6/15/12

Hartzman’s Wells Fargo Whistleblower Filing: Part Four




“...Wells Fargo bought Wachovia Corp.,
...because depositors were pulling their money from Wachovia,
the Fed channeled $50 billion in secret loans
…through two emergency-financing programs
to prevent collapse before Wells Fargo could complete the purchase.

“These programs proved to be very successful at providing financial markets
the additional liquidity and confidence they needed
at a time of unprecedented uncertainty,”
says Ancel Martinez, a spokesman for Wells Fargo.”

...banks reaped an estimated $13 billion of income
by taking advantage of the Fed’s below-market rates...

...the Fed and its secret financing helped America’s biggest financial firms
…pay employees as much as they did at the height of the housing bubble…

“…JPMorgan, Bank of America, Citigroup Inc. (C), Wells Fargo & Co. (WFC),
Goldman Sachs Group Inc. (GS) and Morgan Stanley
accounted for 63 percent of the average daily debt to the Fed
by all publicly traded U.S. banks, money managers and investment- services firms…

The banks spent $146.3 billion on compensation in 2010,
or an average of $126,342 per worker…

That’s up almost 20 percent from five years earlier
compared with less than 15 percent for the average worker.

Average pay at the banks in 2010 was about the same as in 2007, before the bailouts.

Lobbying expenditures by the six banks
that would have been affected by the legislation rose to $29.4 million in 2010
compared with $22.1 million in 2006,
the last full year before credit markets seized up -- a gain of 33 percent…

Lobbying by the American Bankers Association, a trade organization,
increased at about the same rate…

They’re more stable, better able to serve large companies
and more competitive internationally, and breaking them up would cost jobs
and cause” long-term damage to the U.S. economy,”
according to a Nov. 13, 2009, letter to members of Congress
from the [Financial Stability Forum]

Estimated Income from Fed Loans to Wells Fargo: $878.2 million.

Wachovia: $149.4 million”

Bloomberg

The Financial Stability Forum (FSF)
was a group consisting of major national financial authorities
such as finance ministries, central bankers, and international financial bodies.



Wikipedia

The Federal Reserve unanimously approved the merger with Wells Fargo
on October 12, 2008.

Wells Fargo & Company said today
it has completed its merger with Wachovia Corporation,
effective December 31, 2008

“Fourth Quarter 2008:

Successfully closed Wachovia acquisition on December 31, 2008

Significantly reduced the risk, or “de-risked,” the balance sheet
and future earnings stream of the new Wells Fargo

De-risking at Wachovia:

No plans to request additional TARP capital

Fourth quarter net loss of $2.55 billion, or $0.79 per share,
included the following significant items:

The decline in profitability was caused by adding $8.1 billion to credit reserves…

The fundamentals of our time-tested business model, however,
are as sound as ever.

…our company at year-end 2008
was one of the world’s strongest financial institutions.”

Wells Fargo Bank, N.A. has the highest credit rating currently given to U.S. banks
by Moody’s Investors Service, “Aa1” and Standard & Poor’s Ratings Services, “AA+.”


"Only months after it was started,
the U.S. program designed to purge debts of no immediate discernable value
from the balance sheets of troubled banks
has helped transform the frozen debt into a money-maker as the bonds have rallied.

…Under the program, asset managers were supposed to raise money from investors
and, with additional capital and loans from taxpayers,
buy as much as $1 trillion in toxic assets from U.S. banks, freeing up money for lending.

It’s “absolutely ridiculous” that banks,
which were expected to reduce their holding of such volatile mortgage securities,
bought them before the government program was running and may now profit…

“Some of them created this mess, and they are making a killing undoing it.”

…Neither the Treasury nor the funds
have disclosed how much and what debt has been bought.

Prices for some of the securities that the funds were supposed to buy
have almost doubled since March.

Business Week, Jan 4, 2010

“Wells Fargo & Co.,.plans to raise $10.4 billion in a share sale
so it can get out of the Troubled Asset Relief Program.

