Ed Schultz“Big” Ed Schultz (personally, I prefer to call anyone with that moniker “Eddie Baby”), on his shiny new show on MSNBC, just welcomed Senator Chris Dodd (D – Troubled Assets) to kvell about the fact that Wells Fargo, a bank that received about 25 billion in bailout bucks, has announced a record quarterly profit of $3 billion.

Now, I don’t claim to be any sort of phynancial expert. When I hear the name of that bank, I think of that awful song we had to sing back in elementary school chorus… that song that harked back to a more innocent day in the life of capitalism:

O-ho the Wells Fargo Wagon is a-comin’ down the street,
Oh please let it be for me!
It could be curtains!
Or dishes!
Or a double boiler!
Or it could be
Somethin’ special
Just for meeeeeeee!

Wells Fargo logoAnyway, I’m not sure the bank’s profits are something to celebrate. Sure, I suppose it’s better than seeing them lose money. But what did Wells Fargo do with their share of the TARP funds?

For one thing, they bought Wachovia. (I’m going to miss that name. It always made me think of the axiom, “What do big banking corporations do? They Wachovia.”) We all know what happens when one bank buys another. This is from a November article in the Charlotte Observer, the paper in Wachovia’s erstwhile home town:

The San Francisco-based bank has started to lay out where it will get $5 billion in annual cost cuts, about 10 percent of combined expenses. High-level plans have been drafted for key businesses, and Wells is working to impose its own lending policies, according to a Wells presentation this week.

Wells is likely to cut jobs in Charlotte but hasn’t provided specifics. It signaled this week, however, that it will pare areas such as corporate and investment banking. For Wachovia employees, long in the driver’s seat during their bank’s decades of acquisitions, it’s an unfamiliar position – following another bank’s procedures for implementing a merger.

While much is still to be determined, Wells has roughly fleshed out where it plans to get its $5 billion in savings. About $3 billion will come from cuts in overlapping businesses such as general banking and investment banking. Another $1.4 billion will come from reductions in duplicative corporate functions, including jobs and expenses such as marketing and director fees. About $0.6 billion would come from office and branch closures and other cuts.

Yippee! Cost cutting! Job cutting!

And then there’s this piece from today’s Seattle Times:

The earnings news does not clearly signal a recovery of the banking sector. Even Wells risks projecting too much optimism — it hasn’t really absorbed the financial death star that is Wachovia. At that former banking giant, a great institution run into the ground on subprime gambles, most of the huge layoffs have yet to fall in its very vulnerable headquarters city of Charlotte. Crosstown rival Bank of America faces continued weakness across the board, especially from its misbegotten merger with Merrill Lynch (Marry in haste, repent at leisure). Wells is trumpeting its big mortgage share gain from Wachovia, but it will be interesting to see how it manages Wachovia’s troubles. (And Wells is a TARP recipient, $25 billion of your money).


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