Wells Fargo 2008 Annual Report Download - page 128

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Wells Fargo is participating in the Federal Deposit
Insurance Corporation’s (FDIC) Temporary Liquidity
Guarantee Program (TLGP). The TLGP has two components:
the Debt Guarantee Program, which provides a temporary
guarantee of newly issued senior unsecured debt issued by
eligible entities; and the Transaction Account Guarantee
Program, which provides a temporary unlimited guarantee
of funds in noninterest bearing transaction accounts at FDIC
insured institutions. Under the Debt Guarantee Program, we
have $91.7 billion of remaining capacity to issue guaranteed
debt as of December 31, 2008. Eligible entities will be
assessed fees payable to the FDIC for coverage under the
program. This assessment will be in addition to risk-based
deposit insurance assessments currently imposed under
FDIC rules and regulations.
The aggregate annual maturities of long-term debt
obligations (based on final maturity dates) as of December 31,
2008, follow.
(in millions) Parent Company
2009 $ 16,799 $ 53,893
2010 20,829 42,433
2011 22,487 38,630
2012 11,159 23,622
2013 4,846 15,228
Thereafter 57,906 93,352
Total $134,026 $267,158
The interest rates on floating-rate notes are determined
periodically by formulas based on certain money market
rates, subject, on certain notes, to minimum or maximum
interest rates.
As part of our long-term and short-term borrowing
arrangements, we are subject to various financial and
operational covenants. Some of the agreements under
which debt has been issued have provisions that may limit
the merger or sale of certain subsidiary banks and the
issuance of capital stock or convertible securities by certain
subsidiary banks. At December 31, 2008, we were in compliance
with all the covenants.
Note 15: Guarantees and Legal Actions
Guarantees
Guarantees are contracts that contingently require us to make
payments to a guaranteed party based on an event or a
change in an underlying asset, liability, rate or index.
Guarantees are generally in the form of securities lending
indemnifications, standby letters of credit, liquidity
agreements, written put options, recourse obligations,
residual value guarantees and contingent consideration. The
following table shows carrying amount, maximum risk of loss
on our guarantees, and for December 31, 2008, the amount
with a higher risk of payment.
(in millions) December 31,
2008 2007
Carrying Maximum Higher Carrying Maximum
amount risk of payment amount risk of
loss risk loss
Standby letters of credit $ 130 $ 47,191 $17,293 $ 7 $12,530
Securities and other lending indemnifications — 30,120 1,907 ——
Liquidity agreements 30 17,602 — ——
Written put options 1,376 10,182 5,314 48 2,569
Loans sold with recourse 53 6,126 2,038 —2
Residual value guarantees — 1,121 — ——
Contingent consideration 11 187 — 67 246
Other guarantees — 38 — 1 59
Total guarantees $1,600 $112,567 $26,552 $123 $15,406
The amounts shown in the table above as having a higher
payment risk represent the amount of exposure for which
there is a high likelihood that we will be required to make a
payment or perform under the guarantee. Such payment may
not result in a loss and, accordingly, the higher payment risk
column is not an indication of loss probability. The risk of
payment or performance is considered high if the underlying
assets under the guarantee have an external rating that is
below investment grade or an internal credit default grade
that is equivalent to a below investment grade external rating.
In rare circumstances for which neither external nor internal
ratings are available, we determine the current status of
payment risk based on whether historical experience
indicates a higher likelihood of performance. We assumed
substantially all of the guarantees in the table above in the
Wachovia acquisition.