Did you read about the kerfuffle Tuesday when word came out that Wells Fargo (NYSE:WFC), a recipient of TARP money whether it wanted any or not, was planning a four-day “junket” for its mortgage lenders in Las Vegas? It all went according to the same, depressing script: 1) The media breathlessly reports the meeting is going to happen; 2) Congresspersons bray about how outraged they are that a TARP recipient is frittering away government money on an obvious boondoggle; 3) Wells dithers, then backs down and cancels event.
That’s too bad. The meeting would have been no waste of money for Wells shareholders—or the government. I know this will sound heretical at a moment like this, but events like the one Wells canceled Wednesday have a legitimate business purpose. This one figured to, in particular. In the wake of the collapse of the housing bubble, recall, politicians and regulators squawked that too many lending officers and mortgage brokers didn’t know what they were doing as they underwrote loans. But here’s Wells, gathering its highest-producing mortgage lenders (who originated $230 billion in mortgages last year, by the way), to teach them (among other things) how to improve their sales and underwriting skills. One would think the government should be encouraging this sort of thing.
Remember, Wells Fargo is one of the few mortgage lenders that didn’t self-detonate this cycle. It’s reasonable to conclude that the information imparted to loan officers on these sorts of powwows is one reason why. (Disclosure: I spoke at the Wells mortgage sales meeting last year. I know firsthand how much work goes on at meetings like this.)
But the people in Congress heard “Wells Fargo” and “Las Vegas” and “junket,” and started screaming. Ridiculous.
This is no way to run a bank. Worse, this second-guessing by the government of how banks spend their money sets a terrible precedent. It’s one thing, I suppose, for the government to be tempted to jawbone the banks about how they should allocate the capital they’ve provided. (Although why Congress is pushing banks to lend more aggressively is beyond me. Too-aggressive lending is what got us into this mess in the first place.)
But the Wells Las Vegas meeting wasn’t a capital allocation decision. It was an operating expense. Wells Fargo has been running these meetings for years, and others like them, and has obviously come to the conclusion that they represent money well spent. Which they do: meetings like this motivate employees, educate employees, and in general help induce them to work harder and smarter. That’s good! Now Congress reacts as if the whole thing is some kind of low-level corruption.
Crazy. If Congress gets into the habit of trying to micromanage how banks spend their money on a day-to-day basis, it runs the risk of permanently debilitating the system it’s trying to save. Smart, talented people will walk out the door, and the banking system will slowly, steadily turn into a bloated, coast-to-coast version of the Department of Motor Vehicles, only with vaults and teller windows. I somehow don’t think that’s a resolution to the credit crisis that the public has in mind. The politicians should keep their hands off, and let Wells and other banks have their meetings, and in general spend their money as they see fit.