Guest Post: TARPless Tuesday - WFC Joins The Exodus

Submitted by Phil at Phil's Stock World

Wells Fargo (WFC) is repaying their $25Bn TARP loan.

That makes WFC the last of the big boys to be done with
the emergency loan program, just one year after it started.  At this
point $161Bn of the $245Bn lent out will be repaid with WFC raising
$10.4Bn in a stock sale to get out from under the government’s thumb
- just in time to pay out the Christmas bonuses.  I won’t go off on a
rant about how stupid it is for the banks to borrow and dilute in
order to pay big bonuses and further punish shareholders by reducing
earnings – it won’t matter anyway, any bank but C that announces they
are done with TARP gets a nice boost as it indicates they can go back
to raping and pillaging as usual in 2010.

It’s good that we can label this bailout a success because that way
Congress won’t waste time approving the next one in March when CRE
fails (oops, that’s supposed to be a secret).  The banks were anxious
to get out from under Government oversight as soon as their pay
practices were called into question.  Perhaps WFC was the last to pay
us back as they “only” have 62 employees who got bonuses over $1M last
year with just 7 employees putting more then $3M in bonus money under
the tree.  That’s nothing compared to C, who had 738 employees who
would consider anything less than $1M a pay cut and you would think GS
would be the leader with 983 Million Dollar bonus babies last year but
they got nothing on JPM, where 1,626 Employees got 7-figure bonus
checks.

Of course, GS beats JPM on a bonus per employee basis by a
wide margin but that’s because JPM actually does own a bank while
Goldman only pretends they are a bank when they have their hand out for
government aid:

So move along folks, nothing to see here – all is well…  You can tell
by the sound bytes that even Obama is disgusted by this BS,
particularly since the banks aren’t lending and, in fact, are putting
more money into their foreclosure and litigation departments to really
put the screws to the consumers who hold what may be flippable
properties for the banks.  After a record-setting 1.5M personal
bankruptcies were filed in 2009 it looks like we’re on track to beat that in 2010 by as much as 30%
as the banks pull even further back on consumer credit, making it
impossible for consumers to extend or refinance their debts (you know,
the way the banks were able to under TARP).  It was Thomas Jefferson
himself who warned us over 200 years ago, saying:

“If the American people ever
allow the banking system to control their money, first by inflation,
then by deflation; their children will one day wake up homeless on the
continent their fathers conquered.”

Thomas Jefferson would be mortified at what has become of our
country.  My bearish outlook is partially based on the very cynical
view that we are heading into stage two of the banks’ property seizure
cycle.  We had our inflation where first the banks lent money on homes
and collected huge fees.  Then the banks directly and indirectly
speculated in commodities and drove those prices sky high, making it
impossible for homeowners to pay the banks their mortgages and eat at
the same time.  The banks seize properties and write the losses off on
the people, crash the housing market and then start throwing more
people out of their homes so that the banks can once again own the land
at the beginning of the next up cycle (which pretty much starts
whenever they decide it does), where they can sell at amazing profits.

This won’t be the first time this has happened, this
happens over and over again in every country since the Magna Carte
first forced the nobles to give land to the peasants and the nobles
quickly figured out they could bleed the peasants dry in new and
exciting ways by forcing them to buy high and sell low over and over
again.  This was so much more fun than simply charging rents that the
concept of individual land ownership caught on Word-wide, changing
old-fashioned slavery for modern wage slavery, where people are
convinced that paying off a $200,000 mortgage at $1,200 a month for 30
years is a good idea even though the borrower ends up paying $232,000
in interest (at 6%) plus all the taxes and
upkeep on the property.  If, at some point, the peasants should fail
to pay – all the better as the the nobles take the property back (keeping fees, deposits and interest paid by the ousted peasant) and patiently wait (as they are playing a long game)
for the next cycle to sell high into.  If the peasant does manage to
pay off the house – that’s fine with the bank too because another one
will buy it and the bank will collect ANOTHER $232,000 in interest ON
THE SAME PROPERTY – they never had a scam like that going when they
kept the land to themselves.

Yes, Capitalism at it’s finest is playing out right in front of us –
these are very exciting times indeed!  It’s not just individuals who
can’t get loans, small businesses and corporations with less than
A-grade paper are getting foreclosure notices as well as banks are
pulling credit and just saying no to all requests for extensions and
modifications.  In Europe the situation is reaching crisis levels
– all this despite the Trillions of Dollars and Euros in aid that has
been given to the banks in 2009 that was meant to allow them to make
these loans.  Instead, the banks are taking their 0% government money
and putting it into 3% government bonds.   Better to make a 2.5% spread
on $50Bn borrowed ($1.25Bn) with “safe” government bonds than
lend it to homeowners and businesses with questionable assets and
repayment abilities.  If you were a banker and wanted to protect your
$1M bonus this year – what would you be doing with it?