The bank plans to return all of the $25 billion that taxpayers invested last year…

TARP began in October last year when then-Treasury Secretary Henry Paulson
persuaded nine of the biggest banks
to sell $125 billion in preferred stock to the government to stabilize the financial system.

Banks chafed under restrictions imposed by the program,
which affect lending, foreclosures, pay, and perks.

Wells Fargo chairman Richard Kovacevich initially said he did not want TARP money
and later called government stress-tests tied to the program "asinine."

Boston Globe

“When the U.S. Treasury persuaded the nation’s nine biggest banks
to accept capital investments in October, it signaled the whole industry was weak,
Kovacevich, 65, said in a March 13 speech…

Even though Wells Fargo didn’t want the money,
it must comply with the same rules that the government placed on banks
that did need it, he said.

“If we were not forced to take the TARP money,
we would have been able to raise private capital at that time”
and not needed to cut the dividend to preserve cash, he said.

Kovacevich joins a growing list of bankers who are chafing at restrictions imposed
by the TARP program, which affect lending, foreclosures, pay and perks.

…Wells Fargo slashed its dividend by 85 percent on March 6 to 5 cents a share,
citing savings of $5 billion and the need to build a capital cushion
in case the market deteriorates further.

…The company reported its first loss since 2001 in the fourth quarter
after accounting for the acquisition of Wachovia Corp…

…Wells Fargo suspended cash bonuses for executives including Kovacevich
and CEO John Stumpf.

Any bank receiving government funds
has to limit annual pay for top executives to no more than $500,000.

…Kovacevich said the government is still making mistakes
as it tries to save the industry.

The “stress test,” designed to determine which of the 19 largest U.S. banks
need more capital, provides opportunities for short-sellers to drive down bank stocks
and can hurt confidence in the system even more, he said.

…“We do stress tests all the time on all of our portfolios,” Kovacevich said.

“We share those stress tests with our regulators.”

Bloomberg, Mar 16, 2009

“Wells Fargo & Company (NYSE: WFC) announced today
that, pursuant to terms approved by U.S. banking regulators and the U.S. Treasury,
it will redeem the $25 billion of series D preferred stock issued to the U.S. Treasury
in October 2008 under the government’s Troubled Asset Relief Program (TARP),
upon successful completion of a $10.4 billion common stock offering.

…Its success also generated financial returns for taxpayers,
including $1.4 billion in dividends paid to the U.S. Treasury by Wells Fargo,”
said Wells Fargo President and CEO John Stumpf.

“Now we’re ready to fully repay TARP in a way that serves the interests
of the U.S. taxpayer, as well as our customers, team members and investors.”

“Over the last decade Wells Fargo maintained capital ratios above peer levels,
one of the main reasons we have been able to continue
to profitably grow our company
– including three consecutive quarters of record profits this year
– despite the credit crisis of the last two years.
– …our capital ratios are growing organically
– as we realize the revenue and expense synergies from the acquisition,
– and as Wells Fargo’s business model continues to generate capital internally
– as we historically have.“

December 14, 2009

“Wells Fargo & Company’s (NYSE: WFC) board of directors
approved a grant of retention performance shares
for President and CEO John G. Stumpf and three other executive officers.

…the retention performance shares provide an incentive for these executives
to achieve continued extraordinary results for the Company.

…In granting the retention performance shares, the board took into consideration
the need for the continued leadership of these executives
as Wells Fargo further integrates Wachovia into its operations,
and navigates through and beyond the current economic recession.

…said Steve Sanger, chair of the board’s Human Resources Committee
and retired chairman and CEO of General Mills, Inc.
… they have played key roles in generating record profits
in the first three quarters of 2009, despite the challenging economy.”

December 31, 2009

THE INFORMATION I HAVE STATED IN THIS COMPLAINT
IS TRUE AND ACCURATE TO THE BEST OF MY KNOWLEDGE.

George Hartzman

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