The Real Story Behind Wells Fargo's Vegas Trip

Home Builder with CSR

Hank Paulson sat at a large table at the White House across from the CEO's of all the major banks. He offered them each approximately $25billion, but explained that they all must take it. The CEO of Wells Fargo protested saying they didn't need the money and were perfectly solvent. Mr. Paulson stared him down and the CEO acquiesced. He did it thinking that if it would help the overall economy, why not and $25 billion doesn't suck. Remember though that he didn't want it and had his arm twisted to take it.

Now we hear that Wells Fargo was going to take it's top mortgage guys out for a week of partying in Vegas. This is common in corporate America for top sellers to be rewarded. You should see the trip s my insurance buddy gets taken on. Vegas pales in comparison to the insurance industry's trips to Europe. Anyhow, the news got out and the American public was appalled. "What is a company that took bailout money doing spending it on this?" we all chimed.

Now, President Obama is capping CEO salaries to $500k. Where do you think the CEO of Wells Fargo is going to go? Will he go to a company in the insurance industry that will offer him $20m per year or will he stay with Wells Fargo? Remember, Wells Fargo did not need the bailout. They were doing fine. This bodes well for their CEO. This guy obviously knows what he is doing to navigate the country's largest bank through rough waters. Now the government is going to push him out and all other talented and skilled CEO's.

We all are saying that this is the end of capitalism, but it really seems to be. They forced Wells Fargo to take money they didn't need. Now they are forcing the CEO out. What is next.? This is the wholesale hostile takeover of the banking industry guised as a way to stimulate the economy.

When I first heard about the enormous pay these guys were getting, I cringed. When I hear about these lavish trips that they take, I cringe. When I read about $1 million office renovations, I cringe. But then I step back and remember that these are private businesses. The very thing that I champion. They are free to be stupid with their money. In fact, it doesn't matter to me at all. If a CEO wants to buy an $87,000 rug, why should that bother me. If his Board of Directors is O.K. with it than so am I. He runs a company that employs thousands of people. Sure I would like to have that kind of money, but I don't. I am not mad that he does. I won't be sucked into that kind of class envy that destroys the talent and motivation of others.

Remember that it was the government that bailed them out. We should have let them fail. No one is too big to fail. Do we have such little faith in our capitalism that it can't withstand the failure of a few large companies? Let's not let Uncle Sam trick us into being mad at a few CEO's for their overspending. Remember who the real overspender is. Class envy is a powerful motivator. Our government is using it allot these days. It is akin to terrorists using religion to muster up  compassion for its cause when religion has nothing to do with it's cause, but power does. Do not be fooled.



Ed Tse
richvalley - Florence, TX

Job well done!

Our government bureaucrates don't know who needs money or what plans are effective, but they are good at giving out "mandate."  You don't need my opinion, just mind you that a pre-capital system is working on "mandate," not a free market mechanism.

I would like to post your article at a Chinese forum if you could give me your permission.



Feb 04, 2009 06:17 AM
Mike Frazier
Carousel Realty of Dyer County - Dyersburg, TN
Northwest Tennessee Realtor

I cannot believe Wells Fargo did not need the money. I am seeing lots of foreclosures of houses financed by Wells Fargo.

Feb 04, 2009 06:55 AM
Es r
CSR - Huntington, TX

Ed Tse - You have my permission with gratitude.

Mike. - You can google it. It is all over the place. here is a snippet from Cramer's Mad Money.

"Cramer recommended looking at two banks that do not need TARP money; Wells Fargo and JP Morgan. In fact, Wells Fargo is doing so well, that it refused to take TARP funds until Treasury Secretary Henry Paulson forced it to. Cramer would buy Wells Fargo or JP Morgan on any pullback, since these banks are the least likely to be hurt by government reforms."

Feb 04, 2009 07:09 AM
David Holzmann
Holzmann & Associates - Mountain View, CA

Well said, Chris!  I couldn't have said it better.

Shame on the Democrat-led Congress and Senate for writing up the bailout bill, shame on all those who voted in favor of it - from ALL parties, and shame on President Bush for signing it into law.  Now, shame on President 0bama and the more-heavily-slanted Congress and Senate for suggesting that those who were pressured into taking their ill-advised bailout money should not recognize those within their company who are making significant positive contributions to keep them financially solvent.

Feb 04, 2009 09:06 AM
Terry Haugen STAGE it RIGHT! 321-956-2495
Stage it Right! - Melbourne, FL

From all I've read recently Wells is in pretty bad shape.  We all must remember that the former republican president is the one that fostered what has been happening to the financial sectors regarding the bailouts.  The fact that Paulson was a former Goldman CEO, lends a lot to the argument that he and bush just basically gave money to anyone who held out their hands, most of which were the Wall Street thugs.  The difference between that and our current administration is that formerly there were no restrictions, constraints or oversight 

Feb 04, 2009 09:40 AM
William Feela
Realtor, Whispering Pines Realty 651-674-5999 No.

I have a hard time also believing that Wells Fargo didn't need the money...but I do believe that they didn't want Government meddling in thier affairs.  As for the Astronimical parties that the Ins. industry gives...They also could cut back to keep premiums lower.  I know they will say that is only a drop in the bucket...yea...What's their point?  Extravegence is extravagence!

Feb 04, 2009 09:44 AM
David Holzmann
Holzmann & Associates - Mountain View, CA

Terry - you said,

"We all must remember that the former republican president is the one that fostered what has been happening to the financial sectors regarding the bailouts. The fact that Paulson was a former Goldman CEO, lends a lot to the argument that he and bush just basically gave money to anyone who held out their hands, most of which were the Wall Street thugs. The difference between that and our current administration is that formerly there were no restrictions, constraints or oversight"

Apparently you missed this:

"New Agency Proposed to Oversee Freddie Mac and Fannie Mae

By Stephen Labaton September 11, 2003

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

”There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,” Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan.


Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

And you also missed this:

Federal Housing Enterprise Regulatory Reform Act of 2005

The United States Senate May 25, 2006

Sen. John McCain [R-AZ]:

Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac – known as Government-sponsored entities or GSEs – and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

I urge my colleagues to support swift action on this GSE reform legislation.

Did you happen to notice why there has been "no restrictions, contraints, or oversight?"

Yeah, I thought not.

There's a reason why the biggest beneficiaries of Freddie and Fannie largesse fought against "restrictions, contraints, and oversight."

In case you're still failing to make the connection between 0 and the corruption in the GSEs, see this video of a "family" event.

Feb 04, 2009 11:24 AM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

If I recall back in October, the government was planning on buying Wachovia for its prefered (too big to fail bank) citi group. Wells came in and bought Wachovia with out government money. Citi threatened to sue Wells.

I will say this about Wells, they are one of the few banks these days that are showing up at closings with money.

Feb 04, 2009 02:42 PM
Es r
CSR - Huntington, TX

Terry - You are correct. Bush and Paulson started this mess and I disagreed with them for doing it. Let's not get bogged down with justifying one side because the other was wrong. As far as oversight, I think you are missing the point entirely. The government should not be bailing anyone out. It should never be in the position to oversee it's money in this way. The government has a much worse track record of managing money than does almost any private industry. It is appalling that anyone would think that the government can manage this bailout. As far as oversight, take a look at the HOPE project started bay Rep. barney Frank (D). This program was created last year to assist 400,000 struggling homeowners. A bad idea if you ask me. Since last year the program has only helped 25 homeowners. This is not an exception, this is the norm. This is that standard effectiveness of the government. Anyhow this gets funnier. Rep. Frank is now holding hearings to fix the problem.Read this:

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Committee Chairman Barney Frank (D-Mass.) has scheduled votes today on a bill that would allow HUD to loosen pricing restrictions and reduce the amount of losses banks would have to take in some instances to participate. Legislation that created the program was "drafted badly" in a rush to insure taxpayers against losses, Frank said.

Changes are needed "as quickly as possible," said Burns, who runs residential housing programs at the Federal Housing Administration under HUD.

Do you start to see the problem. Rep. Franks says they messed up because they were rushing out another bullshit bill to fool people like you into thinking that they are doing something. Now that they realize that they screwed up, they are going to change the bill "as quickly as possible". Let me guess that the revisions won't be very effective either. You can't trust the government, not their morals or their competence, only their greed and capacity to manipulate us. Look how good their restrictions, constraints, and oversights were with Bernie Madoff.

William- you also miss the boat. You may be right about the insurance industry, but it is not yours or my call to make (thank God). It is theirs, private industry. It scares me that you would judge their spending and assume that you know better. It scares me that you feel your premiums could be reduced if they spent in a manner closer to how you would spend it. . The point is for us to have restraint and wisdom. The wisdom to know what we do not know and the restraint to only pass judgment on what we do know. The insurance industry lavishes it's top producers with these junkets to Europe. They do that to retain talent. That talent makes them money and it is that money that allows them to get more clients. With more clients comes more income and economies of scale and your premium comes down. Now, that is just one possible scenario of how those lavish trips make sense for them. I don't claim to know exactly how it all works, so I would never tell them how to run their business. I have the wisdom to know that I do not know and I have the restraint to step back from my own envy of their money and my own desire to control others. I let them do their thing and I do mine. I vote and pass judgment with my dollar and most businesses seem to respond well to that. I meant no offense and I thank you for your comment.

Feb 04, 2009 06:39 PM
Kevin Robinson
Twin Falls, ID
Fractional Developer

Nice blog. We are crossing a line that we may never recover from. It is very scary unless you are a champion of socialism which I am not.

Feb 05, 2009 02:18 AM
Bob Cumiskey
A1 Connection Realty, Inc. - Sun City Center, FL
US Army Retired, Your Sun City Center, Florida ~ Realtor

Great job on this one.  I remember back when Wells Fargo wanted to buy up Wachovia and the Citigroup got upset.  I have an account with Wachovia which I plan to close because of this.  I don't like Citigroup or Citibank. I've done business with them in the past. 

Feb 05, 2009 03:08 AM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Bob, Wells Fargo is buying Wachovia not Citigroup. Wells won Citigroup lost even though they got upset. I don't like Citigroup either. I would have preferred them broken up instead of bailed out. Wells is a good bank.

Re: Bernie Madoff the SEC is responsible for ignoring claims of ponte scheme and fraud for 8 years.

Feb 05, 2009 03:26 AM
Jon Wnoroski
America's 1st Choice RH Realty Co., Inc. - Green, OH
Summit County Realtor

Interesting post.  I had heard that about Wells Fargo and still can't understand why Paulson would force bailout money on a firm that did not need or want it.  Wells Fargo certainly wouldn't have hurt the economy by not taking the money and the point made that they were doing fine says they were one of the bright spots in a down economy.  From the public's point of view the bailout money was supposed to help stabilize troubled institutions. 

Feb 07, 2009 11:03 PM
Es r
CSR - Huntington, TX



I think the money was forced on them strictly for PR purposes. Paulson didn't want any one single bank to be singled out as weak, so he decided that all must take the money , weak or not. That way, the public wouldn't make one of them out to be a pariah.

Feb 09, 2009 06:22 AM