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.please add your thoughts now! }