Now that the stock price has gotten back up, this topic is no longer sensitive and the bullying fools no longer feel that they need to condescend towards an Asian guy writing from Singapore. All the better because I intend to talk about this and hope that intelligent people with more informed comments help shape my thinking about Wells Fargo’s acquisition of Wachovia.
Even without Wachovia, there is good reason for Buffett to be worried about Wells Fargo. There would have been less reason to worry if Wells Fargo had simply come clean about its exposure to bad mortgage debt and provisioned accordingly. How is it possible that all the major mortgage lenders in Wells Fargo’s key markets are acquired or else put to sleep by the Federal government but Wells Fargo remains unscathed? If Countrywide and IndyMac got into trouble, could Wells Fargo have avoided similar losses? Instead of an honest admission, Wells Fargo has made a big show about its underwriting standards. Apparently, only the loans they acquired through correspondent channels are bad whereas the loans they underwrite are good. The basic storyline is that others are bad, Wells Fargo is good. Why do people believe them?
Wells Fargo is the biggest mortgage originator and servicer in the nation. There is no way for them to escape unharmed the downturn in the real estate market. If Golden West was offering option ARMs, could Wells Fargo have stuck to amortizing mortgages and still hope to get any business?
This has been discussed ad nauseum on the board and by WFC management. If you don't care to believe that fine. If you don't understand, didn't do the research and don't believe the people who did that WFC didn't do certain types of loans that got CountryWide and IndyMac in trouble, that's certainly negligent of you. If you can't avoid loaded terms like, 'come clean', 'honest admission', 'big show' and 'escape unharmed' that's certainly disingenuous of you.
Why don't you come clean, make an honest admission and tell us all that you're just another shortie saying whatever you think will work to talk the stock down?