Bank-Implode: Wells’ commercial book a time bomb

September 17, 2009

Teri Buhl has a interesting report on Bank-Implode today:

Not only do [Wells Fargo’s] outstanding commercial loans collectively exceed the property values to which they are attached, but derivative trades leftover from its acquisition of Wachovia are creating another set of problems for the already beleaguered San Francisco-based megabank.

Wachovia, which Wells purchased last fall as it teetered on the brink of collapse, was so desperate to increase revenue in the last few years of its existence that it underwrote loans with extremely shoddy standards and paid traders to take them off their books.

There is much more in the article. Suffice it to say, Wells is in much deeper trouble than its executives are letting on.

By the way, Warren Buffett says he knows Wells Fargo’s book better than bank examiners and that the company is doing just fine. We shall see…


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Every day I read a new “ticking time bomb” story regarding CRE.
One day one of these bombs is going to go off.
The problems seem insurmountable; 1/3rd of all commercial mortgages unable to refi…?
This is scary stuff.
The only bright spot is the fact that conventional wisdom is usually always wrong. Most people are too optimistic on the upside and to pessimistic on the downside.
So although this is bad, I doubt the worst predictions (CRE Armageddon) are true.
And Buffet still has some credibility…maybe he knows something the rest of us don’t

Posted by MasterPlan Capital LLC; Commercial Real Estate Investment Banking | Report as abusive

I recall the huge, full page ads in the NYT for Wachovia not so very long ago. I guess it only proves again that you can’t judge a book by its cover…or should we say a bank by its book?

Posted by CB | Report as abusive

The Trouble With Warren Buffett

Well, the trouble with with us – we give him credit way beyond his narrow expertise of financial investment. Financial investment (spending other people’s money to buy other people’s businesses for a quick return before moving on to the next hot property) is a parasitic occupation creating little or no net wealth. More often, these ‘oracle’ types do no better than throwing darts. Those who does well basically use their capital to corner trades. Or play complex gambling games to squeeze a few dimes out of short term volatility, multiply by their billion-dollar funds, and claim genius.

Successful economies are not built by financial investors cum gamblers. They are built by businessmen, entrepreneurs, inventive and creative professionals. These people do not manipulate money for a buck. They create and manipulate knowledge to create the buck in the first place.

So if worshiping the banks make you look silly, stop worshiping the ‘oracle’.

Posted by The Real Deal | Report as abusive

Perhaps Mr. Buffet & Bill Gross(PIMCO) know a bit more than us mere mortals.

Maybe something about investing in “too big to fail” entities…

Posted by StevenKs | Report as abusive

I’ve noticed a pattern of companies about to implode launching massive ad campaigns and Wells Fargo has been doing this for the past couple of months. I knew they were in trouble…

Posted by Katherine Smith | Report as abusive

Wells would have failed along time ago if FASB had not changed accounting rules. I expect that they are deemed to be to big to fail and will get more money soon from TARP. The oracle is very well connected.

Posted by Johnnymustardseed | Report as abusive