Chart of the day: Wells Fargo’s construction loans

By Felix Salmon
September 17, 2009
Teri Buhl found this chart at WLMlab.com. It shows the percentage of Wells Fargo's $38 billion in construction and development loans which are in default, compared to nationwide figures:

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Teri Buhl found this chart at WLMlab.com. It shows the percentage of Wells Fargo’s $38 billion in construction and development loans which are in default, compared to nationwide figures:

wfc.tiff

“Alarming, Alarming, Alarming” is right — especially the last line, which shows that the loans more than three months in arrears are running at more than nine times the national rate. And that’s before the spike in delinquencies which seems certain to hit:

The bank specialized in underwriting short-term loans up to five years during the credit boom of 2005-2007. The standard terms for such loans included interest-only payments on a floating rate with a huge balloon payment in the final year of the loan. If these loans cannot be refinanced, more waves of defaults are inevitable.

“The bank”, here, is Wachovia, not Wells, but it’s all Wells Fargo’s problem now, along with untold billions in contingent CDS liabilities which no one seems to be able to estimate.

I fear that Wells Fargo is representative of the banking system as a whole: since MLEC and TARP and PPIP all failed in their original intent of ridding the system of its toxic loans, those loans remain stinking up balance sheets across the nation. Wells is bad — but then again, so might everybody else be, too.

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