Wells Fargo's Huge Writeoff - The WaMu Angle

From one of my really bright sources — the same one who first brought my attention to the ETrade’s (ETFC) real estate debacle:

Wells Fargo (WFC) just took a $1.4 billion charge on $11.9 billion of home equity exposure. That’s a 12% cumulative loss rate! If you used that as a read across for Washington Mutual’s (WM) $59 billion home equity book it would imply a charge of $7 billion!! Total reserves are $1.9 billion. Oh my…

While it may appear that this is an apples to oranges comparison, Wells is considered a much higher quality home-equity lender. These numbers used by the analyst assume that much of WaMu’s home equity portfolio could be comparable to the $11.9 billion that Wells Fargo identified as its “highest risk” loans.

Comments

[Arohan:]

Herb, thanks for re-publishing your article on a different forum. However, it makes sense for the readers to know that your article has been widely discredited. Just go to blogs.marketwatch.com/... and read the comments

By the way, we have been advocating a purchase of WaMu stock at this price even in the face of a possible dividend cut

arohanvalue.blogspot.c...

2007 Nov 28 02:11 PM

[IPAYMYTAXES:]

GREENBERG IS KNOWN TO FRONT FOR SHORT SELLING HEDGEFUNDS LIKE GREENLIGHT WHERE DAVID EINHORN JOINED WITH GREENBERG TO BASH ALLIED CAPITAL. CRAMER IS A FRIEND OF GREENBERG.

2007 Nov 29 11:42 PM

[Quaker:]

I have only anecdotal info on Fargo, but my former secretary used them for a mortgage. She and her husband had been bankrupt just 3 years earlier. They sold a house in Syracuse they were backwards on and bought a new house near Rochester with no money down and 125% loan to value.

I wouldn't have lent this couple a buck for a cup of coffee. They were incredibly reckless with debt. That had a summer home, a harley loan and credit cards up the ass.

Markit's equity line indices are in the toilet for a reason.

2007 Nov 28 03:38 PM

[User 126359:]

Mr. Greenberg,

You probably recognize me from your other blog. Why are you continuing to publish this article now that you know it is untrue?

Kevin

2007 Nov 29 07:31 PM

[jrham:]

Herb, I wonder what Warren thinks of your piece on WFC.

mahjr

2007 Nov 30 06:07 AM