Blow-by-blow of Wachovia's Demise

December 21, 2008 12:48 PM

A blow-by-blow analysis of Wachovia's demise,as told by the bank's local paper, The Charlotte Observer.
posted by SeizeTheDay (16 comments total)

Had Wachovia executives passed on the deal, the company might still have a future on its own. But once they placed the bet on Golden West, it's debatable whether they could have escaped the financial meltdown that would follow. “If you look back on it, who could have predicted that?” asks former Wachovia director Robert Brown, who voted to approve the deal.

Ah, the old "Who could have predicted!?" There have been some good post-mortems on the financial industry lately. Here is a good one on the Madoff swindle, and then there's this one supposedly talking about what went on in the bush administration (I haven't read it, but I've seen summaries)
posted by delmoi at 12:58 PM on December 21, 2008

Couldn't have happened to a nicer bunch of amoral larcenous thugs. Motherfuckers once tried to dock my pay after one of their tellers claimed to have overpaid me by $24 — damn near cost me my job. My schadenfreude is for once pure and untroubled.
posted by enn at 1:18 PM on December 21, 2008 [3 favorites has favorites]

The demise of Wachovia sickens me. My mom worked for First Atlanta from about 18 or 20 years old, and I remember very well when the merger between First Atlanta and Wachovia went through - it took a few years to complete the process, with a whole "First Wachovia" phase, but no one was concerned about the merger. However, when the First Union merger went through ("Good Old F-U" as my mom would say), the old Wachovia hands were pretty upset - the FU culture was not based around relationship banking, but around profit-making - which sounds great, until you think about it. Lenders are professionals whose job it is to tell you NO when you should not be able to get a loan. They are not, and should not be, yes wo/men, who are prepared to DO ANYTHING TO GET YOU IN THAT CAR! (Or, house, as the case may be, but you take my point.)

So it was, after 40 years of service, that my mom retired, and thank God she did, because it's not as if there was anything left of the original, conservative culture of Wachovia Bank by the time First Union got through. FU was buying the brand - not its practices - and now a bank that was around for over 100 years is defunct thanks to greed. I'd feel sorry for them, except for the fact that the rank and file - the men and women in the branches - saw this coming, so I have no idea how Robert Brown can say that no one could see it coming.
posted by Medieval Maven at 1:21 PM on December 21, 2008 [3 favorites has favorites]

about what went on in the bush administration

half of me suspects that when Karl Rove saw the 2000 polling data correlation between home owners and voting (R) he started pushing on that policy direction as a win-win.

this is the same half that suspects the administration had a general idea that airliners were going to be hijacked but decided to let it happen for the net benefits that would be forthcoming, so take it FWIW.
posted by troy at 1:37 PM on December 21, 2008 [1 favorite has favorites]

I've met Ken Thompson a couple dozen times at community events and he always seemed like a really nice, thoughtful guy. It was a huge surprise to many in Charlotte that he would have made such a tremendous error in judgment with the Golden West purchase. Also makes you wonder why no one on the board raised concerns (or took their share of responsibility after they threw Ken out the door).

Charlotte's really been dealt a body blow with Wachovia's near collapse and the imminent layoffs from Wells and Bank of America. No different than a hundred other communities, but a bit of a new experience for a city that's grown like crazy (but in a seemingly rational, non-bubbly way) over the past 25 years.
posted by Sweetie Darling at 2:41 PM on December 21, 2008

I've met Ken Thompson a couple dozen times at community events and he always seemed like a really nice, thoughtful guy.

Seeming like a nice, thoughtful guy is a great skill for all sorts of assholes.
posted by TheOnlyCoolTim at 3:07 PM on December 21, 2008 [9 favorites has favorites]

I've met Ken Thompson a couple dozen times at community events and he always seemed like a really nice, thoughtful guy.

Seeming like a nice, thoughtful guy is a great skill for all sorts of assholes.
posted by TheOnlyCoolTim at 5:07 PM on December 21

Agreed. You do not become CEO of one of the nation's largest banks by being nice and thoughtful.

