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Wachovia Next To Fall?
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Since the biggest of the titans, Washington Mutual, was acquired by JP Morgan Chase last week, the spotlight now moves to Wachovia Corporation, another bank that carries a lot of “toxic” debt on its balance sheet. Shares tanked over 35% on Friday after the market had a chance to react to the WaMu acquisition news. (though Citi might be buying them up)
So what was Wachovia’s greatest sin? It acquired Golden West Financial Corporation in 2006 for about $25 billion at the height of the housing boom. Guess waht Golden West specialized in? “Pick-A-Payment loans” where borrowers picked what kind of payment they wanted. As you can imagine, that’s not all prime 30-year fixed stuff on those books.
“The fundamentals at Wachovia right now are not real strong, there is no question about that,” said Joe Keetle, senior wealth manager at Dawson Wealth Management, who previously spent 25 years at Wachovia. “But the reaction today has more to do with WaMu going under and waiting for Congress to pass a bill. It’s more emotional reaction today.”
As I said with WaMu, don’t panic. If you have deposits there, make sure you’re under the $100,000 coverage limit because there’s no reason to be above the FDIC limits nowadays. If you’re under the limit, just conduct business as usual until you hear otherwise. If you’re really concerned and think that stuff might get complicated, open an account somewhere else, and transfer over some spending money. That way you can still get access to your money in the event there is a failure and there’s an extended delay before you can access to your funds.
Wachovia shares plunge as investors question fate [AP]
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You want a list of banks? Check out this research groups proposal that was submitted to The Federal Reserve Board. It’s a year old, when the “experts” were yelling Danger and we still ignored them.
saladdin
http://www.weissgroupinc.com/whitepaper1/Housing_white_paper.pdf
Either there is a Fed bailout or more banks fail, either way Main Street is going to have to pay higher taxes and learn to live within their means.
This is unfortunate, but it should serve as a wake up call to all American investors. If you want to protect your money, you need to diversify and invest at least some of it overseas. These are hard times for American investing firms. I personally use offshore bank accounts and they have helped me with diversification and asset protection. If you want to read more on why offshore investing is smarter, feel free to visit my website.
Best,
Frank Miller
Well, we bank at Wachovia, so I’m curious to see how this pans out but I’m not to worried. We’re under the FDIC limits and our joint money is at ING Direct. If need be, we’ll switch our individual accounts, but no rush now.
saladdin: I see a lot of familiar names on that that list…
Interesting watching all these banks failing. I wonder what the next bank might be…
Something to think about, if these banks are being bought up, aren’t the bad loans going as well? What might happen to the bank that then takes on these loans? Are they going to bloat and pop?
I saw that Wachovia is raising their interest rates on money market accounts. I wonder why after reading this…….