Buffett Likes Wells' TARP Patience

The hastiness of Citigroup and Bank of America, however, is vastly different from the patience seen coming from Wells Fargo.

Recently, the Wells' top representative insisted that his firm's failure to pay back the TARP money isn't an issue of its weakness. Rather, the bank's reimbursement delay is due to its moral obligation to its shareholders. CEO John Stumpf explained that the company wants to repay the taxpayers' money. However, rather than exiting as quickly as possible, Wells is more focused on doing so in "a shareholder-friendly manner." When Wells frees itself from TARP, it wants to make sure that not only the government and taxpayers are paid back, but that the firm's shareholders have something to show for their troubles.

With a persuasive individual like Buffett as one of the firm's shareholders, this delay is hardly surprising. Earlier this year, the Oracle explained that an injection of additional shares would deal a sharp blow to the firm's stockholders. Although the move may ultimately help Wells pay back some, if not all, of its outstanding obligations to the government, issuing additional common equity will both decrease earnings power and increase the number of shares outstanding.

For Buffett, a Wells secondary would prove devastating. According to a Sept. 30 filing, Berkshire Hathaway boasted a 7% stake in the bank valued at $9.2 billion, making Buffett the bank's largest shareholder. Interestingly, not only is his position in the bank massive, but the recent filing shows that this is an increase from previous quarters.

Obviously, Buffett is not only confident that Wells will be able to pay back TARP on its own terms, but the firm has a bright, strong future ahead of it. For his sake and for the sake of all future customers and shareholders of Wells Fargo, this is one bet the Oracle has to get right.

-- Written by Don Dion in Williamstown, Mass. >>See our new stock quote page.

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