Email | Print    Type Size  -  +

Wells Fargo paying $371.5 million to government

The big bank says taxpayers are reaping a dividend for their $25 billion investment.

Colin Barr, senior writer
February 2, 2009: 12:21 PM ET

wells_fargo_new.03.jpg
Wells Fargo said last week it doesn't expect to need more bailout money.

NEW YORK (Fortune) -- Wells Fargo wants taxpayers to know their investment is already paying dividends...literally.

The San Francisco-based bank said Monday it paid a $371.5 million quarterly dividend to the U.S. Treasury on the preferred shares the bank issued to the government in last fall's banking industry rescue.

Wells (WFC, Fortune 500), which got $25 billion from Treasury last October in the first installment of the Troubled Asset Relief Program, or TARP, also said that it has been lending money aggressively even as the economy sputters.

"Last quarter alone, we made $22 billion in loan commitments and $50 billion in mortgage originations," Wells finance chief Howard Atkins said in a midmorning press release Monday. He added that this is almost three times what the Treasury invested in the bank.

What banks are doing with the money the Bush administration's Treasury Department showered on them beginning last fall has become a major issue on Capitol Hill. Congressional Democrats are demanding that any further aid to the financial industry come with strict terms for how much recipients of TARP funds must lend, how much they can pay their executives and how they keep track of where the money is going.

The Obama administration has signaled it is receptive to those ideas, saying for instance that future recipients of any "exceptional" government aid would have to cut their quarterly dividend to a penny a share. But the full terms of any future assistance remain unclear.

Last week, Bank of America (BAC, Fortune 500) -- the troubled Charlotte-based lender that, like rival Citigroup (C, Fortune 500), has received two infusions of federal funds -- became the first big bank to say it would track and disclose its lending and investing activity across 10 key areas.

Wells' dividend payment to Treasury isn't unusual, though the bank appears to be the first financial titan to announce the payout in a press release.

Firms that received aid under the TARP capital purchase plan agreed to issue the government preferred shares paying a 5% dividend for the first five years and 9% thereafter. The government also got warrants to buy common stock in the future.

In Wells' case, Treasury got warrants to buy 110 million Wells shares -- equivalent to about 3.3% of shares outstanding -- at $34.01 each. But bank shares have been in free fall the past few months. The KBW Bank Index has lost half its value since mid-October.

Wells, despite reporting better-than-expected results last week and saying that it will not need more TARP money, has been no exception. The stock was trading around $18.83 in midday action Monday, which means the taxpayers' warrants have lost about $1.7 billion of their value on paper. To top of page


Company Price Change % Change
Facebook Inc 75.19 0.21 0.28%
Apple Inc 97.67 0.64 0.66%
Bank of America Corp... 15.59 -0.03 -0.19%
Ford Motor Co 17.62 -0.22 -1.23%
Applied Materials In... 21.23 -0.52 -2.41%
Data as of Jul 25
Index Last Change % Change
Dow 16,960.57 -123.23 -0.72%
Nasdaq 4,449.56 -22.54 -0.50%
S&P 500 1,978.34 -9.64 -0.48%
Treasuries 2.47 -0.04 -1.59%
Data as of 3:20pm ET
More Galleries
Best-loved cars in America These cars and trucks topped J.D. Power's APEAL survey, which measures how much owners like their new vehicles. More
America's most powerful cars A new 'horsepower war' has erupted among U.S. automakers and these are the most potent weapons in their arsenals. More
A sampling of beers being made with traditional Latin flavors A small but growing number of craft breweries are including passion fruit, Mexican cinnamon and other traditional Latin flavors. More
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.