Wells Exiting TARP

Wells Fargo said Monday that it will repay the government’s entire $25 billion investment, made under the Troubled Asset Relief Program, after the San Francisco bank raises $10.4 billion in a stock offering.

Wells will raise another $1.35 billion by issuing stock in lieu of cash to certain compensation programs and raise another $1.5 billion through asset sales by the end of 2010. The remainder will come from the bank's internal resources.

As the New York Times points out, Wells officials were among the most reluctant of the big banks to take government aid in the first place last year.

But now, Wells CEO John Stumpf said, “TARP stabilized our country’s financial system when confidence in financial markets around the world was being tested unlike any other period in our history. Its success also generated financial returns for taxpayers, including $1.4 billion in dividends paid to the U.S. Treasury by Wells Fargo.”

Wells follows Citigroup and Bank of America in its exit of the program. Bank of America paid the government back earlier this month and Citi announced its plan to exit Monday morning.

“The stigma of TARP is becoming such an emotional, testosterone-driven thing that they want to be done with the government,” David H. Ellison, a portfolio manager at FBR Funds, which specializes in financial stocks, told the New York Times. “If Bank of America, if Citigroup can do it, then why not me, too?”

Citi will immediately issue $20.5 billion of capital and debt. That will include $17 billion of common stock, with an over-allotment option of $2.55 billion; and another $3.5 billion of equity units, with $2.8 billion of that being common stock purchase contracts and another $700 million being recorded as debt.

The Treasury will sell $5 billion in common stock it holds in a secondary offering. The Treasury would then sell its nearly 7.7 billion shares in a series of stock sales to institutional investors over the next several months.

Citi will also end a loss-sharing agreement with the government on about $250 billion in troubled mortgage and credit card assets.

Bank of America, having already paid back the government, is moving forward with its search for a CEO to replace Ken Lewis, who is retiring at the end of the year.

Robert Kelly, CEO of Bank of New York Mellon, who was said earlier this week to be the leading candidate for the BofA job, had dropped out of the running, according to reports in the Wall Street Journal and Bloomberg this morning.

The Journal, citing unnamed sources, said even though BofA paid back the government in part to free itself of pay restrictions, still couldn't come up with enough money to satisfy Kelly. Kelly had asked for $20 million a year.

Pay, though, wasn't the only stumbling block. The Journal reports Kelly wanted to walk through the door as chairman of the bank's board and CEO. BofA shareholders have voted to separate those two jobs.

Kelly's departure as a candidate makes it more likely the bank will fill Lewis' position with an insider, according to Bloomberg.

---