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Stress Testing: What's Your Bank's AQ?

That's the first thing that struck me: why is Wells on the Good Bank list and yet the leaks on the Stress Test results are saying they need to raise $10 bn of capital?

Is their rank being distorted in the AQ by the recent run up in their share price? Is there something about their underwriting standards that is not being capture by the inputs to the AQ test? I think it's a combination of the two. I personally think that Wells pretty much ring fenced the potential damage from acquiring Wachovia. I think the stress testing done by the government was probably skewed towards further downside cases on real estate, particularly commercial, and Wells is and has been primarily a bank focused on commercial real estate. However, Wells has traditionally been a conservative underwriter on commercial real estate and may be getting painted with the excesses in lending that went on in this area. It's a tough call to make unless you had access to the details in their books.


On May 04 12:00 PM Vikingblood wrote:

> Wells Fargo is under your Good Bank list ... last time I looked,
> they were asked to raise an additional 10 Billion in Capital.