Misperceptions on Wells Fargo and the TARP


  • That Wells Fargo wanted it! They were asked to take it! Answer: here
  • Why did the government force this upon the banks: Because of fractional banking, the "gift-so-called" increased bank capitalization and enabled the banks to loan more money (to ease the credit crunch of a year ago)
  • That it was somehow a "gift". Answer. The Government bought $ 25 B of preferred stock. What is preferred stock? Answer: here. What it meant to the stockholders (the common stock ones .... as I once was!): We surrendered our dividends!
  • That it should have been "given out" to borrowers. Answer: One cannot both blame the banks for making poor loans AND encourage them to afford EZ credit for people who cannot pay!
  • That it "cost" the government. Bank TARP recipients paid 5% interest on the TARP funds!
  • Comment: TARP funds given to GM and Chrysler are not likely to be ever paid back.

Wells Fargo repays $25 billion TARP bailout


Wells Fargo & Co, the fourth-largest U.S. bank by assets, on Wednesday said it repaid the $25 billion government bailout it received during the financial crisis, after last week selling $12.25 billion in stock.

Wells Fargo also paid dividends of $131.9 million to the government as part of the repayment, it said in a statement. The bank has paid $1.44 billion in dividends on the government's investment since it took the bailout, it said.

More details:

Companies receiving TARP funds

Companies that have paid back TARP funds (this is not current with today's news of WFC paying the TARP back)

An additional fact about TARP and the banks (at least Wells Fargo):

Eye on Wells Fargo

Wells Fargo was among the eight large U.S. banks to receive the Treasury Department's initial round of capital investments -- money described by Treasury officials not as a bailout, but rather as funds to help bolster "healthy" banks in tough times.

As part of the so-called "bailout", the government continues to hold warrants to purchase approximately 110 million shares of Wells Fargo common stock at an exercise price of $34.01 per share. This is tantamount to an option to buy stock at a set price. Wells is at $ 25 or $ 26 today. Were the stock to climb to $ 40 per share, the government could make $ 6 per share X 110 M = $ 660,000,000!

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