This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

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), 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), 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) and Goldman Sachs (GS) trade at about their book value; Citigroup (C) 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.)

Stock quotes in this article: WFC, BAC, JPM, C, GS, PB, AFCB, FIBK 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,501.65 -12.72 -0.08%
S&P 500 1,876.29 -3.26 -0.17%
NASDAQ 4,131.2570 -30.2010 -0.73%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs