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Things are not so good at the Banks

monsoon

By monsoon
in Charlotte

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monsoon Gigalopolis

monsoon

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This would seem to be the case. It's the 3rd largest bank failure in the United States history. People did a run on the bank when it was determined the bank had over extended itself with mortgages. Customers started withdrawing $100M/day. Certainly not a good time for BofA and Wachovia which are going to feel some fallout from this given how much they have bet on this same business.

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monsoon Gigalopolis

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ABC news is reporting that the FDIC and others are trying to stop a similar run on other banks that have made such risky loans. Apparently anyone at Indymac that had more than $100K on depost there may lose some money. The most important thing a bank has is it's reputation.

Does anyone know if Wachovia or BofA are on the secret FDIC watch list?

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Bynocerus Unincorporated Area

Bynocerus

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Um, Monsoon, I usually enjoy your posts, but, um...

If anyone did know which banks were on the watch list, she would be an insider and subject to insider trading laws as an individual in position of material non-public information. And, if she said word one, she would go directly to jail, but not before paying lots and lots of money to the SEC.

I don't think we have anyone either connected enough, or, conversely, stupid enough to let others know, especially on a message board.

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monsoon Gigalopolis

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The news media alludes to the fact that it does know about some of the banks on this list because Indymac was one that was not on this list. However your point it taken. Please don't post confidential information on UrbanPlanet despite my post above.

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On a different note, does anyone have any comments on the fact that Wachovia is now being run by a member of the NYC banking establishment? For years there has been this look of disbelief that Charlotte has 2 of the largest banks in the country. Obviously they should have been in NY. Now the bank is being run by someone from the secret society of NY banking. There is a bit of irony there, but I can't quite state it at the moment.

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MZT Burg

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Today on the way home, I overheard a pair from Wach griping that the total market cap of Wachovia is now about what it paid for Goldenwest... and the continuing drop is getting spooky.

B of A bought Countrywide on the cheap and is an experienced acquirer. They'll come through. But Wach bought World Savings and Goldenwest at the top of the market. There are probably umpteen billions in dead money, waiting to be written off. The cynic in me wonders if Wach (ie, the old FU) made a single good acquisition in the last decade. Anyone remember Keystone or Money Store? {shudder}

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swh1972 Hamlet

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Bank of America reported better than expected 2Q results this morning. Net Income was $3.41 billion, or $0.72 per share. The Street had expected $0.53 per share. That makes four of the top five banks to report better than expected numbers for the quarter.

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monsoon Gigalopolis

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^It's interesting how a 43% drop in earnings is being spun into something good. It should be noted however these results don't include losses from Countrywide as they did not count them in this quarter.

Meanwhile, BofA having been nudged out of the running by it's own subsidary Countrywide, has made it to the final 2 for this year's Worst Company in America matchup. (see above) See here to vote. I wonder if BofA will display their award in their lobby on Trade and Tryon in the CHQ tower?

wciafinal.jpg

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swh1972 Hamlet

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^ It's not spin. It's fact. The reason it is considered good news is that just about everyone had expected earnings much lower than this - and the stock price reflected that. Remember, BAC was trading around $18.50 last week, and closed at $28.56 today. As for Countrywide, you are correct, their numbers are not included as the deal closed on July 1. I think I read somewhere that CFC lost over $2 billion in the second quarter, but keep in mind that BAC knows pretty much what it bought in CFC, and has set aside a sizeable loss reserve to account for it.

I don't think anyone is saying that everything is roses and sunshine - but for a sector that has been absolutely crushed over the last two quarters, this is a step in the right direction.

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swh1972 Hamlet

swh1972

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Wachovia Bank did not have a good Second quarter. They announced a loss of $8.86 billion, cut their dividend to $.05/share, announced 6,350 job cuts and announced that they were closing their Wholesale Mortgage Unit.

Ouch!

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swh1972 Hamlet

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^ It was to investigate Wachovia Securities for the sales practices associated with Auction Rate Municipals, which have recently come under attack in the industry from individuals who hold these securities and cannot sell them due to the structure of the security. Without going into too great a detail, you buy the security based on the auction interest rate at a pre-determined time, and hold the securities until the next auction (maybe 30 days later). At that time, you can opt to hold or sell them at the auction. The interest rate is set based on the supply and demand at the auction.

Because of some of the problems that municipalities are having currently, demand for these has completely dried up, and the brokerage houses are no longer covering for the lack of demand (they don't want them either).

The complaints are based on individuals claiming that they were never told these details when they were sold the securities.

This is not limited to Wachovia.

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swh1972 Hamlet

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The 10,750 includes the 6,350 announced this morning which are actual full time employees that will lose their jobs and an additional 4,400 which includes open positions that will not be filled or positions currently filled by contractors.

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jednc Burg

jednc

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The Observer is quoting Tom Wurtz, Wachovia CFO, as saying the HQ is still on track (sortof expected since it's 30 stories up already) and that they are still very "interested" in doing the condo tower but are considering partnering with someone else to do it.

Also, through mid-day Wachovia stocks actually seem to indicate investors are receiving the news of the intended turn-around plan positively.

(that's just my positive interpretation...investors could also believe this is the death knell for Wachovia and believe the stock is undervalued preceeding a take-over)

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monsoon Gigalopolis

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This was Channel 36's lead in story at 6pm. They say that 11,000 jobs are going and that the knife will take a broad cut in Charlotte. They also indicate that Wachovia is now a potential takeover target and if that happens, 1000s more jobs will go. JP Morgan and Wells Fargo are mentioned.

Seems to me the new vanity skyscraper they are building was not such a good idea.

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