John Stumpf, the CEO of Wells Fargo, addresses the a new lawsuit by the state of Massachussetts’ AG. The firm is one of the banks targeted in the lawsuit
Video and transcript below:
the offer ends january 3rd. ho, ho, ho! particularly hard hfr-litlately but it’s been a good week for wells. wells is also in the news today, one of the banks targeted in a new lawsuit by the massachusetts attorney general. a lot to talk about. and we’re thrilled to welcome wells fargo ceo john stumpf. the power lunch is standing by with our mary thompson. take it away, mary. thank you, tyler. we’re here with john stumpf. you finished the integration. congratulations on that. i want to ask you about the news of the day. wells fargo is being sued for illegal and deceptive practices concerning foreclosures. how do you respond to that? i’ve not seen the complaint. we’ve worked hard which i think would be good for the country and housing. we can work through that better together than working it out incourt. iowa attorney general believes global massachusettscould participate in a global settlement if that happens. if it doesn’t happen, how much would it cost your bank if you had to settle with each one of these attorneys general? i really don’t know. it’s hard to anticipate what that might look like. but, again, our focus is oncoming to an arrangement, if it makes sense for both parties. again, i think that would be the right thing for housing and the country. can you tell us at all about the settlement talks that are currently occurring? even if massachusetts doesn’t agree or step in with the rest of the attorneys general, when we might accept a settlement between the two sides? i can’t say. still a wait and see. it’s been a long time. yes. talk about the housing market right now and where you see it as far as getting better, staying the same in 2012. i think the big thing for housing is finding stability. and one of the opportunities, i think, we have — first of all, the refinancing program, for those under water for a loan to value but have made their payments is a very good thing. we’re working out, rules are coming out. secondly, if we could find a way to take foreclosed housing and have that become not part of the sales process but maybe a rental pool, i think that also would provide a good stability in housing. housing still is challenged. it’s not going to be fixed next year. it’s still going to take some time. but i’m optimistic in the long run in housing. how about the mortgage business? you’re the largest mortgage servicer in the country. some of your bigger rivals, b of a and jpm saying maybe we’ll wind down that origination business. it’s not something — well, they’re taking a second look at it given the new regulations. is that an opportunity for you? it is, but selectively so. we like the mortgage business. we like serving customers. the financial traction the size of a house is probably the biggest financial transaction most consumers will ever have. if it’s important to them, it’s important to us. that’s something we’re going to want to focus on. what their exiting is a correspondent business. we’re being very thoughtful andcareful to make sure we do that business with the rightcorrespondent partners. and who would those be when you say the right correspondent partners? those are people whooriginate for their own and buy it from them. we want to make sure we do business with the right people doing the right kind of underwriting putting people in the right products and services and so forth. the other issue of course in the headlines effecting the banks are the problems in the euro zone. in the third quarter wells had $14 billion in gross exposure to euro zone countries. have you brought that exposure down at all since then? and what are the risks to yourbank in the event there is a deep recession in the euro zone or a breakup of the euro zone? the $14 billion is for all euro zone countries. you really need to focus on the troubled ones. the so-called five. the piigs depending how you want to put it. we’ll call it the five. the risk to country risk is less than surrounding. in the other credit we have out is trade finance. some of it’s secured by u.s. treasuries. we’re comfortable with that. the bigger risk for us is the secondary exposure what happens to the u.s. economy including we play an active role in the u.s. economy with our borrowers. but it’s not direct exposure. you have actually taken advantage of the problems that some of the euro zone banks are having. they’re deleveraging, selling some assets, you’ve bought loans from an irish bank. you’re said to be a bidder for an aviation business for rbs. what are they looking for when they sell these assets? what do you want to buy fromthem? we want value. we want things that make sense for us.we’re not looking to trade their problems to become our problems, but as they look to sell their u.s. denominated assets or dollar-denominated assets to other banks, we are clearly abuyer. but we’re very selective. just think of how we went aboutthe purchase on wakovia. it has to make sense financially. we’ll look at a lot of things, kick a lot of tires and see how it all turns out. we’re thrilled with it so far. if we get no more, that’s fine. if we get a substantial amount, that’s also fine. i want to stick with the euro zone theme in large part because s&p recently downgraded your bank as well as a number of other u.s. banks in part because of the negative outlook that they have for the u.s. as a whole. uh-huh. this put your rating below some of the banks in europe, which u.s. banks would argue are not as well capitalized. what’s your response to that rating cut and do you think s&p has it wrong? well, i would look at the ratings as a, you know, a barometer. and one organization’s view of value and of risk. i know this company as well or probably better than a rating agencies do. i’ve spent my whole career here. we’ve never had stronger capital, liquidity’s never been better. i like the way we are in the market. so to calibrate it againstcompanies and other businesses in europe that i don’tunderstand as well, it’s hard for me to understand. but i do know this, one of the real benefits in the u.s. today is we have a strong banking community and group of banks. that’s important for the country. it’s important for our recovery. look in europe today. that’s not the case. and it’s very difficult for them. so as we go upon this recovery and participate in it, strong banks are critical element to that. one question, how much more is this going to cost you, the rating cut? is it going to cost you anymore? our spreads moved almost not at all. it really doesn’t have a big impact there. i want to go back to one of the issues that was a focus of the banks just this last fall on the issue of the debit card fee. what did you learn from bank of america’s decision to go out there with that fee immediately? well, we planned early onto do some tests — we’re always testing things, mary. that’s what’s interesting and unique about us. we don’t ever make a big move one way or another. we are testing. and we learn from our customers, they don’t want that. they want to do it another way. so at the end of the day, it’s about value, about convenience, about helping customers succeed financially.and we’ll do it in a different way. there are other ways to help add value. one last question. i know a number of our viewerswould be curious about this. what is the situation as far as loan growth? wells has actually seen some loan growth in the last couple of quarters. what is the fourth quarter look like? what do you anticipate for 2012? we had $13.5 billion growth in our fourth quarter in our portfolio. we don’t give guidance, but wehave boots on the street. we are hungry to make loans. we have lots of liquidity and we are finding opportunities. okay. john, i want to thank you for spending time with us. tyler, i’m going to toss it back to you. but we want our viewers to know that we will continue our conversation with john stumpf, ceo of wells fargo.that will be available on the web later today.
Baupost's investment process involves "never-ending" gleaning of facts to help support investment ideas Seth Klarman writes in his end-of-year letter to investors. In the letter, a copy of which ValueWalk has been able to review, the value investor describes the Baupost Group's process to identify ideas and answer the most critical questions about its potential Read More