Feds Should Leave Wells Fargo Well Alone

Did you read about the kerfuffle Tuesday when word came out that Wells Fargo (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.

Comments

[User 353294:]

Wow. The same month Wells Fargo raises the interest on my credit card, alerts me to the fact that they bought Wachovia after receiving handouts from the fed, the above mouth-piece attempts to set the record straight; in this case, that cancelling a planned trip to Vegas is only going to hurt the financial stability of Wells Fargo in the long run.

Clueless.

Feb 08 06:24 PM

[User 353303:]

Just because they have done it for so long does not make it right. Perhaps that lavish spending along with other things they have done for so long caused this mess. You needed the feds now enough with the perks. No way its all learning in Vegas.

Feb 08 06:46 PM

[wells fan:]

Wells Fargo did not want the government money nor did thy want Wachovia. Treasury told them they had to take the money and Wachovia. They got the hatchet job from the media for not toeing the Govt. line. Wells' bottom line was OK until the Govt. got involved.

Feb 08 06:53 PM

[Sue D'Nym:]

WFC took the high road and avoided the subprime temptations of its peers. It did no option ARMs, no neg am, no subprime stated income loans, no teaser rate underwriting in its consumer finance affiliate. So why does the media ignore all that and talk about the subprime lender who needed a bailout. Neither component of that argument is true. It's time we recognized the bank that took the high road and use it as a role model for others, unlike its now-defunct competitors.

Feb 08 06:54 PM

[User 353310:]

It is always the same with the people at the top who make these decisions to take the "top producers" and honor them. It is always to boost the ego of the top who can say these are things we are doing so they can get more millions tacked on to their already bloated pay checks, perks and stock options.

Feb 08 06:57 PM

[mikeg3:]

>Wells Fargo did not want the government money nor did thy want >Wachovia. Treasury told them they had to take the money and Wachovia.

I guess that will be Kovacevich's defense in the Citi/Wachovia trial: "Sheila Bair made me do it".

Good luck!

Feb 08 07:01 PM

[jepittman:]

Wells Fargo is a well run bank and deserves to reward their sales personnel as they see fit. Those critical of the trip do not understand the facts.

Feb 08 08:10 PM

[port2348:]

Wells argo did NOT want the TARP money. The Government wanted to invest in a strong bank to ensure they received dividends and all of their money back. They forced Wells Fargo to take the money in exchange for preferred stock then told them they had to pay 5% on it. That isn't going to help Wells Fargo lend money, it raises the cost of funds and makes it harder to have loans and savings at a competetive rate. The TARP money wasn't to help Wells Fargo it was an investment by the government. To bad we can't all have that kind of power. The government has hurt both Wells Fargo and Bank of America, whom they forced to buy a faiing brokerage company. When B of A said they didn't want Merril Lynch because it was too toxic. The government said too bad, we can't let Merril Lynch go down and you are going to buy it with government money then pay us a high interest and sacrifice your bottom line. The government is the one orchestrating these arranged marriages and if the media would report the facts the backlash would be directed where it should be instead of at the few strong banks that are now being forced to bear the weight of the bad decisions made by other banks. Wells Fargo was not a subprime lender, they bought mortgages from other institutes and ended up with some, but did not take part in or allow their mortgage officers to sell them. Wells Fargo doesn't have mortgae brokers. A broker is someone who works for an independent company and sells mortgages to the best rate once they have completed them. Much the same as if you went to a car lot and they got you financing. I wish people and especially REPORTERS would get their facts straight before trying to sensationalize. You are as to blame for this mess as anyone.

Feb 08 08:39 PM

[Aye 2 Zea:]

I agree that Wells didn't want the TARP money, but where did you get the idea that they didn't want Wachovia.

They came back after Citi's bid and offered billions more for the company. They even exposed themselves to a multi billion dollar lawsuit by Citi for breaking up the deal.

Its kind of scary that Citi's most valuable single asset may be this lawsuit.


On Feb 08 06:53 PM wells fan wrote:

> Wells Fargo did not want the government money nor did thy want Wachovia.
> Treasury told them they had to take the money and Wachovia. They
> got the hatchet job from the media for not toeing the Govt. line.
> Wells' bottom line was OK until the Govt. got involved.

Feb 08 09:24 PM

[Tom Vega By...:]

Oh boohoohoo! No more bankers trips to Vegas! These guys need to get real and read the writing on the wall. If they don't want government's golden handcuffs, pay the billions back, now! Otherwise, the taxpayers' representatives should continue to give them grief when they waste our tax money.

Feb 08 10:18 PM

[User 353394:]

Some of you need to do a little more research before you start complaining about everything Wells Fargo does. Wells Fargo did want Wachovia, because they would be able to offset their profits for years to come because of Wachovia's losses. Wells Fargo is positioned to be a much stronger bank than their peers once the economy picks back up again. To think that the government knows how to run a bank, and therefor knows how a bank should spend it's money, is absurd. What is our national debt again? Who is trying to come up with another $900B stimulus? The media knows it can always sell a story just by putting a negative spin on anything. It's what the public feeds off of. The sky is falling! The sky is falling! In some cases that may be a self-fulfilled prophecy. Also, Wells Fargo rewards top performers from the bottom of the company to the top. What kind of reward would it be to go to Oakland?

Feb 08 10:24 PM

[mr freddo:]

In these difficult times, it is important for all financial institutions to pay attention to the image they create with their spending activities. Taking employees to Vegas just sends the wrong message at the wrong time. The author sounds like he is bitter because he didn't get to go to Vegas this year.

