Chapter 1382: Wells Fargo was set up

In fact, Wells Fargo does not always have more than $10 billion in liquid funds.

Previously, it had long positions in currencies such as the Japanese yen and British pound, and short positions in the US dollar. The funds used to enter the market were basically the principal used.

The main purpose was simply to preserve the value of the funds.

However, this time, in order to take over the assets of the Mellon Financial Group, the funds were withdrawn within a short period of time, and other financial companies were sought for cooperation in the form of leveraged financing.

However, these businesses are relatively secretive, and the partners will not go around shouting about them, lest they ruin their reputation and no company will dare cooperate with them in the future.

Douglas Master and others certainly don't know.

And over the years, Wells Fargo has merged with so many banks that the assets originally held by those banks have been transferred to Wells Fargo's asset management department.

Xia Yu once had a detailed discussion with Peter Lynch about Wells Fargo's plans, and the latter has been following them.

So over the years, non-performing loans have been disposed of at low prices to stop losses in a timely manner, and some lending partnerships that have no strategic significance have been recovered after the loans have expired and will not be renewed.

Wells Fargo's funds are used more to provide personal consumer loans and small loans, and then to provide financial support to companies within the Polaris Consortium.

However, most of the companies in the Polaris Consortium are highly promising companies excavated by Xia Yu, and without the premise of mergers and acquisitions, they generally only provide initial expansion funds, and these companies can form a virtuous internal cycle.

Therefore, in order to prevent funds from being idle, Wells Fargo has invested a lot of funds in the asset management department to increase the value of assets.

Futures, stocks, bonds, etc. are all involved.

This time, in order to take over the assets of the Mellon Group, Wells Fargo sold a lot of funds in advance and recovered a lot of funds.

Of course, there is no need to announce these operations.

Therefore, this made Douglas Master misjudge that Wells Fargo's capital chain was really tight!

Douglas Master's method was simple, rude and clumsy, but it was very effective.

That was to get the media to question the capital chain of Wells Fargo and directly make a big deal out of it.

It caused panic among depositors and pushed Wells Fargo to the forefront!

After all, since the failure of the Boon Square Bank in 1982, there have been a succession of bank failures, and the collapse of the large bank Continental Illinois Bank has pushed the wave of failures to a peak, triggering a series of adverse effects.

In particular, in May of this year, the failure of the Maryland Savings and Loan Institution ultimately resulted in a loss of 185 million US dollars to the Maryland State Deposit Insurance Fund and taxpayers.

Then, less than a month later, a number of banks in Ohio went bankrupt, which directly led to the bankruptcy of the Ohio State Deposit Insurance Fund!

The banking situation in other states was also relatively chaotic.

As a result, by August, the US Federal Savings and Loan Insurance Corporation's original insurance fund of more than 20 billion US dollars was down to only 4.6 billion US dollars.

As a result, the chairman of the Federal Savings and Loan Insurance Corporation, Gary, tried to gain support in Congress for the company's capital injection!

Therefore, the nerves of many depositors have long been on edge.

Early in the morning of November 15th,

the Cleveland News, the largest newspaper in the Cleveland area, published a news article questioning the huge business risks of Wells Fargo.

The report was not just off the cuff, but seemed to be well-founded.

The report also listed a series of recent acquisitions by Wells Fargo, which had consumed tens of billions of dollars and involved a very haphazard investment of assets.

The author questioned the business situation of Wells Fargo, which was the third largest bank in the United States but was still not listed...

The entire article was written in a worried tone, agitating and infectious.

That morning, after reading the newspaper, many readers in Cleveland were convinced.

Some relatively cautious depositors or companies began to apply for withdrawals.

The newspaper reporter, in turn, specially photographed a scene of a crowded crowd at a Wells Fargo branch in Cleveland.

That evening, the Cleveland Evening News put this photo on the front page and wrote a special report on this phenomenon.

At the same time, newspapers outside Ohio also reported the news with artificial promotion.

And in order to absolve themselves of responsibility as much as possible, these evening newspapers systematically reprinted the Cleveland News report directly.

After this set of small actions,

the matter quickly became a big deal!

In fact, when the Cleveland News reported the negative news about Wells Fargo, the branch manager in the Cleveland area reported the news to his superiors.

