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The State and Local Budget Squeeze: It’s Not All Negative for the Private Sector

Wells Fargo Securities publishes cross-market research report

NEW YORK - March 2, 2011

Wells Fargo Securities has published a unique, cross-platform report that examines the impact of state and local budgets on the private sector. The report, titled The State and Local Budget Squeeze, is part of the group’s Thematic Research Across the Capital Structure (TRACS) series and includes contributions from 19 analysts and strategists.

“While deficits and potential defaults may be the focal point of the press, they are not the full story,” said Diane Schumaker-Krieg, global head of Research & Economics at Wells Fargo. “This report is a unique effort to assess the impact of state and local finances on the private sector, not all of which is negative.” Our TRACS reports provide in-depth, comprehensive looks at topics that are at the forefront of investors’ minds. In this case, our analysts have identified both industry and individual company ramifications of the budget squeeze across our research coverage universe.”

“As the municipal market transforms from a commoditized, largely insured asset class to a credit-based product, we believe there will be attractive investment opportunities as well as hot spots,” says Natalie Cohen, head of Municipal Research.

In an introduction to the report, Cohen addresses where budget cuts and changes are most likely, where infrastructure spending will take place, and the expected positives and negatives for the private sector. “Positives for the private sector include numerous proposals to cut the corporate income tax as well as potential new markets for products that help improve service delivery efficiency, particularly through technology and in the healthcare area. We believe the $2.8 trillion municipal market is heavily nuanced,” added Cohen.

Gina Martin Adams, institutional equity strategist, addresses the budget squeeze’s impact on the Equity markets. “At 11% of GDP and 15% of employment, state and local government budgets can have a sizable impact on the U.S. economy,” she said.. “However, the impact on S&P 500 revenue is more limited, as large-cap U.S. companies are significantly more diversified than the U.S. economy. We do not expect the state and local government budget crunch to dismantle our generally positive expectations for the equity market this year.” The report includes Martin Adams’ assessment of exposures at the industry and sector level.

The State and Local Budget Squeeze also includes contributions from 17 other Wells Fargo Securities research analysts addressing the state and local budget squeeze’s impact on the consumer, financial services, healthcare, industrial, real estate, technology and energy sectors. A copy of the report may be accessed at

About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.3 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, the Internet ( and, and other distribution channels across North America and internationally. With approximately 280,000 team members, Wells Fargo serves one in three households in America. Wells Fargo & Company was ranked No. 19 on Fortune’s 2009 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

Wells Fargo Securities is the trade name for certain capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Securities, LLC, member FINRA and SIPC, and Wells Fargo Bank, National Association.