Outlook 2008: Banks


Shares of Wells Fargo (WFC) climbed Friday as investors bet conservative lending standards probably helped the San Francisco-based bank sidestep most of sub-prime slime, explains Dylan Ratigan. And these buyers are in good company. Warren Buffett is one of Wells Fargo's largest shareholders!

Chief Executive John G. Stumpf joins the panel for this conversation. Following is a synopsis of his main points.

What is your outlook?

“For next year, it will be more of this year with respect to housing,” says Stumpf. “But from a Wells Fargo perspective, we’ve been operating (in the do more for consumers model) for 20 years or more. It’s served us well in the past and it will be our mantra going forward.”

What is your exposure to future mortgage weakness?

“About 92% of our mortgages are prime mortgages. Only 8% are subprime,” says Stumpf. “And our subprime loans perform twice as well as other banks. Really this is a very small issue for Wells Fargo although a larger one for the industry.”

What do you think about the teaser freezer?

“I think Paulson has done a terrific job,” says Stumpf. “He’s trying to do the right thing. But it’s not going to be a silver bullet. I suspect President Bush will sign FHA reform. .. But this idea of a bailout doesn’t work. In that case the medicine is almost worse than the disease,” he adds.

What are you thoughts on the Fed?

“I think the Fed has done a terrific job so far,” Stumpf replies. “This is somewhat uncharted territory and they’ve been very responsible in their actions as well as responsive.”

Dylan Ratigan asks the panel what they think of this stock?

Jeff Macke likes Wells Fargo but voices concern. Where’s the growth going to come from as the credit crunch unravels, he says.


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