Is Wells Fargo Regretting Its Wachovia Acquisition? 48 comments
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Putting aside the all-but-irredeemable basket-cases BofA and Citigroup, there’s only one major bank which has yet to repay its TARP money: Wells Fargo. How come? Wells has a reputation as being the best and most solid bank in America, a favorite of Warren Buffett, and a bank which managed to sidestep most of the worst excesses of the credit boom.
The answer, I think, is that Wells (WFC) was ultimately undone by exactly the same thing which doomed BofA (BAC): a panicked and unwise acquisition. In this case, of Wachovia. Because the demise of Wachovia was structured with a different acquirer (Citigroup) already in place, Wells had to essentially outbid Citi (C) for Wachovia, and is now suffering from the winner’s curse.
The other problem with the Wachovia acquisition is that Wells Fargo is now far too big — it has an astonishing $711 billion in US deposits, 11% of the total US deposit base — and as a result it will be under intense regulatory scrutiny for the foreseeable future.
Only one of America’s four megabanks seems particularly healthy: JP Morgan (JPM). Wells Fargo, which should by rights be the big boring safe one, is instead struggling with all the extra leverage it brought upon itself with the Wachovia acquisition; its sheer enormity also leaves it vulnerable to calls from people like myself who think that all banks of its size should be broken up into less systemically-dangerous chunks. One can’t help but think that with hindsight, Wells might rather have simply left Wachovia to Vikram Pandit’s tender mercies.
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The question is . . . . why does Berkshire Hathaway still own it? Can’t be they don’t have enough analysts to figure this out, eh?
The big financial melt has morphed into one big predators' ball and the biggest predators are gorging and feasting with no fear of indigestion because Benranke and Geithner and Congress will give them all the trillions they need to settle their stomaches..
I note an earlier poster, a smaller bank executive from the heartland, observes that big government is biased toward big banking.
But by its nature, banking ever evolves into bigger and bigger entities, gobbling up or destroying the less nimble, the less astute, the less well connected with guvmint.
Of course, the customers get trampled in the process, but that is the American way....
Soon after moving to a sleepy Colorado town I observed to a county commissioner:
" Why in southeastern Colorado do you see crumbling ruins surrounding a shiny bank building?"
Well, we have a crumbling America with a few big, shiny banks.
Disclosures: Own AIB and my outlook is biased by living in rural America, rather than in bright shiny suburban America. I truly hope your bright shiny view of glossy shopping centers and new bank and office buildings leads to an American Renaissance.
But I think we have to come up with a different system not utilizing usury. There was no usury during the European Renaissance
BofA - Huge credit card mess mainly from MBNA
C - Citifinancial should be renamed KingofSubprime
HSBC - Swallowed HFC and found out it was NastySubprime
JPM - They have a pretty agressive in-house legal department that sues the bejesus out of non-performing credit defaulters
WF - They are the king of no-interest purchases such as furniture and mattresses, not the kinda stuff you can repo and resell to cover even your repo costs - should've left that to the rentown outfits. At least their guys usually carry a firearm in the truck
BofA - Huge credit card mess mainly from MBNA
C - Citifinancial should be renamed KingofSubprime
HSBC - Swallowed HFC and found out it was NastySubprime
JPM - They have a pretty agressive in-house legal department that sues the bejesus out of non-performing credit defaulters
WF - They are the king of no-interest purchases such as furniture and mattresses, not the kinda stuff you can repo and resell to cover even your repo costs - should've left that to the rentown outfits. At least their guys usually carry a firearm in the truck
RevokeTheFed.comMarch 2008
WHEREAS, Article I, Section 8 of the Constitution of the United States of America authorizes Congress "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures";
WHEREAS, on December 13th, 1913 the US Congress enacted the Federal Reserve System;
WHEREAS, the Federal Reserve System is considered an independent agency within the federal government, with oversight of Congress and containing appointed public officials on its board of directors;
WHEREAS, the Federal Reserve System Controls the Federal Reserve Note, the official currency of the great nation of the United States of America;
WHEREAS, there may be controversies regarding the legality and constitutionality of the Federal Reserve System, it is recognized that the said system has operated continuously as the central banking system of the United States since the inception of the Federal Reserve Act of 1913;
WHEREAS, the Constitution of the United States of America granted Congress the authority to create the current Federal Reserve System, it also does grant Congress the authority to modify or revoke the Federal Reserve System;
WHEREAS, the actions of the Fedreral Reserve System represent the credit and currency of the United Stated of America to the citizens of this great nation and to the world;
WHEREAS, the Federal Reserve System, acting independently within the federal government allowed, supported, and even promoted parasitical and non-productive uses of the money and credit of the United States of America;
WHEREAS, the United States and likely the entire world's financial system is undergoing massive de-leveraging of the said parasitical and non-productive uses of the credit and money of the United States of America (as well as other nations' currencies);
WHEREAS, the US dollar, the "Federal Reserve Note" is declining in value due to these parasitical activites, as well as potentially other causes;
WHEREAS, it is recognized that the citizens of the United States and other nations did willingly participate at some level in the creation and propogation of said parasitical activities;
WHEREAS, it is also recognized that the United States of America, a sovereign nation, has the legal, moral, and God given authority to take actions to benefit its citizens and to protect its good name, credit and money in times of difficulty;
WHEREAS, it is recognized that the current time is such a time of great difficulty;
WHEREAS, it is recognized the parasitical financial institutions and their activities are at odds with citizens of the United States of America and the good credit and money thereof;
WHEREAS, the current indications are that the Federal Reserve System is acting to preserve the financial system currently flooded with the parasitical activities;
WHEREAS, the current indications are that the neither the Federal Reserve System, nor the Congress of the United States, nor the people of the United States have access to the books of the institutions being preserved by the Federal Reserve, and therefor the degree of inter-connectivity and risk associated with the institutions and other entities cannot be determined;
WHEREAS, the Federal Reserve System is accepting non-performing assets as collateral for credit with ultimate taxpayer responibility to entities not under its legislative mandate;
IT MUST BE CONCLUDED, that the Federal Reserve System is not acting to the benefit of the people of the United States of America, its credit, money, and good name;
WHEREAS, it is recognized that the political will and capability of the government of the United States of America may not be up to the task of prosecuting this proclamation ; It is also recognized that this may be the only hope for the continued survival of the United States of America as the great nation as it has historically existed.