Comments

[T-888]

FWIW, when I click on the TARP chart, I get the picture of Jefferson instead.

[Anonymous]

tyler-
how much of the equity issues used to payback tarp (with a profit to the government) will ultimately be on the fed balance sheet?

[Pat C]

Need to follow Europes lead and tax excess bonuses at 50%.  We will see if this is a democracy or not.

[Assetman]

Speaking of the windfall profits tax, if you hadn't seen the interview of Dylan Ratigan grilling Congressman Ed Perlmutter the other day on MSNBC-- it's well worth the look.  I know there is a posting for it on Karl Denninger's site (The Market Ticker).

Link: http://market-ticker.org/archives/1732-Dylan-Ratigan-Reams-Ed-Perlmutter.html

[earnyermoney]

This post reminds me of a parable in the 18th Chapter of the book of Matthew.

Therefore, the kingdom of heaven is like a king who wanted to settle accounts with his servants. ²⁴As he began the settlement, a man who owed him ten thousand talents^[g] was brought to him. ²⁵Since he was not able to pay, the master ordered that he and his wife and his children and all that he had be sold to repay the debt.

 ²⁶"The servant fell on his knees before him. 'Be patient with me,' he begged, 'and I will pay back everything.' ²⁷The servant's master took pity on him, canceled the debt and let him go.

 ²⁸"But when that servant went out, he found one of his fellow servants who owed him a hundred denarii.^[h] He grabbed him and began to choke him. 'Pay back what you owe me!' he demanded.

 ²⁹"His fellow servant fell to his knees and begged him, 'Be patient with me, and I will pay you back.'

 ³⁰"But he refused. Instead, he went off and had the man thrown into prison until he could pay the debt. ³¹When the other servants saw what had happened, they were greatly distressed and went and told their master everything that had happened.

 ³²"Then the master called the servant in. 'You wicked servant,' he said, 'I canceled all that debt of yours because you begged me to. ³³Shouldn't you have had mercy on your fellow servant just as I had on you?' ³⁴In anger his master turned him over to the jailers to be tortured, until he should pay back all he owed.

[john_connor]

http://www.nakedcapitalism.com/2009/09/wells-commercial-real-estate-ticking-time-bomb-and-coming-cre-woes.html

'Nuff said.  I shorted WFC yesterday.  Next stop is $20-$21 within the next 2 months.

[Assetman]

Does anyone know whether ALL the banks that were stress-tested eventually ended up paying back their TARP money?

I'm sure the bonus incentive is the top reason why the banks are doing this... but I'm beginning to wonder why the "marginal" ones are scrambling now, versus October or November.

I get the sense that this Administration wants to place their "Mission Accomplished" banner over TARP, and perhaps "carrot and stick" were applied to achieve political ends.  Either that, or unadulterated blackmail.

Or perhaps, we have another stress test coming-- and those remaining on TARP won't be available for more "assitance" starting next year.

Point being, all this has the makings of a massive "pump and dump"... does it not?

[deadhead]

PNC still on the hook i believe.

I think KEY is as well but not sure.

STI???

[Green Sharts]

Of the 19 that went though the so-called stress test, the 3 you mention plus GMAC, Regions and Fifth Third have not paid back TARP.  GMAC went back to the well for their third cash injection and issued more FDIC insured bonds in the last couple of months.

[Ripped Chunk]

Fuck Wells

Take some relief in the fact that they swallowed Wachovia, a fish that was really rotten.  Now they have food poisoning.

Don't worry, Dr. Ben & Dr. Timmy will save the patient.

[deadhead]

phew, i'm sure glad Stumpf lived up to his promise to make this "shareholder friendly".

i so can't wait to see wfc back in the teens again...just a question of when and how low.

[Rainman]

The Banksters all follow the same payback strategy like good little Nazis. No coincidence, that's for sure.

BAC, then C, then WFC. It is coordinated and moving according to plan. All announcements are in conjunction with new securities issues....check.  The Team Obama recovery myth is in ( shaky )........check. Taxpayer investment recovery ( kinda' )...check. Bonus machine full speed ahead ( ubetcha' )....check.

Now they can just sit back and wait for the CDS thing to blow.