Riders On the Storm (Wells Fargo Chairman Still Fuming About TARP)

[PBS Poll-435]

Riders on the storm

By Adam Lashinsky, editor at large
Fortune Magazine via CNNMoney.com
Last Updated: April 20, 2009: 11:40 AM ET


Wells Fargo avoided the reckless tactics of other banks and quietly built a powerhouse in the West. Now its takeover of Wachovia makes it a national force, but how much toxic waste is aboard the stagecoach?

Dick Kovacevich ought to be happy. The sun is shining in San Francisco on an early April morning, shares of Wells Fargo, where Kovacevich is chairman of the board, have almost doubled in a month, and Wells appears to have survived the worst of the banking crisis with its reputation intact (so far).

Yet Kovacevich, at 65 a pugnacious and famously outspoken banker, is peeved, to put it mildly. He's miffed at short-sellers who have hammered Wells Fargo as if it were one of those troubled-asset repositories. He bemoans the media for failing to recognize Wells Fargo's achievements. Most of all, he's seething with anger at Washington for all sorts of bad decisions, from making a show of big-bank stress tests (which he has publicly called "asinine") to giving him exactly one hour to accept a $25 billion investment in October from the controversial Troubled Asset Relief Program, or TARP

"I'm willing to say the emperor has no clothes," Kovacevich says, his face reddening as he loudly denounces the government's behavior. "The facts are so obvious," he booms. "It's just not credible that you would give $25 billion to someone who didn't need it."

The Wachovia purchase has injected a note of tension into the story of Wells Fargo, which in every other way has been a rare upbeat tale amid the banking wreckage. Simplicity explains its success. Among the big banks, Wells has one of the lowest cost of funds, a steady stream of nonbanking revenue (from businesses like insurance brokering and mortgage-loan servicing), and, most of all, a history of avoiding the rest of the industry's dumbest mistakes. It never got into the type of structured investment vehicles, or SIVs, that tripped up Citigroup (C, Fortune 500), for example. (Says John Stumpf, Wells Fargo's CEO, who succeeded Kovacevich in that position last year: "When I first heard about an SIV, I thought it was a four-wheel-drive vehicle. Honestly.")

[w4rma]

1. In other words, Geithner's and Summer's BS is costing good companies so that bad ones can profit. nt

[PBS Poll-435]

2. Actually, I blame Sheila Bair (FDIC Chair), Paulson and Bernanke

The series of events that led up to the dissolution of WaMu should be investigated.

[DJ13]

3. I blame Wells Fargo for buying Wachovia loaded with the bad assets

The CEO exposed his own bank to the toxic asset mess by buying them (remember, they actually had to outbid and circumvent a pre-arraigned by the FDIC merger between Wachovia and Citi), so being thought of as in trouble enough to be included in the TARP was all their own doing.

[PBS Poll-435]

4. Wells Fargo saved taxpayers by aquiring Wachovia. Plus they preserved some of the stock value.

Wells bought the entire company at $7 when Citi wanted 1$ for just the banking operations.

[DJ13]

5. No, the CEO needlessly exposed his company to Wachovia's toxic assets

[PBS Poll-435]

6. I think you are wrong

I really do.

[w4rma]

7. I tend to agree with you, PBS Poll-435. I'm happy Wells Fargo bought out Walk-all-over-u. (nt)