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Wells Fargo Playing Hardball With New York This October

NEW YORK ( TheStreet) -- Justice delayed sucks, if you think you got away with it.

Wells Fargo (WFC - Get Report), which dominates the mortgage market and has sometimes taken one-third of it, must have figured it was past the market's problems after signing off on the $25 billion national industry settlement in 2011, dealing with charges against mortgage holders during and right after the Great Recession.

But ambitious New York Attorney General Eric Schneiderman wants the bank back in court, claiming it didn't meet obligations under the settlement, which included loan modifications, principal reductions and short sales.

To a banker, loan modifications and principal reductions are among the hardest words in the language to read. They seem like a violation, and the bank is always the victim.

This time, Wells Fargo is the only bank before the New York bar. Its co-defendant, Bank of America (BAC - Get Report), had its New York suit dropped after promising to do better. Wells Fargo disputes the new charges.

While Bank of America came out of the 2008 crash with low-grade assets like Merrill Lynch and Countrywide Financial, Wells Fargo was able to pick off Bank of America's healthier North Carolina rival, Wachovia, for a market price of $14.8 billion. Bank of America had tried to buy Wachovia for $2.1 billion, a good bank to make up for the bad banks it was taking.

History has shown Wells Fargo did some smart business there. Wachovia gave it a nationwide reach and put it into the money center major leagues.

Thus, among all the largest banks, Wells Fargo is the only one that has generally traded at a substantial premium to its book value since the crash. It currently trades at about 1.47 times book, which is more than double the ratio of Bank of America, still struggling to hold .70. ( JPMorgan Chase (JPM - Get Report) and Goldman Sachs (GS - Get Report) trade at about their book value; Citigroup (C - Get Report) at .77 times book.)

I like to call book value the "Mendoza Line" of banking, because it's a barely acceptable figure, like the Pirate shortstop Mario Mendoza, who hit .200 yet stayed in the show for a decade. (Go Pirates.)

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