http://www.marketwatch.com/News/Story/Story.aspx?guid={A80BA738-16A4-4A2F-9287-AF3756D337FA}&siteid=yhoof2

How about taking the 2nd home equity book, applying a default rate and severity assumption to it and then running it through Wells income statement to ascertain the impact on income/capital? That would require actual analysis – something you seem unable to perform!

Wall Street debates outlook for Wells Fargo
Sacramento Business Journal
Friday, August 15, 2008 – 2:45 PM PDT

Wells Fargo & Co., parent of the top bank in Greater Sacramento, is the subject of an intense debate among investors on how the credit crisis will affect the bank’s bottom line.

San Francisco-based Wells is one of the nation’s largest lenders of residential mortgages and other consumer loans that could go bad depending on the toll a slowing economy takes on their pocket books.

That leaves some on Wall Street waiting for the other shoe to drop on Wells Fargo.

As the West’s largest bank, Wells Fargo’s fortunes and future are closely watched in the region. Given the relative strength of the Bay Area economy, some might be surprised how nervous lenders and investors are about California these days. For instance, some San Francisco businesses are finding lenders back East cutting credit lines as they seek to reduce their exposure to the Golden State.

Wells Fargo recently filed its quarterly report with the Securities and Exchange Commission that offered more insights into the bank’s performance and triggered a volley between the Wall Street Journal’s Heard on the Street column Friday and analyst Richard Bove with Ladenburg Thalmann.

Bove, in a report titled “Point-Counterpoint,” lowered his earnings estimates on Wells, but maintained his “buy” recommendation in his Friday report.

“Loan losses are likely to be higher for all banks than estimated earlier and that includes Wells Fargo,” Bove said. He now sees the bank earnings at $2.21 per share this year rather than his earlier expectation of $2.34. Next year he expects the bank to earn $2.65 per share, down from $2.92 per share, and the 2010 estimate has been reduced to $3.16 per share from $3.45.

“The outlook for Wells Fargo remains quite positive,” Bove said, pointing to reduced competition in both the capital markets and in West Coast banking. He urged clients to “buy this stock aggressively.”

Specifically, he notes that Washington Mutual (NYSE: WM) has contracted its operations, Countrywide Financial is history. Bank of America (NYSE: BAC), he says, has less appetite residential mortgages as it integrates Countrywide. Out-of-staters, such as J.P. Morgan Chase (NYSE: JPM), KeyCorp (NYSE: KEY) and Zions Bancorp (NASDAQ: ZION), owner of California Bank + Trust, are pulling back from the California market, Bove said, adding that “the community banks in the region are very weak.”

“The opportunities to expand the customer base in bad times should meaningfully enhance the bank’s secular opportunities in good times,” Bove said.

While not addressing specific issues raised in the Wall Street Journal column, Wells Fargo responded to a request for comment by pointing to its top ratings from Moody’s Investors Service and Standard & Poor’s as well as the 10 percent dividend hike last month as signs of strength.

“Wells Fargo continues to be the only bank in the U.S. to be rated ‘AAA,’ continues to grow, has a strong balance sheet, and has the strongest capital ratios in our peer group,” said Wells spokesman Chris Hammond. “Given the company’s diversification, Wells Fargo continues to perform well during the current economic cycle just as it has endured through all kinds of economic cycles during our 156-year history.”

Bove, known for his outspokenness, took issue with some of the specifics in the Wall Street Journal column, saying that comparing Wells to J.P. Morgan is inappropriate. He said the bad loans and other problems the New York bank took on with the Bear Stearns deal in which “it dramatically overpaid for Bear Stearns to help the financial markets. Wells does not make a mistake like this,” Bove said.

He notes the bank’s portfolio of collateralized debt obligations — a source of great pain for many banks and brokerages — is insignificant at less than $900 million, or 0.14 percent of the bank’s balance sheet.

“Most banks that have CDOs have written off amounts that are many multiple times the size of the Wells Fargo total portfolio,” Bove said.

Bove dismissed concerns raised in the Journal column over Wells Fargo’s (NYSE: WFC) jump in short-term funding, saying the bank is simply taking advantage of today’s lower cost of money in the wholesale capital markets. He also dismissed concerns about the growth of Wells Fargo’s so-called level three assets — those which cannot be valued based on pricing in the open market. Bove said Wells Fargo’s level three assets are primarily mortgages and mortgage-servicing-rights, which is the business of collecting mortgage payments from borrowers and distributing them to those who hold the loans.

Bove anticipates that Wells Fargo’s ability to weather today’s financial storm will pay dividends on sunnier days ahead.

“It is increasing its customer base in bad times,” Bove said. “In good times, customer memories will focus on the fact that when times were tough, Wells Fargo was the bank to go to.”

Written by Mark Calvey of the San Francisco Business Times, an affiliated newspaper.

Trailer is here—
http://www.youtube.com/watch?v=jcGbXMEgmcA

Banks are not going away. Neither will their dirty standards or the corrupt system. These so-called “economic cycles” will continue to happen. The whole point of the game is to time them.