The shares in Wells Fargo (WFC) are up 22% to $19.76. The bank’s modest results are not the cause. There is optimism that the federal government will create a "bad bank" to take toxic assets off of financial firm balance sheet. Investors are pushing the shares of all money center banks higher.

The hunger for M&A that swept through the banking industry in the third quarter of last year has claimed another victim. Wells Fargo (WFC), which bought Wachovia,

Wachovia recorded fourth quarter loss of $11.2 billion, including $2.8 billion deferred tax asset write-down, $4.2 billion credit reserve build and $4.3 billion of market disruption losses. But, Wells Fargo made the best of a tough set of circumstances. The firm booked $37.2 billion of credit write-downs taken at December 31, through purchase accounting adjustments on $93.9 billion of high-risk loans segregated in Wachovia’s loan portfolio which reduces need for provisions in future

The bank declared its normal $.34 dividend and said it would not need any more TARP money.

Chief Financial Officer Howard Atkins said, “Despite the significant challenges facing the industry in 2008, the Company earned a profit of $2.84 billion, even after charging earnings $8.1 billion pre-tax to build credit reserves. We are disappointed to report a loss for the fourth quarter. Fourth quarter loss included $6.9 billion of pre-tax charges, largely de-risking and merger related, including $3.9 billion of credit reserve build on Wells Fargo’s books to conform both Wells Fargo’s and Wachovia’s credit reserve practices to the more conservative of each bank."

Overall,  WFC’s net loss for fourth quarter 2008 was $2.55 billion, or $0.79 per share, compared with earnings of $1.36 billion, or $0.41 per share, in fourth quarter 2007. This did not include results from Wachovia.

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