Wells Fargo Assails TARP, Calls Stress Test ‘Asinine’

[PBS Poll-435]

Wells Fargo Assails TARP, Calls Stress Test ‘Asinine’

Bloomberg.com
By Ari Levy

March 16 (Bloomberg) -- Wells Fargo & Co. Chairman Richard Kovacevich criticized the U.S. for retroactively adding curbs to the Troubled Asset Relief Program, which he said forced the bank to cut its dividend, and called the administration’s plan for stress-testing banks “asinine.”

When the U.S. Treasury persuaded the nation’s nine biggest banks to accept capital investments in October, it signaled the whole industry was weak, Kovacevich, 65, said in a March 13 speech at Stanford University in California. Even though Wells Fargo didn’t want the money, it must comply with the same rules that the government placed on banks that did need it, he said.

“Is this America -- when you do what your government asks you to do and then retroactively you also have additional conditions?” Kovacevich said. “If we were not forced to take the TARP money, we would have been able to raise private capital at that time” and not needed to cut the dividend to preserve cash, he said.

Wells Fargo slashed its dividend by 85 percent on March 6 to 5 cents a share, citing savings of $5 billion and the need to build a capital cushion in case the market deteriorates further. Last month the San Francisco-based bank made a quarterly payment of $371.5 million to the Treasury for interest on the $25 billion TARP investment.

[Beetwasher]

1. “If we were not forced to take the TARP money, ..."

Oh these mutherfuckers....

[Gin]

3. so.....give it back Wells Fargo.

[Phx_Dem]

13. They can't give it back. They signed a contract stating they

could not repay the money until they had raised enough capital to replace it -- $25 billion. Presumably, the reason they aren't allowed to give it back right away is because it would alleviate the reason for giving it to banks (who neither asked for it nor wanted it) in the first place, which was to pump huge amounts of money into the credit market to get it flowing again. If the nine big banks gave back the TARP funds, we'd be right back where we started with a frozen credit market.

That said. I believe Congress is looking into revising that contract to allow banks to repay the money sooner.

[grantcart]

19. I believe that Wells Fargo was brought in with 8 other banks and told that

they would not be able to leave DC that night until they signed the paper.


I remember (could be wrong) that Wells Fargo did not ask, did not want to participate was told that it had no choice.


Because they were not heavily involved in Sub Prime Loans they did not need TARP.

[PBS Poll-435]

20. Correct

From the WSJ - Subscription Required

http://online.wsj.com/article/SB122402486344034247.html


The rest of the article via http://www.zimbio.com/CEO+Dick+Kovacevich/articles/119/Wells+Fargo+Forced+TARP+Plan


During the discussion, the most animated response came from Wells Fargo (WFC) Chairman Richard Kovacevich, say people present. Why was this necessary? he asked. Why did the government need to buy stakes in these banks?

Morgan Stanley (MS) Chief Executive John Mack, whose company was among the most vulnerable in the group to the swirling financial crisis, quickly signed.

Bank of America's (BAC) Kenneth Lewis acknowledged the obvious, that everyone at the table would participate. "Any one of us who doesn't have a healthy fear of the unknown isn't paying attention," he said.


It continues:

Mr. Paulson said the public had lost confidence in the banking system. "The system needs more money, and all of you will be better off if there's more capital in the system," Mr. Paulson told the bankers.

After Mr. Kovacevich voiced his concerns, Mr. Paulson described the deal starkly. He told the Wells Fargo chairman he could accept the government's money or risk going without the infusion. If the company found it needed capital later and Mr. Kovacevich couldn't raise money privately, Mr. Paulson promised the government wouldn't be so generous the second time around.

[grantcart]

21. tks you may want to edit it back into the OP because it gives an unfair

impression of Kovacevich.

[yourout]

2. What an asswipe......I would have said let them fail but Kovacevich would....

have still been left with more money then the average joe/jane will see in a lifetime.

Prison would have been an appropriate punishment.

[PBS Poll-435]

14. It is virtually certain that they would not have "failed" without the TCPP proceeds

In fact, the only people that got hurt were the common shareholders who saw their dividends slashed from 34 cents per common share to 5 cents.

