Tuesday, July 21, 2009

Toxic Loans And Wells Fargo

Wells Fargo is expected to report earnings tomorrow morning.

Wells should deliver a strong number as Mortgage origination's were very strong during the quarter.

But whats hanging over Wells is the $5.1 billion in fresh capital the government wants Wells to raise by November, thanks to the bank's performance in stress tests. Wells has already raised billions via a secondary offering, but its not enough.

Whats going to be interesting is how Wells responds to FASB making a mandate that Wells repatriate toxic loans from SPV/OBS.

Wells still faces rising credit losses, with exposure to some $325 billion in commercial loans and nearly $100 billion in risky option adjustable-rate mortgages that they need to bring back unto their balance sheet.

So far both Goldman and JP have paid back TARP, while Wells has not paid back the $25B they received from the government.

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