Wells Fargo Spending Big on Workouts

Wells Fargo said it currently has more than 17,000 employees dedicated to dealing with loan workouts and foreclosures.
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SAN FRANCISCO (

TheStreet

) -- One of

Wells Fargo's

(WFC) - Get Report

biggest costs besides bad debt may be ensuring that more debt doesn't go bad.

During a conference call to discuss

first-quarter results on Wednesday, an analyst asked management to estimate the "environmental costs" of dealing with troubled debt -- employee compensation, legal costs, appraisal costs and other operational expenses involved with loan workouts and foreclosures.

CEO John Stumpf replied simply: "They are a lot."

He didn't follow up with a single estimate, though he noted that there are 17,400 employees working on loan modifications in Wells Fargo's residential mortgage business alone. (That doesn't include commercial loans and real estate, or other areas where Wells is working to mitigate loan-losses.) As of the end of 2008, Wells had 276,000 employees.

CFO Howard Atkins went on to say that the combined cost of handling foreclosures and performing loan workouts is up $250 million from a year ago, and $150 million to $170 million above the 2009 average.

"That is going to stay high for a short period of time," he added.

Wells Fargo shares were down 1.6% at $33.16 in afternoon trading. Volume of 63.7 million compared to the issue's three-month trailing daily average of 44 million.

-- Written by Lauren Tara LaCapra in New York

.