March 16, 2009 - 9:22am
Richard Kovacevich, Wells Fargo & Co. Chairman, during his speech on March 13 at Stanford University in California criticized the Troubled Asset Relief Program, and called the stress-testing banks “asinine.”
Kovacevich, 65, stated that when the U.S. Treasury persuaded the nation’s nine biggest banks to accept capital investments in October, it signaled the whole industry was weak, although some of them, including Wells Fargo didn’t need the capital. He said the bank was able “to raise private capital at that time” and did not need to cut the dividend to preserve cash.
Wells Fargo had cut its dividend 85 percent on March 6 to 5 cents a share, so preserving the savings of $5 billion. On the other hand, the San Francisco-based bank made a quarterly payment of $371.5 million as an interest payment on the $25 billion TARP investment last month. Moreover, the bank had suspended cash bonuses for its executives including Kovacevich and CEO John Stumpf.
The stress test announced by the Obama administration last month is aimed at determining which banks are healthy enough to withstand surging unemployment and tumbling home prices. Kovacevich said the “stress test” provided opportunities for short-sellers to decrease bank stocks and could negatively effect the confidence in the system. “It is absolutely asinine that somebody would announce we’re going to do stress tests for banks and we’ll give you the answer in 12 weeks,” he said.
There have already been speeches made opposing the TARP program. Some of the lenders including Bank of America Corp., U.S. Bancorp and Goldman Sachs Group Inc. have even said they wanted to pay the money back. More than 500 banks, insurers and credit-card companies had applied for TARP capital, through which the government has distributed almost $300 billion.
Kovacevich, 65, stated that when the U.S. Treasury persuaded the nation’s nine biggest banks to accept capital investments in October, it signaled the whole industry was weak, although some of them, including Wells Fargo didn’t need the capital. He said the bank was able “to raise private capital at that time” and did not need to cut the dividend to preserve cash.
Wells Fargo had cut its dividend 85 percent on March 6 to 5 cents a share, so preserving the savings of $5 billion. On the other hand, the San Francisco-based bank made a quarterly payment of $371.5 million as an interest payment on the $25 billion TARP investment last month. Moreover, the bank had suspended cash bonuses for its executives including Kovacevich and CEO John Stumpf.
The stress test announced by the Obama administration last month is aimed at determining which banks are healthy enough to withstand surging unemployment and tumbling home prices. Kovacevich said the “stress test” provided opportunities for short-sellers to decrease bank stocks and could negatively effect the confidence in the system. “It is absolutely asinine that somebody would announce we’re going to do stress tests for banks and we’ll give you the answer in 12 weeks,” he said.
There have already been speeches made opposing the TARP program. Some of the lenders including Bank of America Corp., U.S. Bancorp and Goldman Sachs Group Inc. have even said they wanted to pay the money back. More than 500 banks, insurers and credit-card companies had applied for TARP capital, through which the government has distributed almost $300 billion.