The AP reported this afternoon that Wells Fargo
What's the number?
The key question now is: "How much capital will they be required to raise?" The answer to that may determine the means with which they do so. Although the idea is unpalatable, Wells may be forced to consider a conversion of the government's preferred shares into common shares. Indeed, if the bank were asked to raise $25 billion, for instance, it's not clear that private investors have the appetite to put that up (admittedly, that figure is probably well in excess of what authorities will ultimately require). Either way, existing shareholders would face dilution.
In any case, we're getting ahead of ourselves. Wells Fargo (along with Citigroup
The Oracle speaks out
Furthermore, Wells has a high-profile, highly credible defender in Warren Buffett, the CEO of Berkshire Hathaway
Is Buffett talking up his position? I've been a Buffett-watcher for a while, and I can't be sure, but it isn't in his habits. Who is more likely to be right -- the government or Buffett? Here, I have no hesitation in answering Buffett. The trouble is, the government's opinion is right de jure, and that could end up costing shareholders, Buffett included.
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Alex Dumortier, CFA has a beneficial interest in Wells Fargo, but not in any of the other companies mentioned in this article. Berkshire Hathaway is a Motley Fool Stock Advisor pick. Berkshire Hathaway is a Motley Fool Inside Value selection. The Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.