After taxes, Wells Fargo wouldn’t pay a dime for Wachovia; also: Bad fuel bet grounds Northwest profits, and U.S. Bank is open to government investment

If the Wells Fargo-Wachovia deal were to close today, Wells Fargo would pay about $14 billion for the bank and save an estimated $19.4 billion in taxes. In other words, the Motley Fool writes, Wells Fargo wouldn’t pay anything. The IRS would essentially pay Wells Fargo more than $5 billion to take Wachovia. The tax benefit was sweetened last month by a rule change, which lifted limits on what a bank can annually write off after buying a distressed peer.

More Wells Fargo: Forget the Great Depression. The current economic crisis doesn’t even beat the 1980s. That’s what Wells Fargo chairman Richard Kovacevich had to say at an event in San Francisco Tuesday, Bloomberg reports. The banker said the 1980s economic crisis was “by far the worst” of his career. Kovacevich also said he supports the U.S. Treasury’s decision to buy stock in the nation’s largest banks, including Wells Fargo. He said it will be more effective than buying up bad loans and should help end the credit freeze “reasonably soon.”

A bad bet on fuel prices sank Northwest Airlines’ profits for the third quarter. The airline blamed fuel hedges for the $317 million loss it posted this morning. Without the hedges, the company would have made a profit of $93 million. Northwest locked in a fuel price over the summer when prices were high and showing signs of climbing. Economic uncertainty drove down the price of oil and jet fuel, meaning Northwest is paying more today than it would have without the bet.

U.S Bank CEO Richard Davis Tuesday wouldn’t rule out joining its larger rivals in accepting a cash infusion from the government, Bloomberg reports. Speaking on a conference call with investors, Davis said some of the money from a government investment could be used for acquisitions. The Minneapolis-based bank has so far avoided much of the fallout from subprime-mortgage-backed securities. Still, profits for the last quarter were down 47 percent, compared with a year ago.

Do you have an inside scoop or news tip about a Minnesota company? Spotted something interesting in your RSS reader? Drop Business Agenda a note at dhaugen [at] minnpost [dot] com.

You can also learn about all our free newsletter options.

No comments yet

Leave a Reply