Thanks to Warren Buffet, everybody knows about Wells Fargo & Co. (NYSE: WFC). Oh sure, it’s one of the more prominent U.S. financial corporations anyway, especially since it swallowed up Wachovia last year. But given a Buffet backing, any company can get more prominent.
The legendary investor is standing by his favorite even now, despite stress tests and general woes in the almighty financial sector. If anything, he says, “Wells Fargo will be a lot better off in a couple of years than if none of this had happened,” and that if he had to invest his entire net worth “in one stock, that would be the stock.”
Buffet expressed his opinion on Sunday, that Wells Fargo and his other two financial holdings within the Berkshire Hathaway portfolio - US Bancorp (NYSE: USB) and M&T Bank Corp (NYSE: MTB) - don’t need more equity. They’re fine as they are, regardless of what anybody else might say.
In the case of Wells Fargo, Buffet says, that’s because the company operates under a vastly different business model than other large banks. In addition, he told a press conference, the general health of any of the country’s larger lenders can’t be calculated as easily as the Treasury Secretary Timothy Geithner and Federal Chief Ben Bernanke like to think.
“The bank stress test is very likely to be done poorly,” Berkshire Vice Chairman Charlie Munger agreed with his boss yesterday. “Maybe the whole idea was not such a good idea.”
Such strong support - and outspoken derision - from the Oracle of Omaha is all well and good, but it looks like President Obama’s administration just doesn’t agree with him. And in the end, they’re the ones in charge. So regardless of what Buffet says, if Bernanke and Geithner tells WFC to jump, that business will have little choice but to ask how high.
Considering the just recently released news about Wells Fargo’s viability, it should probably start practicing its vaulting skills now.
Ahead of the delayed stress test data supposed to be released on Thursday, the financial world learned that Wells Fargo has been deemed unable to withstand any further weakening of the economy on its own. Since that means that the bank will have to accept further help from the government, it will have to continue abiding by federal rules as the Obama administration sees fit.
So how high is it going to be? That’s a good question, though nobody seems to have a very good answer. All we do know is that the banks - or Warren Buffet - don’t like the possibilities.
Monday, May 04, 2009 - by Jeannette Di Louie, Assistant Editor
