Wells Fargo CEO says California in 'financial ruin'
Sacramento Business Journal - by Mark Calvey San Francisco Business Times
Wells Fargo CEO John Stumpf said Thursday that California’s large budget deficit means state services will have to be cut.
“The state of California is in financial ruin,” Stumpf told those attending a statewide microfinance lenders’ conference at Stanford University. “The budget deficit in California is staggering.”
Stumpf said the recession is taking a toll on some of the loans made to creditworthy borrowers who lost their jobs and fell behind on payments.
“Today we’re charging off loans to people we should have made loans to,” said Stumpf, reiterating that the bank avoided many of the exotic mortgages offered by rivals.
Stumpf’s comments were not intended as guidance on how the San Francisco bank is faring in the second quarter, a bank spokesman said.
The state of California is struggling with a growing budget deficit after tax and financial measures failed at the ballot box this month. Earlier this year, the state delayed tax refunds and other payments due to what State Controller John Chiang called a “cash crisis not seen since the Great Depression.”
The state recently asked the federal government for assistance in guaranteeing California’s short-term borrowings, fearing that it could not raise the money standing on its own credit.
On the national economy, Stumpf said this is his “third rodeo” or downturn. He pointed to the deep recession of the early 1980s when the prime rate hit 21 percent and the struggling economy of the late 1980s that counted most the nation’s largest thrifts and major banks in Texas among its casualties. He says the economic fallout from the dot-com bust and Sept. 11 terrorist attacks was significant but not as harsh as the earlier recessions.
“This one feels different,” Stumpf said. “It feels different in the respect that the whole world is in recession.”
Stumpf said microfinance — typically small loans to individuals to start or grow businesses — could be one tool to help the economy recover. He noted that recent jobs at Bay Area companies with 19 employees or fewer have grown 14 percent while larger companies shed workers.
Wells Fargo has been active in supporting the region’s microfinance lenders and related organizations.
“It doesn’t take a lot of money to help these individuals achieve their dreams,” Stumpf said.
Well this is very deceptive of Stumf; Wells Fargo is the owner of one of largest predatory servicers in the county - ASC. Wells Fargo is profiting from all of these foreclosures.
Posted by: Simonee | June 22, 2009 at 02:36 AM