped watching Frontline

when they shot a chalk-filled skull off a ladder trying to prove a Oswald's shot from behind Kennedy's head would blast skull back toward the shooter. Chalked puffed backward, so... that's the PROOF!!!
And local PBS refused to air the award winning 'Panama Deception' because it was unbalanced against Bush I's Panama war. So I probably miss a lot of good PBS in my little boycott. But I save a lot of contribution money, so wtf!

Wells Fargo bought Wachovia in early October I think. When was the meeting?