As one of the country’s top two mortgage originators and distributors, Wells knew that steering clear of subprime and securitised lending would mean ceding valuable business to more aggressive competitors.
“You can imagine the pressure on us. We were the number one mortgage originator and we had to give up market share and earnings,” Mr Stumpf says. “[But] it is more difficult to attend a party and leave before the trouble starts than not to attend the party at all. Part of my job here is to make sure we don’t attend parties that make no sense.”
With his laid-back delivery and penchant for catchy metaphors – traits he shares with Warren Buffett, his occasional bridge opponent and Wells’ largest shareholder – the 54-year-old Mr Stumpf makes Wells’ escape from the crisis sound easy. The reality is that the lender’s bold counter-cyclical call saved the company from the worst US housing bust since the Great Depression.
To be sure, Wells did suffer some $3bn in credit losses and has a sizeable portfolio of home equity loans that could continue to lose money for some time. But while some rivals such as Citigroup and Wachovia were forced to raise billions of dollars to close the gaping holes in their balance sheet and others such as Countrywide Financial had to sell themselves to avoid extinction, Wells’ relative financial health turned it into the hottest property in US banking.