February 23, 2009

All banks with more than $100 billion in assets will be required under the Treasury's financial stability plan to submit to a financial "stress test" to determine whether they have enough capital to continue lending.Wells Fargo shares (WFC) are down more than 50 percent this year after a decline of 2 percent last year. The fear that shareholders could see their holdings diluted and dividends cut because of government bank-rescue efforts is a drag on Wells Fargo stock, as with many bank stocks.

Wells Fargo recorded a net loss of $2.55 billion in the fourth quarter when it added $5.6 billion to its reserves to cover future loan losses and prepare for its Wachovia Corp. acquisition completed at year-end. The Wachovia deal made Wells Fargo the fourth-largest U.S. bank by assets.Some investors are concerned that credit quality of Wachovia assets is much lower than expected. Upon the Wachovia deal's completion, Moody's Investors Service downgraded Wells Fargo's senior debt rating by two notches, to Aa3, with a negative outlook, which means it could lower it again.