How can a bank earn capital

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Reference no: EM131304985

In September 2009, Wells Fargo indicated that it wanted to pay back $25 billion it had received under the Capital Purchase Program. John Stumpf, Wells Fargo's CEO, was quoted as saying: "We will pay back. . . .

We are now earning capital so quickly . . . we don't want to dilute our existing shareholders."

a. How can a bank "earn capital"?

b. How would a failure by a bank to pay back the federal government's stock purchase under the Capital Purchase Program "dilute existing shareholders"? Source: Zachery Kouwe, "Wells.

Reference no: EM131304985

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