February 20, 2009

Mr. Paul R. Ackerman

Executive Vice President and Treasurer

Wells Fargo & Company

420 Montgomery Street

San Francisco, California 94104

Dear Mr. Ackerman:

This is in response to the request by Wells Fargo & Company (“Wells Fargo”), 

San Francisco, California, for temporary relief from the Board’s risk-based and 

leverage capital guidelines for bank holding companies (“Capital Rules”)1

Wells Fargo has acquired a substantial amount of deferred tax assets (“DTAs”) 

in the Wachovia acquisition that are dependent on future taxable income. The Capital 

Rules limit the amount of DTAs that a bank holding company may include in 

tier 1 capital to the lesser of (i) 10 percent of tier 1 capital or (ii) the amount of DTAs 

that the bank holding company expects to realize within one year of the calendar 

quarter-end date based on projections of future taxable income for that year 

(“look-forward period”).

in 

connection with its acquisition of Wachovia Corporation (“Wachovia”), Charlotte, 

North Carolina. 

2

 Wells Fargo requests approval to include in tier 1 capital 

the DTAs it has acquired in the Wachovia acquisition based on projections of future 

taxable income for a three-year look-forward period during 2009 and for a two-year 

look-forward period during 2010. The Board has broad authority to provide 

exemptions from the Capital Rules.

3

The Board has concluded that granting the limited look-forward periods

requested by Wells Fargo, while maintaining a DTA ceiling of 10 percent of 

tier 1 capital, would allow Wells Fargo to employ a substantial portion of the large 

amount of DTAs generated by its acquisition of Wachovia, which was a financial 

institution with significant financial difficulties. At the same time, look-forward 

 

 1

 12 CFR part 225, Appendices A and D.

2

 See 12 CFR part 225, Appendix A, § II.A.4.a. 3

 See 12 CFR part 225, Appendix A, § III.A.; 12 CFR part 225, Appendix D, § II.b.; 

12 CFR part 225, Appendix G, § 1(c).
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periods of two to three years provide reasonable certainty that Wells Fargo would 

obtain capital relief only for those DTAs that it would be able to use based on actual 

future earnings. Furthermore, granting Wells Fargo’s request would be consistent 

with relief from the Capital Rules that the Board has previously granted to other 

banking organizations that have acquired institutions with similar financial 

difficulties.4

 4

 See Board letter to James S. Keller, Esq. (The PNC Financial Services Group, Inc.), 

December 22, 2008.

 

In accordance with these determinations, the Board hereby grants Wells 

Fargo’s request to include in tier 1 capital -- from the consummation of its acquisition 

of Wachovia until January 1, 2010 -- an aggregate amount of DTAs equal to the lesser 

of (i) 10 percent of tier 1 capital or (ii) the sum of (A) the amount of DTAs acquired 

as a result of its acquisition of Wachovia that Wells Fargo expects to realize within 

three years of the date of the end of the calendar quarter in which the acquisition was 

completed, based on projections of future taxable income for those three years, plus 

(B) the amount of DTAs not related to Wachovia that Wells Fargo expects to realize 

within one year of the date of the end of the calendar quarter in which the acquisition 

was completed, based on projections of future taxable income for that year. From 

January 1, 2010, to January 1, 2011, Wells Fargo may apply a look-forward period of 

two years, rather than three years, in the manner described above for DTAs acquired 

as a result of the Wachovia acquisition. This temporary DTA relief will expire on 

January 1, 2011. 

These determinations are specifically conditioned on compliance by 

Wells Fargo with all the commitments and representations made to the Board in 

connection with this request. These commitments and representations are deemed to 

be conditions imposed in writing by the Board in connection with granting the request

and, as such, may be enforced in proceedings under applicable law. These 

determinations are also based on the specific facts and circumstances of the existing 

relationship between Wells Fargo and Wachovia. Any material change in those facts 

or circumstances or any failure by Wells Fargo to observe any of its commitments or 

representations may result in a different determination or in revocation of the 

exemptions.

Sincerely yours,

(signed)

Robert deV. Frierson

Deputy Secretary of the Board
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