Wells Fargo Quarterly Results Boost the Dow 247 points to 8038!

The Obama Spring rally found a second wind today thanks to a Wells Fargo earnings report that benefited the big financial stocks. With the spring rally is now in its fifth straight week, even the Financial Times front-paged President Obama talking about "glimmers of hope." Yet I wondered: how could Wells Fargo, in this terrible economy, announce a record high quarterly profit of $3 billion? By borrowing at zero per cent and doling out refi's at five? That's a ton of refi's. I didn't get it. Then I stumbled on this post by a guy I don't know - well, he's a goldbug - who knows more about finance than I do and puts questions I'd like to see put to Fargo's Howard Atkins (minus the vitriol):

DaveInDenver said:
This is beyond belief. Wells Fargo's 1st quarter profit forecast goes way beyond any fairy tale ever written in history. Here's what they say: Chief Financial Officer Howard Atkins says the results "reflected strength in our traditional banking businesses, strong capital markets activities, and exceptionally strong mortgage banking results." Mr. Atkins, you are an outright liar and fraud.

Hmmm..."strength in traditional banking?" Who is borrowing that money and making their interest and principal payments on time? Has there been a bunch of businesses started no one is aware of yet? Are existing businesses expanding? You've got to be kidding me.

"strong capital markets activities." Where is this revenue coming from? Any big equity IPO's during Q1 that we missed? Corporate debt issuance was occurring, but at a very low rate and Wells Fargo is not a real player in that business. Mortgage securitizaton? I'm not aware of any. Please explain to me, Mr. Atkins, the source of your "strong capital markets acitivities."

"exceptionally strong mortgage banking results." This one is the most puzzling and troubling to me. We know, with hard data and facts, that home sales and mortgage issuance is plummeting every day. Where are the revenues coming from in this area? Mr. Marks goes on to cite that WFC's acquisition of Wachovia boosted their results. How on Earth can this be? Wachovia's balance sheet is mostly the kinds of subprime mortgage assets that are melting down to zero.

The only possible source of extraordinary revenues I can think of for WFC during Q1 would have been WFC's use of the massive amount of Treasury and Fed money extended to banks at little or no cost and being put to work in Treasury bonds and WFC earning the positive interest carry.

In fact, we know from hard data released every week that the very business activities that Wells says are creating massive profits are, in fact, melting down quickly in every corner of the U.S. and global economy.

For WFC to come out and make those claims is beyond fairy tale - it's outright fraud. And lest we forget, the beloved Warren Buffet owns over 10% of WFC, and thus de facto is standing behind this massive fraud. George Orwell is laughing uncontrollably in his grave now.

Thanks, Dave. Is anyone asking these questions? Is Fargo answering them? Here's one answer:

Wells Fargo’s revenue was boosted by its mortgage banking operations, as the company received about $190 billion in mortgage applications, a 64 percent jump from the fourth quarter. Roughly $83 billion of that volume came in March, when announced governmental programming sent interest rates tumbling. The majority of that was refinance applications with roughly 25 percent coming from home purchases.

And here's another:

Wells Fargo attributed the strong results to healthy lending margins driven by lower interest rates, fewer additional costs related to its purchase of Wachovia and a boom in mortgage activity.

Do these accounts satisfy anyone?

BTW, George Orwell's essay on Politics and the English Language is as timely today as when he wrote it in 1946. Dave may be thinking of Orwell's warning against the "invasion of one's mind by ready-made phrases (lay the foundations, achieve a radical transformation)" that "anaesthetize a portion of one's brain."

DaveInDenver was responding to Henry Blodget's article about why Dylan Ratigan left CNBC. Ratigan, the able host of CNBC's hot "Fast Money" show, says he left because

When you're dealing with systemic policy failures that have rendered a catastrophe the likes of which we've really never seen, the role of journalism is to ask questions of money and power from the broadest possible platform.

Ratigan has anti-fans who doubt his credentials as a journalist - see the other responses to Blodget's article - but for months he has been targeting bailouts that seemingly pick the pockets of taxpayers to benefit big bankers. This alone doesn't make him golden in my book, but I look forward to seeing what he does next.