Vail Daily editorial wrong to mention Wells Fargo
Vail, CO, Colorado
Wrong about Wells Fargo
As I have witnessed what has been reported in the media during the past week regarding Wells Fargo, at least one observation is clear: Journalists can be so eager to weigh in on sensational topics they don’t have time or don’t care to investigate the information to support their stories. From what I can see, many commentaries are nothing more than opinions about opinions, with priority on taking the popular view and getting to press quickly. I am disappointed that the Vail Daily seems to be no exception to this trend.
Your editorial Feb. 5, entitled “Stimulus Needs More Oversight,” declares that Wells Fargo Bank “begged” for federal bailout money. Not true. To back up this case, you can refer to an article in The Wall Street Journal Oct.15, 2008 (“At Moment of Truth, U.S. Forced Big Banks to Blink”) that tells the real story. Wells Fargo was opposed to the action and Chairman Richard Kovacevich was very outspoken regarding this.
The Federal Reserve and the Treasury presented this plan to the country’s nine largest banks as a “necessary measure” to stabilize the financial system. There was very little dialogue at the meeting and no negotiations. My point isn’t to argue for this move by the government, but clarify that Wells Fargo did not request the funds in the first place.
The Vail Daily’s opinion in the editorial was that Wells Fargo was desperate and in need of a bailout. Not true. Many of your informed readers will remember the day Wells Fargo announced third quarter 2008 earnings of $1.6 billion (just before the meeting with government officials), which surprised the market and buoyed up most of the major indices. Investors took courage that at least one major bank was weathering the storm. The stock price rallied near a high for the year and market capitalization exceeded $100 billion.
Why would Wells Fargo be simultaneously desperate for a bailout?
I would also like to provide a proper background to the loss reported for the fourth quarter in 2008, which resulted because of the merger with Wachovia. It is common knowledge, but in case you haven’t checked the facts, this major bank was on the verge of collapse.
Citigroup had offered to take on the bank in exchange for billions in federal guarantees. Wachovia opted instead to accept a deal from Wells Fargo, which had requested no government guarantees with its offer. Should anyone be surprised that losses would be incurred from the resulting merger? Could you think of a better solution for taxpayers, shareholders, or Wachovia customers?
In spite of the fourth quarter loss, Wells Fargo still reported $3 billion in net earnings for all of 2008. Its tier 1 capital still stands at $86.4 billion.
Today, Wells Fargo carries the highest credit rating of any major bank in the U.S. It has managed remarkably well by sticking to a disciplined focus on its core businesses and communities, and truly understanding its customers, especially when it comes to lending.
How has the $25 billion in preferred stock provided by the government been used? In the fourth quarter of 2008 alone, Wells Fargo made over $72 billion in new loans and mortgages.
Can you think of a better outcome than this in terms of a stimulus? Wells Fargo has definitely been doing its part to keep credit flowing, and accomplished this while still remaining profitable.
While the editorial portrays Wells Fargo as just another irresponsible bank on the ropes, perhaps you should do some real investigative reporting and see why Wells Fargo Bank is the only major financial stock that still trades at a premium to book value, and why Warren Buffet is its largest shareholder (he significantly increased his holdings during the financial crisis).
Finally, I’d like to set the record straight regarding the company’s recognition events, which you blend in with comments about executive bonuses, corporate jets and expensive naming rights.
It is best explained by CEO John Stumpf in a press release that went to national publications on Monday. These have not been junkets for executives as portrayed in the media. I realize this is the public’s perception and I understand it is the norm.
I wish you could attend one of these and see what really happens, and who is invited. You would realize that the primary guests would be tellers, customer service representatives, and bankers, just ordinary employees who had achieved extraordinary results in their banks and communities.
It is a rare thing in corporate America to go to great lengths to recognize the people on the front lines.
Wouldn’t savvy business owners consider this a best practice when conducted by a financially sound, stable and profitable company even in today’s environment? These events have been all about acknowledging and rewarding rank and file employees.
The fact is that few major companies are as prudent and disciplined about managing their expenses as Wells Fargo.
These events have been a testament to Wells Fargo’s commitment to its people and conviction that they are the reason for its success.
I felt the need to respond in this letter not as a company representative, but an individual. There are many of us employed by this great company who live and work in this community.
We are proud of our company, its philosophy, its business practices, and the role it has for good in our community. We read your paper and purchase advertising space in it. In conclusion, you say the government needs more oversight of Wells Fargo.
In my opinion, your newspaper needs more oversight of its editorial staff to ensure it is thoroughly informed and unbiased in its reporting.