[Hansel]

16. Let them fail? Not even close.

Wells Fargo, at the time they were forced to take the TARP money, was in great shape. It was rated as the only U.S. bank in the top 10 in terms of stability in 2008 and its stock had a AAA rating. It did not need nor want the money.

Its stock has been downgraded to a AA3 since it took on Wachovia (which was clearly failing), but it's doing alright.

Kovacevich is a straight shooter and a conservative and smart banker that steered the company away from the big mistakes some of the other big players made (with the exception of the purchase of Wachovia which did not stay out of the mess).

I think that if Obama took the time to sit down and talk with him, he would benefit from his insight. He was critical of the shenanigans he saw going on in the banking industry and is probably pretty frustrated that TARP has resulted in Wells Fargo being caught up this mess despite all of their efforts to stay away from it.

[PBS Poll-435]

17. An excellent summation

And I don't even want to think what would have happened if Citi had been allowed to acquire Wachovia's banking operations. Citi just wanted Wachovia's deposits, leaving its mortgage, insurance, and investment divisions to twist in the wind.

Wells Fargo did the Fed, the Treasury Department, and the FDIC a huge favor by purchasing the entire company outright.

[yourout]

22. I stand corrected.

[alcibiades_mystery]

4. He knows damn well that he "had' to take the TARP

because the value of the currency was about to collapse to near zero.

Now he's pretending they could have raised "private capital" amidst the collapse of the entire Western banking model?

What a fucking assclown.

[vaberella]

5. "raise private capital" ---- From where?!

Yeah, from the Citizens you took the Tarp from by increasing their APR and basically forcing them into bankruptcy anyway.

[nykym]

6. And when was the

last time your mortgage company said here take the money NO-STRINGS attached just pay what you can every month we trust you!

[wackywaggin]

7. Wells fargo tellers are telling people

Wells Fargo Bank is returning all their stimulus monies recieved in full and with interest to get out of the prohibitive program. THat came straight from the tellers mouths to customers as they came to the window for their transactions today, Monday March 16,2009 around 1:15 PM.

[PBS Poll-435]

8. I have heard nothing like that at all

Wells Fargo received $0.00 from the Economic Stimulus bill.

They received 25B in exchange for Wells Fargo Class "D" preferred stock in last year's TARP/TCPP program. At the time they were told that they would not even be able to pay back the money for three years. They paid a 371M dividend (interest) payment to the US Treasury for the 4Q08.

A little noticed provision in the Economic Stimulus bill said that after a 30 day notice, if the bank has the permission of the Treasury, they can start to repurchase the Class "D" stock.

[mrdmk]

9. The word is NOT Stress Test, The word is Acid-test ratio

The acid-test ratio is an accounting term. It is a part of Financial Ratios to check the Firm's Liquidity. This is what it looks like:

(Current Assets - Inventory)/Current Liabilities = Acid-test ratio

Just another CEO that does not have a clue as to what he is talking about.

[joeglow3]

10. Ummmm, are you sure?

I am an accountant and know what the Acid-Test ratio is. That said, are they simply complaining about a simple ratio?

I thought the government was running a bunch of different simulations to determine how the banks would hold up. If all they are doing is running ratios, I think the asinine thing is them (the spokespeople) making it seem like these were big computer simulations (which I assumed it was).

[PBS Poll-435]

12. You are absolutely correct.

nt

[PBS Poll-435]

11. Nope. That is not what is being discussed. Geithner has used the phrase many times lately.

So has Larry Summers.

http://www.cbsnews.com/blogs/2009/03/13/business/econwatch/entry4863925.shtml

It would be tempting to rush into action to meet a chorus of questions.... But I don't see how anyone could observe what is happening in calendar years 2007 and 2008 and judge, design or implement policy that bores in on the major financial institutions without feeling the need to stress test them and evaluate the current situation in comprehensive way,” Summers said.

[mrdmk]

18. At first I heard and read an acid test ratio was going to be used

to see if bail-out funds were going to fix a banks financial situation. Now it seems a new term has been coined. Excuse the misinformation...

[PBS Poll-435]

15. Self-kick

:kick: