Wells Fargo

• Here we go again: IMF Said to Seek $1 Trillion Resource-Boost Amid Euro Crisis (Bloomberg)
• China said to Tell banks to Restrict Lending as Local Officials Seek Funds (Bloomberg)
• EU to Take Legal Action Against Hungary (FT)
• Portugal Yields Fall in Auction of Short-Term Debt (Reuters)
• US Natural Gas Prices at 10-Year Low as Warm Weather Weakens Demand (Reuters)
• German Yield Falls in Auction of 2-Year Bonds (Reuters)
• World Bank Slashes Global GDP Forecasts, Outlook Grim (Reuters)
• Why the Super-Marios Need Help (Martin Wolf) (FT)
• Chinese Vice Premier Stresses Government Role in Improving People's Livelihoods (Xinhua)

I continue to believe that the large difference between the valuation of WFC and C is actually about right and is a function of the high-risk business model at C.  Say what you want about the piles of cash, Dick Bove, C has a gross yield on lending assets that is more than 350bp above the industry average, a function of a subprime internal default target for the average customer.  This is a deliberate business model choice and one that, frankly, makes it hard for me to justify buying C. 

Analyst surveys have now risen to the level of fact, as we all know.  Thus Bloomberg and other news outlets feature detailed reports about the opinions of the Sell Side community as though these musings were burned into stone tablets with the fire of the Holy Spirit.

We have now entered the fifth year of this Fourth Turning Crisis. George Washington and his troops were barely holding on at Valley Forge during the fifth year of the American Revolution Fourth Turning. By year five of the Civil War Fourth Turning 700,000 Americans were dead, the South left in ruins, a President assassinated and a military victory attained that felt like defeat. By the fifth year of the Great Depression/World War II Fourth Turning, FDR’s New Deal was in place and Adolf Hitler had been democratically elected and was formulating big plans for his Third Reich. The insight from prior Fourth Turnings that applies to 2012 is that things will not improve. They call it a Crisis because the risk of calamity is constant. There is zero percent chance that 2012 will result in a recovery and return to normalcy. Not one of the issues that caused our economic collapse has been solved. The “solutions” implemented since 2008 have exacerbated the problems of debt, civic decay and global disorder. The choices we make as a nation in 2012 will determine the future course of this Fourth Turning. If we fail in our duty, this Fourth Turning could go catastrophically wrong. I pray we choose wisely. Have a great 2012.

We dont' need any water, let the mo@#$#%ker burn!

How many of those millions of dollars in cars does the "Foreclosure King" still have? How is he able to stay so warm and cozy in his castle on the intercoastal in Ft.Lauderdale staring out at his 100 foot yachts and where is the Florida Bar in all this?

Stop a Wells Fargo Eviction at the Tehiva/Phillips’ Home 5305 Hana Hwy Monday Jan 2...

Despite the recent humiliating defeat for the TBTF bank proposal to establish debit fees, the bailed out banks are still somehow supposed to make money now that their prop trading desks can no longer mimic hedge funds and trade ahead of flow or on "expert network" inside information (and old school revenue generation like advisory and underwriting is just too much work). So what do they do? Why nickel and dime clients to death. As the following interactive graphic from the Pew Trust demonstrates, in a recent example where it was caught red-handed, Wells Fargo literally tried to nickel and dime a client (who subsequently sued) to death, by shifting the order of debit transactions in a way that maximized the penalty fee, ignoring the actual chronological order. In other words, banks have a "malicious" algorithm designed to maximize client pain, while ignoring actual sequence of events. The net result an overdraft balance that is 4 times higher than what it would have been if proper temporal sequence had been followed. And that is why banks are desperate to pickpocket their clients: because once news of such practices is made public, everyone should pull their money. That they still don't is quite incomprehensible.

Five National Banks Sued by AG Coakley in Connection with Illegal Foreclosures and Loan Servicing

Paulson & Co.'s latest 13F is out. As has already been extensively discussed, Paulson largely has eliminated his BAC stake, which in recent days is rumored to have been cut to zero, although as of June 30 was a little over $660 Million, or 60.4 million shares, a substantial 52% cut from the $1.65 billion or 123.6 million shares at March 31. In the process he made BAC his top 12 position, a far cry from where it was in 2010. Overall, Paulson deleveraged substantially in Q2, with the bulk of his positions declining across the board, although he did cut his whopping 1.8 billion Citi stake by just 19% to $1.4 billion, which is where the pain trade for the fund is contained (for those wondering, his JPM position was cut by just 6%). Paradoxically, as of June 30, Paulson actually added $160 million to his Capital One position and a whopping $300 million to his Wells Fargo position making these his top 6 and 8th positions, respectively. Somehow we doubt his LPs will be too happy with this decision. Paulson added new positions in Life Technologies, Savvis, News Corp, Southern Union, Mosaic, Tenet, Walter Energy, Grifols, NYSE Euronext (probably an M&A arb), Agnico Eagle Mines, and State Bank Financial. These are highlighted in green in the table below. Any simple additions are bolded. Paulson cut his entire stakes in Alcon, Alberto Culver, Atheros, Boston Scientific, CIT, Cooper Companies, Emergency Medical Services, International Paper, JC Penney, Kinross Gold, Lorillard, Marshall & Isley, Novell, Pride Intl, RC2 Corp, Seagate, Smurfit Stone (so much for that whole paper trade), St Jude, Talecris and Wilmington Trust. We expect major selling in Paulson's Q3 update unless like last year, his fund rises from the ashes of reality courtesy of yet another round of easing. Somehow we doubt it (the Phoenix thing, not the Easing).

Shocker: the bank of Warren Buffett, that paragon of virtue and decency, busted by the capo di tutti ZIRP capi itself for lying to grandma? Surely WFC investors, who don't have to deal with their investment either admitting or denying wrongdoing, can "suck it in" and we can get Charlie Munger to preach some more fire and brimstone morality about the evils of gold and the miracles of taxpayer bailouts.

Moody's Investors Service has placed the deposit, senior debt, and senior subordinated debt ratings of Bank of America Corporation (A2 senior), Citigroup Inc. (A3 senior), Wells Fargo & Company (A1 senior), and their subsidiaries on review for possible downgrade. Each of these ratings currently incorporates an unusual amount of "uplift" from Moody's systemic support assumptions that were increased during the financial crisis. The review will focus on whether these ratings should be adjusted to remove this unusual uplift and include only pre-crisis levels of government support. At the same time, Moody's said that it will assess improvements in Bank of America's and Citigroup's standalone financial strength, and that this may temper the extent of any ratings downgrades that could result from its review of these firms' unusual level of systemic support...Despite this progress, these banks still have sizable residential mortgage exposures; their credit costs could therefore spike if the US economy were to contract again. Further, they continue to face litigation costs related to faulty foreclosure practices.

"The Justice Department is now contemplating whether to use the HUD audits as a basis for civil and criminal enforcement actions, the sources said. The False Claims Act allows the government to recover damages worth three times the actual harm plus additional penalties."

So much for the financial stock renaissance. David "Balls to the Wall" Tepper appears to have played out his QE card, and at least in the quarter ended March 31, decided to dump a substantial portion of his financial holdings, cutting his stake in Bank of America, Citi and Wells Fargo by 31.3%, 34.8% and 58.6% respectively. Tepper also appears to have lost his faith in GM, trimming his holdings from over a million shares to just 38,700 shares. On the additions side, Tepper did add 200,000 shares of Apple, his biggest new position, followed by a new $76 million Valero Energy position and a new $67 million MetLife holding. Based on this report we fail to see Tepper as showing up on CNBC for another Tepper rally iteration any time soon.

The NFP was a snoozer. Today it is time to put the debate about Wells Fargo's Pick-A-Pay portfolio out to pasture. Please vote in the poll.