Wachovia? Stay Steele-Strong Bob!| Congress Pass the Bailout Today!
September 29th, 2008 Categories: Real Estate News
If a bailout deal isn’t reached this weekend, or latest Monday, Wachovia will be taken over or sold, or both by week’s end.
WaMu Here we come. If Congress acts, Wachovia may survive, as will many other banks teetering on the edge.
Obviously this is important to the shareholders and bondholders of Wachovia, who stand to lose millions. It is important to the nation to head this crisis off before such a big name bank fails… and it is also important to the City of Charlotte. Wachovia, a Fortune 100 company has been a part of Charlotte’s history and is deeply tied to the area from its First Union days for atleast the last 3 decades.
Competition between Bank of America and Wachovia has been good for the banks, and good for Charlotte as BOA stretched coast to coast Wachovia felt compelled to follow… The takover of sub-prime King Golden West in 2006 shows just how much self delusion very smart people are capable of… This takeover, of a West coast bank that was a huge seller of sub-prime loans in California, is the first reason Wachovia finds itself on the brink this morning.
However, the 2nd reason is the same reason so many banks find themselves on the “Troubled Bank” List: Alan Greenspan’s easy money- no regulation policies earlier in the decade. No “bank style” regulations for Investment Banks? Poof. First it was Bear Stearns, then Lehmann brothers fell, and Merril sold to Bank of America (BOA)…
5 years of unregulated greed, and the five titans of Wall Street are no more.
Banks have margin requirements that protect them- (and their stockholders and bond holders) not junk “credit-swaps”, but the White House had drunk the anti-regulation Kool Aide: investment banks didn’t need “all that regulation.” A few believed otherwise. Then Treasury Secretary Paul O’Neil and Alan Greenspan argued for “bank style regulations” on investment banks in 2001. The instrument designed to protect investors, the so called “credit-swap” derivative, was called a “weapon of financial mass destruction” by Warren Buffet in 2003. At the end of the week, the last two big men standing, Goldman Sachs and Morgan Stanley “requested” to be put under the bank standards so the could borrow at the Fed window.
Competition and free enterprise are great for creating wealth, but its the regulations that provide the playing field and rules of the game that each team needs- so there is transparency and accountability. Imagine football, another expression of man’s competitive nature, being played with rules negotiated before each game and only one official. Free markets are an economic theory– this administration bet the house on it, and lost.
Wachovia has been good for Charlotte, and there is a good probability that regardless of ownership, it’s headquarters will remain here. It has also been good for BOA- it is probably too much to hope BOA is quietly working behind the scenes on their behalf, but they should be.
Lets give Wachovia and Bob Steele a chance… just say no to Wells Fargo and Citibank, go see the Feds, ask for patience, and lets see Congress pass the bailout Wachovia and others so desparately need. Depositors (of which I am one) sit tight- they are FDIC insured.
Ed: When I began writing this yesterday morning I thought it newsworthy… what a difference 24 hours make.
