Category: accounting gimmicks

Wells Fargo embraces mark to myth

An article today on Bloomberg by Jonathan Weil exposes the accounting games being played by one of Warren Buffett’s favorites, Wells Fargo. Several weeks ago the CFO of Wells appeared on CNBC claiming no exposure to subprime while commenting on a normalization of the yield curve as a positive for banks like Wells. He failed to mention rising default rates in non-prime. Specifically, one should question mortgage servicing rights valuations in an environment unlike anything we’ve ever seen. Especially when Buffett’s partner Charles Munger was questioning collateral values on bank balance sheets some 15 months ago.

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