I should know

Fear and Loathing in 2009

Todd,
Overall, good analogy of the upcoming market.

I have to agree with the below comment. Wells Fargo originated and purchased through wholesale, broker-in, and correspondent, ZERO Option Arm loans; NONE. They wouldn't do them. The senior managers did not think the loans were good for its customers or good for WFC.

True, they inherited a bunch with their Wachovia acquisition, but WFC already provided for $38 billion in Wachovia losses (after Wachovia ALREADY wrote-down billions on these loans). A $38 billion loss on $182 billion of mortgages "says" that 21% of these loans have NO value whatsoever, or 41% only have 50 cents on the dollar remaining. Even with the worse case forclosure on these types of loans, recapturing 50 cents on the dollar is a slam dunk. WFC will not come out unscathed, but they will be a strong survivor. The have the best senior management and a conservative lending mentality. Their loans are the highest performing in the industry. I panicked back in July and sold a bunch of their stock at $20.75 and have regretted it ever since. I wouldn't sell them short again.

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On Dec 24 09:41 PM E Nuff Sed wrote:

> Wells-Fargo has already provided for 39 Billion losses on the 182
> Billion mortgage book it has taken from Wachovia.
>
> Looks like you are assuming losses will be a lot worse than that.