You might think we're referring to Monday, Sept. 29. That's when
Citigroup Inc. announced it was buying Wachovia Corp. for $2.16 billion in stock. But Oct. 2, 2006, would be just as accurate. That's the day Wachovia closed its nearly $26 billion
acquisition of Golden West Financial Corp. Even at the time, analysts questioned the timing of the bank's largest ever transaction. So what led Wachovia's then-chief executive Ken Thompson (pictured) to pursue it anyway?
When Wachovia bought Golden West, the California mortgage lender had $100 billion in assets and regularly posted double-digit earnings. It was run by the 70-something husband and wife team of Herbert M. and Marion O. Sandler, who had grown their company making adjustable rate home loans -- which can send mortgage payments soaring after a fixed period. The deal boosted Wachovia's market share in mortgage lending, and its presence in the Western U.S.
Still, analysts wondered whether the mortgage lending boom had peaked and whether default on those now infamous A.R.M.s would eventually undermine Golden West's profitability, and ultimately the transaction itself.
At the time, Thompson and company were coming off a string of stinging losses, mostly to crosstown rival Bank of America Corp. Wachovia had considered buying credit card giant MNBA Corp. and dropped out of bidding for FleetBoston Financial. Both companies eventually went to BofA. Analysts and investors began to question whether Thompson and company were committed and capable of growing Wachovia. And remember, all this was happening on the tail end of a sizzling mortgage lending market. In this environment, it's perhaps understandable how Thompson came to see Golden West as a "crown jewel," despite warnings to the contrary.
Did pressure to close a deal -- any deal -- factor into Thompson's decision to buy Golden West? Was the opportunity to fold Golden West's fat portfolio of mortgages into Wachovia simply too great to resist? Interesting questions in fascinating times.
- Suzanne Stevens
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Juergen Lasowski
And the winners are...
Ken Thompson, former CEO of Wachovia Bank, \ruined a legitimate bank operation, paying a good dividend to its shareholders, and after finding SEC violations, truth in lending, and fraud in his actions should be investigated by the FBI, prosecuted by U.S. Attorneys, and imprissoned.