Top of the News: As we check out Wells Fargo's unexpectedly strong earnings announcement today, let's see what is is...and what it is not. It seems to confirm that Wells is an unusually well-run institution compared against the admittedly low bar of American money center banks. It never got as deep into the swamp of subprime mortgages and other junk as its peers. Management was consistently more conservative (and, again, the bar is pretty low here).

The earnings news does not clearly signal a recovery of the banking sector. Even Wells risks projecting too much optimism -- it hasn't really absorbed the financial death star that is Wachovia. At that former banking giant, a great institution run into the ground on subprime gambles, most of the huge layoffs have yet to fall in its very vulnerable headquarters city of Charlotte. Crosstown rival Bank of America faces continued weakness across the board, especially from its misbegotten merger with Merrill Lynch (Marry in haste, repent at leisure). Wells is trumpeting its big mortgage share gain from Wachovia, but it will be interesting to see how it manages Wachovia's troubles. (And Wells is a TARP recipient, $25 billion of your money).

In addition, as most Americans have learned to their dismay in the past year, we don't really have a "banking industry" that underpins the economy in the old-fashioned way. America, much more than Europe, depends on the broader capital markets -- everything from mutual funds and investment bank speculation to the powerful, unregulated shadow banking system. It's the capital markets that are sick and in need of repair, and Wells' earnings give us no indication they are on the mend. And "on the mend" won't be good if they return to the dangerous "privatize the profits and socialize the risk" models that caused the meltdown.