Wells has a reputation for being very conservative. Once they recognized the error of their ways, they quickly cancelled the event.

Willie Brown wrote recently that "resentment is the strongest force in politics." There is plenty of resentment (and pain) out there already without adding to it by taking these kinds of boondoggles.

Feb 09 12:53 AM

[Steven Hansen:]

Tom, the cost / benefit can be debated but the simple fact is that consumers are madder than hell. i would not want to be in business and start pissing off my clients.

Feb 09 01:58 AM

[darlowsenigm:]

I really had the impression that this was an incentive/reward type trip, not a working session or training trip. AFAIK Wells has always done both, and I assume most big banks have done the same. (Personally, I would rather just get the money rather than leave home and family for enforced bonhomie in a time and place not of my choosing, but maybe that's why I'm not in sales.)

Feb 09 10:14 AM

[efg:]

Sabre Jen....

I think you need to re-evaluate where you get your information from when it comes to Wells Fargo and how it stands in this whole mess. The reason for the housing bubble and subsequent bust had to do with "loose"lending guidelines at certain banks/mortgage companies AND the exotic products they put in the marketplace. Marketing these products to customers how could not afford them in the 1st place set the fuse on this bomb. Wells Fargo has NEVER originated any "exotic" mortgage products like Option ARMs. These were reserved for folks like Countrywide (nka Bank of America). Not all large banks are the same. Some grow by buying competitors or luring customers in with products that are usually too good to be true AND if you knew anything about Wells Fargo it grows by increasing the wallet share of it's current customers. Obviously Wells isn't going to turn away new customers who want to do business with them but that's not the growth agent they use. And last, if I'm going to choose a ship to jump on until it sinks, I would like the Captain of that ship to be Warren Buffett. I'll take my chances with Mr. Buffett and Wells Fargo in today's environment and let you and all of the other large bank bashers enjoy pointing fingers at everyone exept those who are truly at fault for the current economic environment.

Feb 09 01:33 PM

[1234st:]

This is a training and informative trip to give people a better understand of the "next stage" that wellsfargo is striving for. the more people they get on board with what the vision is the better the company works and strives toward that end focus! It is a time to also network with other employees face to face that some of us have worked with for years and are finally offered an opportunity to continue a working relationship that tends to become even stronger and more confident after a face to face happens. It took me almost a decade to earn enough points from projects and service excellence awards to be picked for one of these trips. it wasn't in las vegas and was for 3 nights and 2 full days worth of activities. We are typically up by 5 or 6 am and not to bed until 10 or 11. the meetings are very informative and the relationship building cannot be taken away. Although now they seem to be taken away.


On Feb 09 10:14 AM darlowsenigm wrote:

> I really had the impression that this was an incentive/reward type
> trip, not a working session or training trip. AFAIK Wells has always
> done both, and I assume most big banks have done the same. (Personally,
> I would rather just get the money rather than leave home and family
> for enforced bonhomie in a time and place not of my choosing, but
> maybe that's why I'm not in sales.)

Feb 09 02:36 PM

[CLH:]

The hands of the govt. are far more dirty then the banks. They should shut up. I'm tired of listening to their talk to the lowest of our citizens.

Feb 09 09:26 PM

[User 354119:]

What happened to personal accountability??? When I bought my house, or refinanced it for that matter, nobody put a gun to my head and made me sign. It's the tax payers fault in the first place since everyone thought they could just spend freely and refinance any time to fix their bad habit. It's the "I want it now culture". Nobody saves for the things they want any more, just borrow, borrow, borrow....oops, we are over our head AGAIN....it's the banks fault I'm not smart enough to stop buying everything I don't need....but it's also the banks fault when they won't lend to me.....right? You guys know who you are....

Feb 09 10:49 PM

[IrishGal:]

Obviously you didn't read this piece. These annual functions are not to reward BROKERS. They are to reward WF's own people - the mortgage loan officers and their assistants. The company also has recognition events for tellers, personal bankers and almost every kind of employee they have. These people worked hard for the company AND received high marks for customer service from THEIR CUSTOMERS. I have a friend who has gone on several of these trips, and she could not have attended on her numbers alone - her customers gave her anywhere from 96-100% in customer service. So the losers here are the hard working WF employees AND THEIR CUSTOMERS who feel they were treated with respect and had their financial needs met by people of integrity.


On Feb 08 06:18 PM smb1691 wrote:

> The subprime mortage business made big money for Wells Fargo, those
> subprime mortgages were repackaged and sold as the toxic debt that
> has derailed this market. Wells can BS everyone that they are rewarding
> good mortgage brokers, but how many of those mortgage brokers knowingly
> pushed subprime mortages on people who would normally never qualify
> for a loan. In the Mortgage business, its all about closing the deal
> and sealing the commission, damm the consequences after the fact.
> Mortgage brokers are now viewed as equals to the dirt lot used car
> salesman, who are ony concerned about making the fast buck.

Feb 10 09:50 PM

[ScottJ:]

I think a lot of folks are missing the real point. Where in the Constitution does Congress get the authority to run banks? I can't find it in my copy. Forcing WF to take TARP money, they didn't want, is an egregious violation of the limitations on the federal government by the Constitution. Had they not done that, then we would not even be talking about WF's training venue. The villains are in Washington, not San Francisco.

Apr 29 08:58 AM