NOW THEREFORE, it is PROCLAIMED by those supporting this Proclamation that the Congress of the United States of America FULLY NATIONALIZE the Federal Reserve System, and take full control of the credit and money of our great nation; The Congress must take whatever action necessary to seperate out, sequester, disown, or otherwise neutralize the effect of the parasitical financial activities which led to the current crisis; The Congress of the United States of America must reorganize, replace, or terminate the Federal Reserve System as appropriate; or otherwise devise a system for creation of the national currency.
IT IS FURTHER PROCLAIMED, that the Congress of the United States of America in cooperation with the Executive of the United States of America contact allied nations and any other nation willing to participate in the overhaul of the failing and parastical financial sytem currently in operation and create new treaties and alliances as necessary to create a sane and productive system of finance with the express goal of supporting a productive national, and by extension and through voluntary cooperation, world economy;
FURTHERMORE, it is PROCLAIMED that it should be the goal of such an international effort to maintain fair international trading practices allowing for protection in national interest of labor, resources, and productive capabilities;
WHEREAS, it is recognized that such a move on the part of the United States of America may result in the necessity of an isolationist policy IF the other developed nations do not follow our lead; If such occurs, so be it.
SO HELP US GOD!
On Sep 03 12:35 PM swaps wrote:
> Wells Fargo will do just fine. I just typed in Wells Fargo and predatory
> and got lots of hits alleging predatory behavior.
> The big financial melt has morphed into one big predators' ball and
> the biggest predators are gorging and feasting with no fear of indigestion
> because Benranke and Geithner and Congress will give them all the
> trillions they need to settle their stomaches..
> I note an earlier poster, a smaller bank executive from the heartland,
> observes that big government is biased toward big banking.
> But by its nature, banking ever evolves into bigger and bigger entities,
> gobbling up or destroying the less nimble, the less astute, the less
> well connected with guvmint.
> Of course, the customers get trampled in the process, but that is
> the American way....
> Soon after moving to a sleepy Colorado town I observed to a county
> commissioner:
> " Why in southeastern Colorado do you see crumbling ruins surrounding
> a shiny bank building?"
> Well, we have a crumbling America with a few big, shiny banks.<br/>Discl...
> Own AIB and my outlook is biased by living in rural America, rather
> than in bright shiny suburban America. I truly hope your bright shiny
> view of glossy shopping centers and new bank and office buildings
> leads to an American Renaissance.
> But I think we have to come up with a different system not utilizing
> usury. There was no usury during the European Renaissance
On Sep 02 11:26 AM Dr. Roberts wrote:
> Poor little Felix, thinking that his drivel might have even the smallest
> bearish influence on WFC. His headline is ludicrous. The acquistion
> of Wachovia has already begun to pay off, look at last quarter's
> earnings report. The idea that Dick Kovacevich, one of the very best
> bankers in the business would make a "panicked and unwise acquisition"
> is absurd, since he had been eyeballing Wachovia for quite some time.
> Keep in mind that WFC received a special tax-ruling, known in some
> circles as the WFC Ruling, whereby WFC received a 25 billion dollar
> tax break to assist in the Wachovia takeover. WFC was screwed by
> Geitnher and his army of regulators not understanding the WFC business
> model which led to a demand by the Treasury that Wells raise more
> cash, otherwise known as the results of the so called "Stress Test".
> This is what has prevented WFC, up to this point, from paying back
> the TARP injection that Mr. Kovacevich vehemently objected to in
> the first place. Silly little bears, they just love to hate WFC.
> Little Felix and his ilk will hate WFC even more as it climbs the
> wall of worry up to 60 in the next couple of years.
Of the stubborn lemmings continue to listen to idiots like kramer and will once again lose what funds they have remaining.
Once again Will Rogers will be proven correct.
When liquidity returns to markets, WFC with its doubled up in deposits will be waterfall of revenue.
loan loss reserves,chargeoffs .......just narrow comments about
a very very broad subject....the BIg 4 are already 22 billion ahead
of the standard set in the adverse stress test which by the way was the worst two year commercial loan loss rate for banks in history in
other words a standard worse than the Great Depression....Four
paragraphs don't cut it....
And whoever said it shouldn't take 3 years because other banks of similar size didn't take that long. HELLO! This is the largest bank merger to ever happen in the US. They are trying to make the smoothest transition to fit customers needs across the country. I for one, would much rather them take the time and do it right and well than just change the signs and figure it out from there.
Wachovia is a great operational bank that inherited a bad loan product with a unforseen disasterous outcome. That product is out. They were trying to recover from it, but lucked out. Thank goodness Wells sees the value of Wachovia's Company and bought them because they were a good investment, they had the money to help leverage the fall of Wachovia, and when they take the good parts from Wachovia and merge them with the great parts of Wells Fargo, the largest, extremely well operation bank will be available to everyone across the east and west coast.
Where's the problem in that? They made a good investment, to a company that needed the help and they'll come out a 1 really strong, sound bank.