April 10, 2009
Back in early February Wells Fargo received $25 billion in bailout funds, the largest single amount awarded to any bank at the time. Just prior to that, on the day the passage of the bailout bill was announced, they acquired Wachovia. (Many say they used the $25 billion for the purchase, but Wells Fargo denies that.) The purchase happened only six days after they rejected a deal to buy Wachovia. No doubt the reconsideration was based solely on the fact that Henry Paulson, then treasury secretary, single handedly rescinded a tax law which greatly benefited a purchasing bank when they bought out other banks. It was rumored that the change in the tax law was worth an additional $25 billion to Wells Fargo. They were one of nine banks that quickly acquired other banks after receiving bailout money, certainly inspired by the Paulson gift.
Yesterday, Wells Fargo announced record profits from January to March of this year according to this Washington Post article. They also said their mortgage business was “exceptionally strong”, which, according to the Post article, “easily surprised analysts’ expectations”. The article also says Wells Fargo “benefited from having acquired Wachovia”.
As a result of the announcement by Wells Fargo the stock market rose significantly, with the Dow gaining nearly 250 points. The referenced article said the good day for the markets was partly because everyone was braced for a “dismal first-quarter earnings season”.
Wells Fargo certainly should have a profit to record during for the first quarter of this year with a $25 billion bailout and a $25 billion Hank Paulson tax gift for purchasing Wachovia. On the other hand, who can really believe them? Banks have been lying to us for several years now, and I see that nothing has changed in their leadership. But facts aren’t what drive Wall Street’s markets; the ‘word of the day’ is the driver. And to be certain, no one in the media is going to question “good news” from bankers. They see their job as cheer leaders and defenders of what ever comes out of the mouths of Wall Street. And if some later reports come out contradicting the recent Wells Fargo news, it will be waved off as no body caring about “yesterday’s” news.
And speaking of the tax gift from Henry Paulson last year, I am both amazed and not amazed that the main stream media has ignored that like the plague. It’s as if it didn’t happen. I wrote this post on it in January of this year, and the Washington post is about the only main stream news that reported on it. And we wonder why our elected and appointed officials feel absolutely free to commit crimes.
Never underestimate the difficulty of changing false beliefs [with] facts.
Economist Henry Rosovsky