Wells Fargo hit with scathing criticism

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The Atlantic offers a scathing indictment of the banking industry, arguing that sophisticated investors now regard banks as little more than black boxes.

"More and more, the people in the know don't trust big banks either," it notes.

One expert was quoted saying, "There is no major financial institution today whose financial statements provide a meaningful clue" about its risks."

A recent survey by Barclays Capital in fact found that more than half of institutional investors "did not trust how banks measure the riskiness of their assets."

To prove its point, the authors took a look at the Wells Fargo annual report--and came away somewhat alarmed.

"These disclosures wouldn't earn anyone's trust. They are littered with language that says nothing, at length. The report is riddled with progressively more opaque footnotes—the financial equivalent of Dante's descent into hell. Indeed, after the friendly introduction, the report ought to bear a warning to the inquisitive reader intent on truly understanding the bank's financial positions: 'Abandon all hope, ye who enter here.' "

The bank did tell the authors that it devotes great resources to fulfilling all reporting requirements, a statement that generates little doubt with me. It no doubt fulfills the letter of the law, though that may less than a direct tell-all.

All in all, it may be little unfair to pick on Wells Fargo when it does little different than other big banks. The issue may be one of packaging. Most companies today see the annual report as a marketing exercise, and the information is presented accordingly. Still, you can't argue with the main point: The industry still suffers from a lack of transparency. Undercutting the argument to a degree is the fact that stocks are rallying. Some might marshal this fact as support for the proposition that investors are growing more confident in banks, and de facto, their disclosures.

For more:
- here's the long article