At around 9am on the 15th, Wells Fargo CEO, J. Michael (Jim) Sullivan, was informed.

In response, Sullivan called a meeting with his subordinates to discuss the matter.

The result of the discussion was that other branches within the state of Ohio would temporarily transfer funds to the Cleveland branch, while keeping the matter within the Cleveland area.

Wells Fargo headquarters would not specifically dispel rumours to avoid actively expanding the matter.

If it hadn't been such a big deal, he would have refrained from actively attracting the attention of the media from all over the country.

Yalman Simmons knew the media's mentality: sales are the most important thing, and they want to make everything as big as possible, because the consequences have nothing to do with them.

Of course, he didn't do nothing.

While keeping an eye on the situation, he went to the asset management department and asked them to increase asset sales that day, which brought in more than half a billion dollars.

This was the safest approach. After all, liquidity is the greatest backing!

When the banks in the Cleveland area were forced to close for the day that afternoon,

it was discovered that a total of more than 24 million US dollars in deposits had been withdrawn from the 17 branches in the entire city of Cleveland, including the larger towns below.

After seeing this statistic, Yalman Simmons's face was very serious.

As the evening wore on, and the evening papers in other regions reprinted the news, Yalman Simmons knew that things had gotten out of control!

Yalman Simmons had his think tank discuss countermeasures.

On the other hand, he went directly to the home of Peter Lynch, the chairman of Polaris Capital.

Now that the trouble was clearly aimed at the entire consortium, the decision on how to respond could only be made at the consortium level!

...

It was a little after 7:00 p.m. at Peter Lynch's home.

'…Chairman, this is the situation.'

'At present, the reports from the lower levels are that newspapers in 35 states have already reported negative news about us.'

'Although it is after hours, according to reports from employees at the lower levels, there are still many people queuing at our branch ATMs to withdraw money. I think tonight our ATMs will probably be emptied!'

'This incident was most likely done by the Cleveland Consortium!'

Armand Simmons reported to Peter Lynch with a grave face and expressed his guess.

Peter Lynch nodded slightly and asked after a long pause, 'Armand, how much liquid capital does the bank have now?'

'Although we have consumed a lot of it during this period of time, I have been asking the asset management department to sell the previously invested bonds and stocks every day, which has brought back a lot of capital.'

'As of 6 pm tonight, our bank still has 4.7 billion US dollars in liquid capital!'

Yalman Simmons reported the situation truthfully.

Peter Lynch frowned slightly, did not say anything, picked up the phone on the desk and made two consecutive outgoing calls.

The people who answered the phone were the presidents of Northern Trust Bank and Toronto-Dominion Bank of Canada.

After the call, Peter Lynch said, 'For the time being, we can rest assured that Northern Trust Bank and Toronto-Dominion Bank can lend a combined total of 60 billion US dollars at any time.'

Yalman Simmons let out a sigh of relief.

With tens of billions of dollars in liquidity, it really wasn't a problem.

He could last for a relatively long time, and during that time, he could also continue to let the asset management department sell funds.

In this way, Wells Fargo's cash flow should be able to be stabilized.

'Arman, you go and stabilize the emotions of the company's employees. It's too late to deal with it tonight. I'll think about it tonight and make arrangements tomorrow!' Peter Lynch instructed Arman Simmons.

'Okay, Chairman, I won't disturb you then.'

'I'll go back first,'

said Arman Simmons, getting up and leaving.

While Peter Lynch was trying to figure out a rough response plan before reporting the situation to Xia Yu, his encrypted phone at home rang.

When he answered the call, it was indeed his boss Xia Yu calling to ask for details.

Peter Lynch reported the situation to Xia Yu as it was, and then added his own proposal, but it was directly rejected by Xia Yu.

And Xia Yu proposed a response plan that made Peter Lynch feel proud.

Or, it should be said that it was a counterattack plan!

Since the Cleveland Consortium was behind the scenes, questioning Wells Fargo's tight capital chain and trying to drag Wells Fargo into a whirlpool.

Just denying the rumours won't work, it won't convince everyone, and the bank will still lose deposits.

So just punch straight and show everyone whether Wells Fargo's capital chain is really tight or not!