Wells Fargo 2010 Annual Report Download - page 94

An investment in the Company involves risk, including the
possibility that the value of the investment could fall
substantially and that dividends or other distributions on the
investment could be reduced or eliminated. We discuss below
and elsewhere in this Report, as well as in other documents we
file with the SEC, risk factors that could adversely affect our
financial results and condition and the value of, and return on,
an investment in the Company. We refer you to the Financial
Review and “Forward-Looking Statements” sections and
Financial Statements (and related Notes) in this Report for more
information about credit, interest rate, market, litigation and
other risks and to the “Regulation and Supervision” section of
our 2010 Form 10-K for more information about legislative and
regulatory risks. Any factor described below or elsewhere in this
Report or in our 2010 Form 10-K could by itself, or together with
other factors, adversely affect our financial results and condition.
Refer to our quarterly reports on Form 10-Q filed with the SEC in
2011 for material changes to the discussion of risk factors. There
are factors not discussed below or elsewhere in this Report that
could adversely affect our financial results and condition.
Risk Factors
RISKS RELATING TO CURRENT ECONOMIC AND MARKET
CONDITIONS
Our financial results and condition may be adversely
affected by difficult business and economic conditions,
particularly if home prices continue to fall or
unemployment does not improve or continues to
increase. Our financial performance is affected by general
business and economic conditions in the U.S. and abroad, and a
worsening of current business and economic conditions could
adversely affect our business, results of operations, and financial
condition. For example, significant declines in home prices over
the last several years and continued high unemployment have
resulted in elevated credit costs and have adversely affected our
credit performance, financial results, and capital levels. If home
prices continue to fall or unemployment does not improve or
rises we would expect to incur higher than normal charge-offs
and provision expense from increases in our allowance for credit
losses. These conditions may adversely affect not only consumer
loan performance but also commercial and CRE loans, especially
those business borrowers that rely on the health of industries or
properties that may experience deteriorating economic
conditions. A deterioration in business and economic conditions,
which may erode consumer and investor confidence levels, also
could adversely affect financial results for our fee-based
businesses, including our mortgage, investment advisory,
securities brokerage, wealth management, and investment
banking businesses.
Financial and credit markets may experience a
disruption or become volatile, making it more difficult
to access capital markets on favorable terms. Financial
and credit markets have experienced unprecedented disruption
and volatility during the past several years. While market
conditions have stabilized and, in many cases, improved, a
disruption in, or worsening of, financial and credit market
conditions, or increased volatility in financial and credit markets,
may adversely affect our ability to access capital markets on
favorable terms and could negatively affect our liquidity. We may
raise additional capital through the issuance of common stock,
which could dilute existing stockholders, or further reduce or
even eliminate our common stock dividend to preserve capital or
in order to raise additional capital.
Enacted legislation and regulation, including the Dodd-
Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act), as well as future legislation and/or
regulation, could require us to change certain of our
business practices, reduce our revenue, impose
additional costs on us or otherwise adversely affect our
business operations and/or competitive position.
Economic, financial, market and political conditions during the
past few years have led to new legislation and regulation in the
United States and in other jurisdictions outside of the United
States where we conduct business. These laws and regulations
may affect the manner in which we do business and the products
and services that we provide, affect or restrict our ability to
compete in our current businesses or our ability to enter into or
acquire new businesses, reduce or limit our revenue in
businesses or impose additional fees, assessments or taxes on us,
intensify the regulatory supervision of us and the financial
services industry, and adversely affect our business operations or
have other negative consequences.
For example, in 2009 several legislative and regulatory
initiatives were adopted that will have an impact on our
businesses and financial results, including FRB amendments to
Regulation E, which, among other things, affect the way we may
charge overdraft fees beginning on July 1, 2010, and the
enactment of the Credit Card Accountability Responsibility and
Disclosure Act of 2009 (the Card Act), which, among other
things, affects our ability to change interest rates and assess
certain fees on card accounts. The impact of the Regulation E
amendments and the Card Act could vary materially due to a
variety of factors, including changes in customer behavior,
economic conditions and other potential offsetting factors.
On July 21, 2010, the Dodd-Frank Act became law. The
Dodd-Frank Act, among other things, (i) establishes a new
Financial Stability Oversight Council to monitor systemic risk
posed by financial firms and imposes additional and enhanced
FRB regulations on certain large, interconnected bank holding
companies and systemically significant nonbanking firms
intended to promote financial stability; (ii) creates a liquidation
framework for the resolution of covered financial companies, the
costs of which would be paid through assessments on surviving
covered financial companies; (iii) makes significant changes to
the structure of bank and bank holding company regulation and
activities in a variety of areas, including prohibiting proprietary
trading and private fund investment activities, subject to certain
exceptions; (iv) creates a new framework for the regulation of
over-the-counter derivatives and new regulations for the
securitization market and strengthens the regulatory oversight of
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