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Wells Fargo & Co. (NYSE:WFC) chairman Richard Kovacevich went as far as calling the Obama administration's new bank stress tests for Troubled Asset Relief Program recipients "asinine" in a March 13 speech at Stanford University in California. He also warned the tests will provide opportunities for short sellers to drive down bank stocks and potentially damage the confidence in financial institutions even more, according to Bloomberg. "We do stress tests all the time on all of our portfolios," Kovacevich said. "We share those stress tests with our regulators. 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." Wells Fargo slashed its dividend by 85% to create a capital cushion of $5 billion and has started paying back Treasury's $25 billion TARP investment. Kovacevich argues that Wells didn't need the capital, but was forced to take Treasury's TARP investment. Further, he states that the bank might not have had to cut its dividend if TARP wasn't imposed on the bank, according to Bloomberg:
As Clusterstock's Joe Weisenthal states:
In addition to stress tests, which are meant to determine how much capital the U.S.'s 19 largest banks will need to weather the recession, banks receiving TARP funds have been asked to:
Kovacevich isn't the only one miffed over the management of TARP. Several banks are equally upset over TARP's growing requirements. Northern Trust Corp. (NYSE:NTRS) recently returned Treasury's investment after controversy erupted over its sponsorship of a golf tournament. Additionally, Goldman Sachs Group Inc. (NYSE:GS), Signature Bank of New York (NYSE:SBNY), IberiaBank of Louisiana, and TCF Financial (NYSE:TCB) of Minnesota have announced intentions to return TARP funds as soon as possible. Other banks such as Park Avenue Bank (NYSE:PABK) and Johnson Bank of Racine, Wisconsin are simply rejecting the funds they originally requested. Nonetheless, analysts reportedly believe the government has reason to do the stress tests as those money center banks may need $450 billion in new capital to cover mounting losses in mortgage-related and other portfolios. And although the stress tests pretty much show that the government will be there to offer these banks the capital they need, many of them see the stress tests as an addition to the government's growing list of conditions put on financial institutions after accepting TARP funds. The stress tests will take into account the value of all the illiquid assets on the balance sheets. And if a bank is shown to be insolvent, some argue that instead of providing the banks with extra capital the institutions could potentially be closed down and shareholders wiped out, Adam Posen, deputy director of the Peterson Institute for International Economics, told The Deal's Bill McConnell. There have been several reports about which banks might be singled out as the "most stressed." Citigroup Inc. (NYSE:C) ,Bank of America Corp. (NYSE:BAC) and Fifth Third Bank (NYSE:FITB) were singled out by Peter Cohan of Peter S. Cohan & Associates. - Maria Woehr Also see:
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Sounds like Dick Kovacevich had a Howard Beale moment and this observer is thankful that he finally took the gloves off and expressed his anger and frustration with Little Timmy Geitner. Of course it is ridiculous to have 12 week stress tests which allow the shorts to spread their insidious rumors in an effort to tank the share price.Dick seems apoplectic at being forced to cut the dividend which is a large component of the total return for long term shareholders that management strives to provide. At least there is one bank Chairman with a pair. Too bad he is not pictured, "Dealscape" used a stock photo of CEO John Stumpf instead which is so analagous as to how the press has covered the Bank Crisis.