Bankers are lemmings. If there is anything that terrifies them, it's standing apart from the crowd; once Bank of America (NYSE:BAC) and Citigroup (NYSE:C) announced that they were repaying the government's TARP investments, it was only matter of time before Wells Fargo (NYSE:WFC) did the same. In order to fund this repayment, Wells has already priced a $10.65 billion equity offering at $25 a share. After all the equity raisings and asset shuffling, here is how the capital ratio league table for major commercial banks now stands:

Company Name

Tier 1 Common Equity Ratio %
(Sept. 30, 2009)

Citigroup (NYSE:C) -- Pro forma


Bank of America (NYSE:BAC) -- Pro forma


JPMorgan Chase (NYSE:JPM)


US Bancorp (NYSE:USB)


Wells Fargo (NYSE:WFC) -- Pro forma


PNC Financial Services (NYSE:PNC)


Source: Bank of America presentation, company press releases.

To jump or not to jump?
Let's be fair to Wells, its instincts are less lemming-like than most of its peers, so was repaying TARP now a smart decision? (To show rodents the same fairness as bankers, readers should know that lemmings' mass suicide is a myth fostered by a 1958 Disney documentary).

In my judgment, Wells' equity raising was overdue -- the market has been favorable, and the California lender was significantly below its peers in terms of its Tier 1 common equity ratio (it remains at the low end of the range). As far as repaying TARP, I'm not convinced Wells should do so immediately; on the other hand, it's more rational on their part than on that of B of A or Citi, since they were never in the same kind of predicament. That Wells should have felt pressure to repay TARP because its two weaker competitors beat them to the post -- instead of the opposite -- is another bizarre twist in this crisis.

One good TARP deserves another
As the last of the major banks to announce its repayment of TARP, Wells Fargo is closing a chapter of the credit crisis, but who's to say that it won't necessitate a rewrite? I think there is a small -- but non-zero -- probability that one of the major banks will have to go back hat in hand to the government in 2010 to ask for another dollop of "extraordinary" assistance. Even if that doesn't happen, I can think of a number of other possible catalysts (commercial real estate, sovereign debt crisis, etc.) that could trigger a correction in the shares of weak financials next year. Buyer beware!

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Alex Dumortier, CFA, has no beneficial interest in any of the companies mentioned in this article. Motley Fool has a disclosure policy.