Wells Fargo (NYSE: WFC) Makes Final Payment on TARP Funds

Wells Fargo (NYSE: WFC) announced Wednesday that they’ve completely paid off the TARP funds it received from the federal government, which amounted to $25 billion.

The U.S. Treasury acquired $25 billion of series D preferred stock in October 2008 as the means to raise the money for Wells Fargo under TARP’s Capital Purchase Program.

Included in the payback were an additional $131.9 million in dividends accrued during that period of time. That brings the total amount of dividents paid to the Treasury to $1.441 billion.

Wells Fargo said that by paying off the TARP funds they will eliminate $1.25 billion in dividends they would have had to pay if they hadn’t paid back the funds.

The fourth-largest bank in America paid the funds back by using excess liquidity as well as raising an additional $12.25 billion in a common stock offering; something they had resisted because of how it would dilute the value of the stock, but which they believe was the least intrusive, and better than remaining under the government thumb.

Even so, the U.S. Treasury still holds close to 110 million warrant shares which it can exercise at the price of $34.01 a share.

President and CEO of Wells Fargo, John Stumpf said in a statement:  “With repayment of the TARP investment, we can intensify our focus on what we do best: helping consumers and businesses achieve financial success.”
 
Although Wells Fargo is putting a good face on the overall situation, they in fact resisted receiving the TARP funds in the beginning, saying they were sound and healthy and didn’t need a bailout.

“We thank the U.S. government and taxpayers for their support of our financial system at a critical time for our nation. Since the TARP investment was accepted in October 2008, Wells Fargo has supplied more than $640 billion in credit to consumers and businesses, helped more than 400,000 households preserve their home ownership and continued our leadership as America’s top lender to small businesses for a seventh consecutive year. This focus will continue as we do our part to help our nation’s economic recovery,” gushed Stumpf.

The government felt differently about it citing the vulnerability of the bank because of its huge number of adjustable-rate mortgages it held in its portfolio when it acquired the struggling Wachovia.