It appears that Wachovia (NYSE: WB) will be bought out by Citigroup (NYSE: C) or Wells Fargo (NYSE: WFC). If a large American bank cannot be helped by the Treasury bail-out, which will probably be approved by Congress this week. what does it say about the bailout's scope?
According to The New York Times, "Wachovia, like WaMu, has been hobbled by bad mortgages, making a merger more urgent and prompting federal regulators to push for a quick sale."
Why can't Wachovia hang on and sell bad assets to the Treasury? Shouldn't that take the bank out of harm's way? Since the federal government is encouraging the sale, the answer must be that there is fear that the extremely broad $700 billion package has severe limits in terms of which companies it can help and which companies it cannot. Investor confidence in the plan may be so compromised that depositors and other customers are pulling capital out of Wachovia at an alarming rate.
Without a buy-out, Wachovia may fail. The Fed is clearly unwilling to put in capital to back the banks assets. Shareholders who bought Wachovia near its 52-week high of $52.25 will probably get little more than the $10 where the bank's shares trade now. Once again, assets from a big bank may find a home, but shareholders will not.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
9-29-2008 @ 5:50AM
mark said...
Wachovia, has screwed up one of the best
lenders in history( World Savings, Golden
West) stop putting blame on the Pick-A-Pay ARM( COSI Index) I am a LO and have had a PAP for 5 years, best mtg ever! The Index is slow moving, tied to low savings CD. You pay interest on Reduced Balance Each Month( if times are hard that month, cash flow, you can skip a payment, Pay more and watch your Loan
Balance Decrease, Don't put your blame on the best Lender Ever! More BS. I wish
the founders of WS would start another
Mtg company just like WS. I would work for them in a heart beat and help millions.
oh by the way, you had to have 20%
down pmt. or equity, not like countrywide,
and others so shut your mouth and get the truth out.. !!
9-29-2008 @ 8:47AM
bob romeo said...
hi- if wb is bought,does what you are saying mean that i will loose the shares i have,what the hell kind of a bailout is this.if wells rargo buys wb do i still loose my shares.i read a blog that wb was in talks last oct. with merril to buy them,why didn't that come out then when the stock was$45,what a lot of crap,is there any form of help for the people
bromeo54@aol.com
9-29-2008 @ 8:16AM
alan said...
If they let the bondholders/preferred get wiped out again, I'm not gonna let another penny of my money ever touch another financial institution again. In a time when all these banks have to raise capital why the heck would anyone give them a dime if they come calling. I'm just a retail guy but I can just imagine what big money guys do. The only companies that will be able to raise money will be the JPMorgans, Wells Fargos and even they may have a tough time. Anyone else if there's even a slight perception they don't have enough capital they'll be toast, they won't be able to come to the capital markets for money. They saved Bear Stearns for God's sake. That's it not a dime, let'em all burn.
9-29-2008 @ 8:44AM
jjones1184@aol.com said...
Finally, the truth is spoken... Yes, the Sandlers were responsible and ethical CEO's. The only huge mistake they ever made was selling off to Wachovia. World would have been able to withstand this mortgage meltdown.
10-12-2008 @ 12:48PM
Kim said...
Hang in there. They are pushing to get this deal through as quickly as possible and then what you will have is one of the strongest financial institutions around. When the Wells Fargo/Wachovia merger happens (by the end of the year), you will be given 1.991 shares of Wells Fargo (now at 22) for EACH share of Wachovia in your portfolio. Also, Moody's just upgraded Wachovia --