NEW YORK (MNI) – The following are excerpts from a statement issued
Wednesday by Moody’s:

Moody’s Investors Service downgraded the long-term ratings of Wells
Fargo & Company (holding company senior debt to A2 from A1) and of its
major subsidiaries including Wells Fargo Bank N.A. (rating on the bank
for deposits to Aa3 from Aa2). The actions conclude a review for
downgrade announced on June 2, 2011. The outlook on the long-term senior
ratings remains negative.

The downgrades result from a decrease in the probability that the
U.S. government would support the bank, if needed. Moody’s believes that
the government is likely to continue to provide some level of support to
systemically important financial institutions. However, it is also more
likely now than during the financial crisis to allow a large bank to
fail should it become financially troubled, as the risks of contagion
become less acute. Moody’s is therefore lowering the amount of support
it incorporates into Wells Fargo’s ratings to levels reflected prior to
the crisis.

The ratings affected are as follows:

Wells Fargo & Company: Moody’s downgraded the supported long-term
senior debt rating to A2 from A1. The Prime-1 short-term rating was
affirmed as was the unsupported hybrid ratings issued by or guaranteed
by Wells Fargo & Company. (Junior subordinated debt rated at Baa1
(hyb)). The holding company senior debt ratings now incorporate one
notch of uplift due to systemic support, down from two notches
previously. The outlook on the supported ratings is negative and the
outlook on the unsupported hybrid ratings is stable.

Wells Fargo Bank N.A.: Moody’s downgraded the long-term bank
deposit and senior bank debt ratings to Aa3 from Aa2 and the short-term
Prime 1 ratings was affirmed. The bank financial strength rating (BFSR)
of C+ was also affirmed, and the banks’ corresponding baseline credit
assessment (BCA) or unsupported rating, remains unchanged at A2. The
bank deposit and senior debt ratings now incorporate two notches of
uplift due to systemic support, down from three notches previously.
Moody’s also affirmed the hybrid rating guaranteed by Wells Fargo Bank
N.A. at A3 (hyb). The outlook on the supported ratings is negative and
the rating on the unsupported ratings is stable.

—

RATINGS RATIONALE

Moody’s continues to see the probability of support for highly
interconnected, systemically important institutions as very high,
although that probability is lower than it was during the financial
crisis. During the crisis, the risk of contagion to the U.S. and global
financial system from a major bank failure was viewed as too great to
allow such a failure to occur — a view borne out in the aftermath of
the Lehman failure. This led the government to extend an unusual level
of support to weakened financial institutions and Moody’s to incorporate
the expectations of such support in its ratings. Now, having moved
beyond the depths of the crisis, Moody’s believes there is an increased
possibility that the government might allow a large financial
institution to fail, taking the view that contagion could be limited.

Moody’s decision to assign a negative rating outlook reflects the
possibility it may further reduce its systemic support assumptions in
the future as a consequence of the process set in motion by the
enactment of the Dodd-Frank Act.. Under the rules recently finalized by
the FDIC, the orderly liquidation authority included in Dodd-Frank
demonstrates a clear intent to impose losses on bondholders in the event
that a systemically important bank such as Wells Fargo was nearing
failure. If fully implemented, the provisions of Dodd-Frank could
further lower systemic risk by reducing interconnectedness among large
institutions and could further strengthen regulators’ abilities to
resolve such firms.

However, the final form of several critical components of
Dodd-Frank intended to reduce such interconnectedness, such as
resolution plans or changes to the over-the-counter derivatives market,
are still pending.

There is also no global process yet in place whereby regulators
could resolve a global financial company such as Wells Fargo in an
orderly fashion. As a result, Moody’s believes that it would be very
difficult for the U.S. government to utilize the orderly liquidation
authority to resolve a systemically important bank without a disruption
of the marketplace and the broader economy.

The principal methodologies used in rating were “Bank Financial
Strength Ratings: Global Methodology” published in February 2007,
“Incorporation of Joint-Default Analysis into Moody’s Bank Ratings: A
Refined Methodology” published in March 2007, and “Moody’s Guidelines
for Rating Bank Hybrid Securities and Subordinated Debt” published in
November 2009. Please see the Credit Policy page on www.moodys.com for a
copy of these methodologies.

Wells Fargo is headquartered in San Francisco. Its reported assets
were $1,260 billion at June 30, 2011.

** Market News International New York Newsroom: 212-669-6430 **

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