Wells Fargo: Housing crisis
worst since Great Depression

NEW YORK (Reuters) — Wells Fargo & Co, which has sidestepped many of the credit and liquidity problems plaguing U.S. mortgage lenders, believes the nation's housing slump is the worst since the Great Depression and is far from over, Chief Executive John Stumpf said.

Stumpf nevertheless said the second-largest U.S. mortgage lender and fifth-largest U.S. bank is well-positioned to ride out the storm, despite expectations for "elevated" credit losses from home equity loans into 2008.

He also said the bank has only "minimal" exposure to collateralized debt obligations and asset-backed commercial paper conduits that have caused well over $40 billion of write-downs industrywide, with more expected.

"We have not seen a nationwide decline in housing like this since the Great Depression," Stumpf said at a Merrill Lynch & Co banking conference in New York.

"I don't think we're in the ninth inning of unwinding this," he continued, using a baseball reference. "If we are, it's an extra-inning game."

Stumpf's comments came hours after Barclays Plc announced a 1.3 billion pound ($2.7 billion) write-down for losses on securities linked to U.S. subprime mortgages.

Other banks to announce write-downs topping $1 billion this month include Bank of America Corp, Bear Stearns Cos , Citigroup Inc HSBC Holdings Plc, Morgan Stanley and Wachovia Corp.

At San Francisco-based Wells Fargo, rising delinquencies and defaults led to a mere 4 percent increase in third-quarter profit, the slowest pace in more than six years, though net income totaled a record $2.28 billion.

Wells Fargo said the credit losses related more to the severity of bad loans than the frequency.


Stumpf pointed out that Wells Fargo never offered some exotic mortgages, such as adjustable-rate loans that let borrowers pay less than the principal due, that have caused problems for rivals.

Countrywide Financial Corp, the largest U.S. mortgage lender, did, and is cutting up to 12,000 jobs after a $1.2 billion third-quarter loss. Its chief executive, Angelo Mozilo, in July lamented "home price depreciation almost like never before, with the exception of the Great Depression."

Mozilo was born in 1938, around when the Depression was ending, while Stumpf was born in the mid-1950s.

Stumpf said the current downturn resulted in part from "froth, unscrupulous lenders, (and) borrowers who got too greedy," and called it the "steepest, fastest, most prolonged decline in residential real estate" in a long time.

"Once we reach the bottom, the (housing) inventory is going to come off pretty quickly," he said. "Once the secondary market gets comfortable with (credit) ratings again, and once you think you've hit bottom, I think we'll see some turnaround, and it could be faster than we've seen in the past."

Wells Fargo shares fell 34 cents to $32.91 in morning trading on the New York Stock Exchange. Through Wednesday, they had fallen 6 percent this year, while the 24-member Philadelphia KBW Bank Index was down 17 percent.