Former Wells Fargo CEO Kovacevich says banks are 'easy target' for government

Big banks have become an “easy target” for the U.S. government and are being unfairly blamed for the financial crisis, the former CEO of Wells Fargo says.

In an interview this week with CNBC, Dick Kovacevich said “exotic” subprime mortgages that went sour caused the crisis but were not big banks’ creations. Instead, savings and loans associations and Countrywide Financial Corp. were the originators of those mortgages, he said.

“And all the distributors were basically investment banks,” he said. “And yet 7,000 commerical banks are being blammed for something that they really didn’t do.”

Kovacevich retired as CEO of the San Francisco bank in 2007, giving up the role to current chief executive John Stumpf. Kovacevich was chairman of the bank during its 2008 acquisition of Charlotte-based Wachovia, but he’s since stepped down.

On CNBC, Kovacevich also described big banks as being “very healthy,” thanks to the amount of capital they have set aside. Since the financial crisis, the Federal Reserve conducts “stress tests” of banks to make sure they have enough capital to withstand a severe economic downturn.

In September, Wells Fargo reported it could incur a net loss of $3.8 billion over nine quarters under a hypothetical downturn affecting U.S. and global markets. The figure was released as part of so-called mid-cycle stress tests that the biggest U.S. banks must conduct.

Wells Fargo also reported at the time that its capital ratios would remain above required minimums over nine quarters.

Kovacevich said that banks' capital levels are strong.

“I think that many banks are overcapitalized at the moment,” he said.

But banks have other work to do, he said.

“The challenge going forward is the industry has to grow revenue,” he said. “Hopefully, the Fed will allow, because of all this capital, for further increases in dividends and stock buybacks.

“If the industry can start growing its revenue, which I think it will in 2014, and be able to give more money back to its stockholders, it should be still good for the stocks.”