A tiny item this week in The Wall Street Journal that quoted Wells Fargo (WFC) Chairman and former CEO Dick Kovacevich caught my eye. From what felt like a long interview, the Journal pulled the nugget that Kovacevich acknowledged mistakes Wells made in home-equity loans. That Wells erred there is old news. What was more interesting was Kovacevich’s condemnation of “stated income” or “low documentation” loans, an industry practice he says Wells Fargo eschewed — and paid for in the form of lost market share.
I happen to be a loyal Wells Fargo banking customer. When I bought a mortgage in 2004 I distinctly remember checking with Wells and being surprised they weren’t remotely competitive for the kind of loan I wanted, a 30-year loan whose rate would be fixed for five years and then adjust. I didn’t give it much thought at the time, figuring instead the big bank simply was slow. As it happens, I wasn’t buying an exotic or overly risky mortgage, and I went with one of the few other major banks that has weathered the credit storm fairly well, a unit of JP Morgan Chase (JPM), which, according to my mortgage broker, was making a major effort in the so-called 5/1 ARMs that I was seeking. Still, by and large Wells just wasn’t playing aggressively in that end of the market — and not at all in the riskier part of the market. Its prudence already has been rewarded in the form of a less beaten up stock price.
There’s also a lesson here. When the dust settles, will investors be more interested in what Countrywide Financial (CFC) has to say or Wells Fargo? That one’s easy.