Wachovia (NYSE: WB) was able to get a real star to be its new CEO. Robert Steel was once a vice chairman at Goldman Sachs (NYSE: GS) and is currently Treasury Undersecretary. He joins the big bank just in time to see its fortune get worse, perhaps much worse.
At the time Mr. Steel comes through the door at the firm, it also said it would lose as much as $2.8 million in the second quarter, which is much greater than Wall Street expectations.
According to The Wall Street Journal, "The naming of a new CEO may quiet market speculation that Wachovia is an acquisition target."
The question is why anyone would want the Wachovia job. The company's shares are down more than 70% in the last year. The drop is even greater than Citigroup's (NYSE:C).
Mr. Steel is likely to cause an uprising among his shareholders within his first few weeks on the job. Wachovia will probably need to raise more money to shore up its capital base. Its market cap is down to $28 billion. If the firm has to raise $5 billion, the stock could fall from its current price of $14.29 to below $11. A worsening housing market and economy will probably cause even more write-offs as the year goes on.
Steel should have stayed in Washington. The chances that things will get better at Wachovia soon are slim and none.
Douglas A. McIntyre is an editor at 247wallst.com.
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