Despite what Wells Fargo management believes, they are going to need all the help they can get from Washington. They should probably hitch up the horses and hire someone to ride shotgun so they can transport the money.
In 1852 Henry Wells and William G. Fargo formed Wells Fargo & Company to provide express and banking services to California. Through a series of mergers and acquisitions it grew to become the fifth largest bank in the United States as measured by total assets. Its trademark stagecoach became nationally recognized.
On Friday, October 3, 2008 Richard Kovacevich, Chairman of Wells Fargo, made a fateful decision when he agreed to buy the shopworn Wachovia Corporation. His offer of $15.4 billion trumped the government’s hastily arranged shotgun marriage of Citigroup and Wachovia.
Reportedly, Wells Fargo had earlier in the week withdrawn from the negotiations, but re-entered when the U.S. Treasury issued a ruling allowing acquirers to use tax losses incurred by sellers.
At the time of the announcement, Wells Fargo & Company common stock was trading at $33.80. On February 3, 2008 its stock closed at $18.53.
Wachovia management had made a disasterous decision to buy Golden West Financial Corporation an Oakland, CA based savings and loan on May 7, 2006. It then compounded that problem by accelerating its residential and commercial real estate lending activities and sealing its doom. Believing its own hubris, Wachovia’s management and directors continually insisted that it was in fine shape.
Since its purchase of Wachovia, Wells Fargo has been given $25 billion in TARP funds, which it implied it did not need but was forced to accept. In return for those funds Wells issued $25 billion in 5% Cumulative Perpetual Preferred Stock to the U.S. Treasury along with a warrant for 110,261,688 common shares at a strike price of $34.01.
Citigroup owes Wells Fargo a serious debt of gratitude for rescuing them from a a fate worse than death by outbidding them. The asset quality problems of Wachovia Corporation were far greater than the insiders there would admit and far worse than Wells Fargo projected. They are certain to linger for an extended period of time.
Wells Fargo went from a well-run bank with $550 billion in total assets to a $1.3 trillion institution by acquiring Wachovia. It is as if a 150 pound swimmer has decided to swim out and rescue a panicking 350 pound swimmer. Worse yet – there are high seas and a heavy undertow caused by a worsening economic storm.
In 1852 Henry Wells and William G. Fargo formed Wells Fargo & Company to provide express and banking services to California. Through a series of mergers and acquisitions it grew to become the fifth largest bank in the United States as measured by total assets. Its trademark stagecoach became nationally recognized.
On Friday, October 3, 2008 Richard Kovacevich, Chairman of Wells Fargo, made a fateful decision when he agreed to buy the shopworn Wachovia Corporation. His offer of $15.4 billion trumped the government’s hastily arranged shotgun marriage of Citigroup and Wachovia.
Reportedly, Wells Fargo had earlier in the week withdrawn from the negotiations, but re-entered when the U.S. Treasury issued a ruling allowing acquirers to use tax losses incurred by sellers.
At the time of the announcement, Wells Fargo & Company common stock was trading at $33.80. On February 3, 2008 its stock closed at $18.53.
Wachovia management had made a disasterous decision to buy Golden West Financial Corporation an Oakland, CA based savings and loan on May 7, 2006. It then compounded that problem by accelerating its residential and commercial real estate lending activities and sealing its doom. Believing its own hubris, Wachovia’s management and directors continually insisted that it was in fine shape.
Since its purchase of Wachovia, Wells Fargo has been given $25 billion in TARP funds, which it implied it did not need but was forced to accept. In return for those funds Wells issued $25 billion in 5% Cumulative Perpetual Preferred Stock to the U.S. Treasury along with a warrant for 110,261,688 common shares at a strike price of $34.01.
Citigroup owes Wells Fargo a serious debt of gratitude for rescuing them from a a fate worse than death by outbidding them. The asset quality problems of Wachovia Corporation were far greater than the insiders there would admit and far worse than Wells Fargo projected. They are certain to linger for an extended period of time.
Wells Fargo went from a well-run bank with $550 billion in total assets to a $1.3 trillion institution by acquiring Wachovia. It is as if a 150 pound swimmer has decided to swim out and rescue a panicking 350 pound swimmer. Worse yet – there are high seas and a heavy undertow caused by a worsening economic storm.
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