Wells Fargo (NYSE: WFC) Announces Plans to Repay TARP, All National Banks Have Exited

It’s lonely when you are the last person to leave the party.

Earlier today, Citigroup (NYSE: C) announced plans to repay the TARP funds the government gave them last year, to bail out the troubled instituion amidst the credit crisis. Bank of America (NYSE: BAC) announced similar plans just two weeks ago, and Goldman Sachs (NYSE: GS), JPMorgan Chase (NYSE: JPM), and Morgan Stanley (NYSE: MS) repaid their TARP funds earlier this year.

Now, in late breaking news, the last national bank with TARP funds, Wells Fargo (NYSE: WFC) has announced plans to repay the entire $25 Billion it received in the Troubled Asset Relief Program.

Similar to the plans laid out by Citi and BofA, Wells Fargo plans an equity offering to raise capital, in an effort to appease regulators. The firm has noted that some of the money would come from a $10.4 billion stock sale, though has not detailed where the remaining funds will come from. The equity will, in effect, dilute the current shareholders, and may cause the stock price to sink in coming days as investors quantify just how much their claim on profits has diminished as a result of this initiative.

Wells Fargo, which is based in San Francisco, said it had received authorization from the Treasury Department and banking regulators to leave the Troubled Asset Relief Program, and was clearly anxious to do so quickly, to remove the stigma of being the last firm to repay TARP. Wells Fargo has a long and storied history, along with strong support by super investor Warren Buffet.

John Stumpf, the bank’s president and chief executive commented that “TARP stabilized our country’s financial system when confidence in financial markets around the world was being tested unlike any other period in our history. Its success also generated financial returns for taxpayers, including $1.4 billion in dividends paid to the U.S. Treasury by Wells Fargo.” He then added “Now we’re ready to fully repay TARP in a way that serves the interests of the U.S. taxpayer, as well as our customers, team members and investors.”

Although the TARP program drew significant criticism, perhaps history will judge it kindly. Each of the institutions that received funds paid them back, early, with interest. In total, the taxpayers made money. Although government should not be in the banking industry (historically, government run banks underperform their counterparts significantly) this may have been the right policy, at the right time.