Let's welcome Wells Fargo to Florida economy
Wake up, good morning and welcome to 2009: Well, two matters this week. Wells Fargo & Co. CEO John Stumpf (show in photo) completed the acquisition of Wachovia Corp., and new housing numbers continue to show Tampa market prices spiraling south. So far, these two stories are being reported in the most mainstream news as separate events, but they are in fact inextricably linked. Let's look:
* First, California-based Wells Fargo finalized its purchase of Wachovia, which means Wells is now the $1-trillion-plus parent company of the No.1 bank by market share in the state of Florida. Warns a Jan. 1 Bloomberg News story: "Wells Fargo & Co.’s $12.7-billion acquisition of Wachovia Corp. faces immediate stress as economists predict home foreclosures will keep rising and some forecast unemployment in 2009 to reach a 26-year high."
* Second, the Standard & Poor’s/Case Shiller Home Price Index said this week that 14 of the 20 cities it surveys reported record one-year price declines in October. Over one month, prices from September to October, prices in Tampa and five other cities — Atlanta, Detroit, Minneapolis, Washington and Charlotte — posted record declines. Tampa prices were down 19.8 percent annually and 1.8 percent in October from September. Here's the monthly raw index data that show Tampa housing market prices peaked in July 2006 and have fallen, almost without interruption, ever since. The October 2008 price index for Tampa now is close to where the area housing market stood in September 2004.
Knit these two business stories together and the headline reads: "Well Fargo lands in Florida amid ongoing housing crisis." The bad news is we don't know how much lower Florida housing prices will fall, and whether that decline will inflict severe pain on Wells. The good news is Wachovia, on its own, was pretty tapped out. So the takeover by Wells brings a fresher management team with demonstrated skills (so far) to avoid major economic pitfalls, and deeper pockets to offer some innovation and staying power through what will assuredly be a difficult 2009-2010 Florida economy.
Check out Wells Fargo's impressive stock performance (ticker: WFC) here over 2008, a year that knocked about 50 percent of the capital stuffing out of most big U.S. banking companies. We like that resilience. In fact, Wells Fargo's own economists predict the recession will end in the latter half of this year.
Nationally, that forecast may hold water. I'm far less certain of the ability of Tampa Bay to snap back that quickly. Maybe the arrival of Wells can help make that happen a bit quicker.
(Photo courtesy of Wells Fargo.)
-- Robert Trigaux, Times Business Columnist