John David Wright, Esq. 

Chief Regulatory Counsel 

Wells Fargo Bank, N.A. 

MAC A0194-274 

BOARD OF GOVERNORS 

OF" THE 

FECERAL RESERVE SYSTEM 

WASHINGTON, D. Co 20551 

November 20, 2008 

45 Fremont Street, 27th Floor 

San Francisco, California 94105 

Dear Mr. Wright: 

ADDRESS OFFICIAL CORRESPONDENCE 

TO THE BOARD 

This is in response to the request by Wells Fargo Bank, National 

Association ("WF Bank"), Sioux Falls, South Dakota, for a temporary exemption 

from section 23A of the Federal Reserve Act and the Board's Regulation WI to 

allow WF Bank to extend credit to its affiliate, Wachovia Bank, National 

Association ("Wachovia Bank"), Charlotte, North Carolina, as described below. 

On October 3,2008, Wells Fargo & Company ("WFC"), 

San Francisco, California, entered into an agreement to acquire Wachovia 

Corporation ("Wachovia"), Charlotte.2 On October 20, Wachovia Bank became an 

affiliate of WF Bank for purposes of section 23A and Regulation W by virtue of 

WFC's acquisition of approximately 39.9 percent of the voting stock ofWachovia. 

WF Bank proposes to extend up to $17 billion to Wachovia Bank to meet 

Wachovia Bank's anticipated funding needs during the transition period until WFC 

acquires the remainder of Wachovia. When WFC completes this acquisition, 

Wachovia Bank will become a "sister bank" of WF Bank, and transactions 

I 12 U.S.C. § 371c; 12 CFR part 223. 

2 This transaction was approved by Board order dated October 12,2008, and 

statement on the approval dated October 21. This letter confirms the exemption 

granted to WF Bank on October 22. 
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between the banks will be exempt by statute from the quantitative limits and 

collateral requirements of section 23A and Regulation W.3 

Section 23A and Regulation W limit the amount of "covered 

transactions" between a bank and any single affiliate to 10 percent of the bank's 

capital stock and surplus, and limit the amount of covered transactions between a 

bank and all its affiliates to 20 percent of the bank's capital stock and surplus.4 

"Covered transactions" include a purchase of assets by a bank from an affiliate, a 

loan or extension of credit by a bank to an affiliate, an issuance of a guarantee by a 

bank on behalf of an affiliate, and certain other transactions.5 In addition, the 

statute and regulation require a bank to secure its extensions of credit to, and 

guarantees on behalf of, affiliates with prescribed amounts of collateral. 6 

Moreover, section 23A and Regulation W specifically authorize the 

Board to exempt transactions or relationships from the requirements of the statute 

and rule if the Board finds such an exemption to be in the public interest and 

consistent with the purposes of section 23A.7 The Board previously has indicated 

that the twin purposes of section 23A are (i) to protect against a depository 

institution suffering losses in transactions with affiliates and (ii) to limit the ability 

of a depository institution to transfer to its affiliates the subsidy arising from the 

institution's access to the federal safety net. 8 

3 Because WFC controls more than 25 percent ofWachovia, Wachovia and its 

subsidiaries are affiliates ofWF Bank for purposes of section 23A. 12 CFR 

223.2(a). Transactions between two insured depository institutions are exempt 

from the quantitative limits and collateral requirements of Regulation W, however, 

if the same company controls 80 percent or more of the voting securities of each 

institution. 12 CFR 223.41 (b). When WFC acquires the remainder of Wachovia, 

it will control more than 80 percent of the voting securities of WF Bank and 

Wachovia Bank, and covered transactions between the two banks will be eligible 

for this exemption. 

4 12 U.S.C. § 371c(a)(1); 12 CFR 223.11 and 223.12. 

5 12 U.S.C. § 371c(b )(7); 12 CFR 223.3(h). 

6 12 U.S.C. § 371c(c); 12 CFR 223.14. 

7 12 U.S.C. § 371c(f)(2); 12 CFR 223.43. 

8 67 Federal Register 76560 (Dec. 12,2002). 
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The extensions of credit by WF Bank to Wachovia Bank would be 

covered transactions under section 23A and Regulation W. Because WF Bank 

proposes to extend credit to Wachovia Bank in amounts that exceed its quantitative 

limits under the statute and rule, WF Bank's proposal requires an exemption from 

the Board. 

The Board believes that a temporary, conditional exemption from 

section 23A and Regulation W for the proposed extensions of credit would be 

consistent with the purposes of section 23A and in the public interest. Importantly, 

the proposed covered transactions are between two insured depository institutions, 

and WF Bank has agreed to several conditions that will help ensure that they are 

conducted in a safe and sound manner. First, WF Bank will limit its extensions of 

credit to Wachovia Bank under this exemption to $17 billion, which constitutes 

less than 40 percent of WF Bank's capital stock and surplus. In addition, the 

extensions of credit will be fully secured by collateral with a current market value 

of at least 200 percent of the amount of the extensions of credit. The collateral will 

consist of a designated pool of first-lien auto loans, first-lien residential mortgage 

loans, and municipal securities. No low-quality assets (as defined in Regulation 

W) will serve as collateral for the extensions of credit. WF Bank also will mark to 

market the extensions of credit daily, and the extensions of credit will be subject to 

daily margin maintenance requirements. Moreover, WFC will reimburse WF Bank 

promptly for any losses sustained by the bank in connection with the extensions of 

credit. WF Bank and WFC also must remain "well capitalized" as defined in the 

Office of the Comptroller of the Currency's prompt corrective action regulation 

and the Board's Regulation y.9 The exemption will expire when WFC acquires 

the remainder of Wachovia. 

Given the fragility in the financial markets and the benefits to 

financial stability of allowing WF Bank to provide liquidity to Wachovia Bank on 

a transitional basis, granting the exemption would have significant public benefits. 

For the reasons stated above, and in light of all the facts presented, the proposed 

extensions of credit appear to be consistent with the purposes of section 23A and in 

the public interest. Accordingly, the Board has granted the requested temporary 

exemption, subject to the conditions and limits discussed above. 

This determination is specifically conditioned on compliance by WFC 

and WF Bank with all the commitments and representations they made to the 

Board in connection with the exemption request. These commitments and 

9 See 12 CFR 6.4 and 12 CFR 225.2(r). 
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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. This determination is based on the specific facts and 

circumstances of the transactions described in your correspondence and this letter. 

Any material change in those facts or circumstances, or any failure by WFC or WF 

Bank to observe any of its commitments or representations, may result in a 

different determination or in a revocation of the exemption. 

Sincerely yours, 

Robert deY. Frierson 

Deputy Secretary of the Board 

cc: Federal Reserve Bank of San Francisco 

Federal Reserve Bank of Richmond 

Federal Deposit Insurance Corporation 

Office of the Comptroller of the Currency