WELLS FARGO WILL FAIL

At the start of the financial crisis in 2007, the top four retail banks — Bank of America, Citigroup, JPMorgan Chase and Wells Fargo — were printing money by turning residential mortgages into securities of various toxic flavors and selling them to investors. In many cases, these securities were deliberately fraudulent, part of a breakdown in the legal protections against such activities put in place during the Great Depression.

Wind the clock forward to 2012 and three of these four behemoths have largely withdrawn from the secondary market for home loans, especially loans purchased from other banks. Weighed down by litigation and other concerns, Bank America, Citi and JPMorgan have been withdrawing from most aspects of the market for real estate finance other than writing new business for their own portfolios and then only profitable business.

But the last of the four banks, Wells Fargo, has thrown caution to the wind and is aggressively writing new business in both residential and commercial real estate loans. The $1.3 trillion asset lender is now the dominant player in the secondary market for mortgage loans and has actually managed to grow its market share and assets when other large banks are shrinking their books.

More