Wells Fargo 2007 Annual Report Download - page 88

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Note 4: Federal Funds Sold, Securities Purchased under Resale Agreements
and Other Short-Term Investments
The table below provides the detail of federal funds sold,
securities purchased under resale agreements and other
short-term investments.
(in millions) December 31,
2007 2006
Federal funds sold and securities
purchased under resale agreements $1,700 $5,024
Interest-earning deposits 460 413
Other short-term investments 594 641
Total $2,754 $6,078
Federal Reserve Board regulations require that each of our
subsidiary banks maintain reserve balances on deposits with
the Federal Reserve Banks. The average required reserve
balance was $2.0 billion in 2007 and $1.7 billion in 2006.
Federal law restricts the amount and the terms of both
credit and non-credit transactions between a bank and its
nonbank affiliates. They may not exceed 10% of the bank’s
capital and surplus (which for this purpose represents Tier 1
and Tier 2 capital, as calculated under the risk-based capital
guidelines, plus the balance of the allowance for credit losses
excluded from Tier 2 capital) with any single nonbank
affiliate and 20% of the bank’s capital and surplus with all
its nonbank affiliates. Transactions that are extensions of
credit may require collateral to be held to provide added
security to the bank. (For further discussion of risk-based
capital, see Note 26.)
Dividends paid by our subsidiary banks are subject to
various federal and state regulatory limitations. Dividends
that may be paid by a national bank without the express
Note 3: Cash, Loan and Dividend Restrictions
approval of the Office of the Comptroller of the Currency
(OCC) are limited to that bank’s retained net profits for the
preceding two calendar years plus retained net profits up to
the date of any dividend declaration in the current calendar
year. Retained net profits, as defined by the OCC, consist
of net income less dividends declared during the period. We
also have state-chartered subsidiary banks that are subject
to state regulations that limit dividends. Under those provisions,
our national and state-chartered subsidiary banks could have
declared additional dividends of $2.2 billion at December 31,
2007, without obtaining prior regulatory approval. Our
nonbank subsidiaries are also limited by certain federal
and state statutory provisions and regulations covering the
amount of dividends that may be paid in any given year.
Based on retained earnings at December 31, 2007, our non-
bank subsidiaries could have declared additional dividends
of $3.7 billion at December 31, 2007, without obtaining
prior approval.
For resale agreements, which represent collateralized
financing transactions, we hold collateral in the form of
securities that we have the right to sell or repledge of
$1.1 billion at December 31, 2007, and $1.8 billion at
December 31, 2006, of which we sold or repledged
$705 million and $1.4 billion, respectively.