Wells Fargo 2008 Annual Report Download - page 105

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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,
2008 2007
Federal funds sold and securities
purchased under resale agreements $ 8,439 $1,700
Interest-earning deposits 39,890 460
Other short-term investments 1,104 594
Total $49,433 $2,754
Federal Reserve Board regulations require that each of our
subsidiary banks maintain reserve balances on deposit with
the Federal Reserve Banks. The average required reserve
balance was $2.6 billion in 2008 and $2.0 billion in 2007.
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
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
Note 3: Cash, Loan and Dividend Restrictions
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 $471 million at December 31,
2008, 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, 2008, our non-
bank subsidiaries could have declared additional dividends
of $3.2 billion at December 31, 2008, without obtaining
prior approval.
On October 28, 2008, the Parent issued to the United
States Department of the Treasury 25,000 shares of its
Fixed Rate Cumulative Perpetual Preferred Stock, Series D
without par value. Prior to October 28, 2011, unless the Parent
has redeemed the Series D Preferred Stock or the Treasury
Department has transferred the Series D Preferred Stock to
a third party, the consent of the Treasury Department will be
required for the Parent to increase its common stock dividend.
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 $1.6 billion
at December 31, 2008, and $1.1 billion at December 31, 2007,
of which we sold or repledged $343 million and $705 million,
respectively.