Joseph Schumpeter touted capitalism's knack for creative destruction. But in the context of the possible outcomes as two giant banks spar over the fate of a third one -- with the government deeply involved -- the notion seems overly idealistic. Kind of like Alan Greenspan's confidence that the derivatives markets would be self-regulating.
This thought results from a little digging into -- of all things -- the retail IT platform at Wachovia Corp.
Wachovia, of course, is a target for both Citigroup Inc. and Wells Fargo & Co., mainly as a result of its high-priced and ill-timed acquisition of mortgage lender Golden West Financial in 2006. No argument here that Wachovia has itself to blame for its troubles. Or that the most important damage to recognize would be that sustained in Charlotte, N.C., where Wachovia is based.
But spare a thought, if you can, for the effort and expense that must have gone into Wachovia's IT system, to say nothing of all the acquisitions, integration work and employee training that led up to it. On Wednesday Suzanne Stevens pointed out that the platform, which enables Wachovia employees to take a unified view of customer relationships across the banking and brokerage businesses, is an
impediment to Citi and Wells divvying up the target, as they
may well do according to the latest reports. Prying the units apart could cost the acquirers customers and deposits.
And in a macro sense, it would also deal a blow to one of the more successful implementations of a business model that looks to be the way forward for this troubled industry. Getting the different parts of these giant organizations to work together properly is (as Citigroup and Bank of America Corp. can attest) a major challenge. If you agree that having them function well is in the public interest -- well, then you probably also agree that this is one more thing we risk losing in the current turmoil.
You can read more about
Wachovia's system in this 2003 article in InformationWeek. Among other things, you'll see what a big deal it was for Microsoft Corp., which has targeted the financial sector. Interesting side note: On Wednesday Microsoft filed a notice
in connection with the Washington Mutual bankruptcy, apparently over licensing fees it would like to collect. -
Kenneth Klee
Join Corporate Dealmaker's LinkedIn forum
Juergen Lasowski
And the winners are...
