Wells Fargo is faced with a terrible exposure to the weakening economy and rising rates of delinquencies on housing related mortgage and credit card debt.
The outlook for the entire financial sector industry is grim and WFC will not be spared. There are those who think the turmoil in the financial services industry has already peaked. I disagree.
Currently, just with subprime portfolios banks around the world, have written down about $238 billion of toxic waste debt. Before all of the confessions have been made public there will probably be over one trillion in writedowns. This is a serious number but is only a small part of the total exposure.
It is thought that at least $45 trillion of questionable derivative instruments are held in investment portfolios, with a substantial amount of that exposure lending right to the banks. Then there is a raising tide of credit card delinquencies. No, WFC will not escape the carnage to come in the financial sector.
The former CEO of Wall Street's largest investment bank, Goldman Sachs, now US Secretary of the Treasury, has proposed new legislation that would be the greatest Wall Street reform act since the Great Depression.
The short take on Mr. Hammering Hank Paulson's bank bailout plan is that the Federal Reserve Bank would become an extremely powerful entity, not that it's not already, but it would become even more powerful with almost unlimited powers to regulate the nations financial affairs, banks, brokerage firms, hedge fund industry, you name it.
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$30.81 (04/03/08)