In fact, I would consider those major impediments.

As with most de-frocked CEOs, it is only later when it is learned how thoroughly dangerous, thoughtless, careless, and malicious most are.

I say this as chief executive of the last 2 local privately owned companies I have worked for, and realizing I have no future in anything larger than perhaps a small regional organization. Once you surpass about 1000 employees, things change drastically, and giving a damn about the consumer OR the employees is considered a giant detriment.

You are supposed to be willing to do everything short of go to federal prison for your shareholders, and even that sometimes is not enough.

I am not properly wired for the office at the top of the big glass building.
posted by Ynoxas at 3:29 PM on December 21, 2008 [3 favorites has favorites]

Ynoxas, I'm open to the view of business leadership that you present, but I just don't understand how the system can be so pervasively and lastingly bad in the way that you describe. Don't the inevitable horrible crashes make it obvious to shareholders and board members that there are systematic problems with this culture and philosophy? If so, what is it that keeps investors from doing better at governing and appointing management? It would at least *seem* they have incentives to protect the value of the company. Or is this simply a cover, while everybody in this class, management and investors alike, simply figures out how to profit from the game while it lasts and finds their seat before the music stops, and therefore none of them really care?
posted by weston at 4:09 PM on December 21, 2008

If you have invested in a company for the long haul, it pays to have steady, careful, smart leadership (see, traditional stock investment as known by our parents and grandparents). If you've invested based on the idea that if the stock goes above $x in the next 30 days you'll make a bundle, you want the most rapacious, thoughtless, emotionless, couldn't-care-less pricks in charge that you can get.

If you're stupid enough as a company to award your top people with stock options that vest in short periods of time for huge amounts of money, and you compound that error by also giving them a golden blowjob so even if they rape the company they get a nice severance package equivalent to the combined token bonuses you give the rank and file, well, you get what you have coming.
posted by maxwelton at 4:26 PM on December 21, 2008 [1 favorite has favorites]

Don't the inevitable horrible crashes make it obvious to shareholders and board members that there are systematic problems with this culture and philosophy?

The short, simple answer to this is "no", these types of crashes do not make it obvious that there are systemic problems. A great example of this is the failure of Lehman Brothers a full six months after Bear Stearns fell. Unfortunately, this is because you've used a word that (while seemingly correct) isn't appropriate: inevitable. Managers and Board members alike often believe that they're better than the just-occurred failure, leading to bigger mistakes.

If so, what is it that keeps investors from doing better at governing and appointing management? It would at least *seem* they have incentives to protect the value of the company.

The most basic business explanation for this phenomenon is the principal-agent problem. Managers (who seemingly are in the best position to build a long-term, prosperous future for a company) are often at the mercy of activist shareholders, Board members (who often represent mutual funds and pension funds looking for short-term stock price gains), and poorly devised compensation plans that reward short-term increases in company profitability. Then add problems like this (where overpaid CEOs underperform), and you soon realize that the entire system has become very, very messy.

I don't completely agree with Ynoxas about having to be an utter scumbag to be a Fortune 500 CEO, although I can understand why he might feel that way. I've seen executives cut corners to get ahead, and I'll be honest here, it works very well. In business, as in life, oftentimes you see people doing whatever it takes to get what they want, and a conscience is an anchor. But I've also seen honesty rewarded. The catch is it takes longer to make it to the top (if you ever get there) and it requires a buttload of patience while more shady people pass you by.
posted by SeizeTheDay at 4:43 PM on December 21, 2008

I used to live in Virginia, and Wachovia ("Watch-ovah-you") was a pretty big deal throught the South.

It's just weird. This was about the polar opposite of a local, mom-and-pop type of bank.

Here's to hoping for soft landings for the workers who've been laid off for no fault of their own.
posted by bardic at 7:52 PM on December 21, 2008

“If you look back on it, who could have predicted that?” asks former Wachovia director Robert Brown, who voted to approve the deal.

I love how when the market is on a bull run these guys are super geniuses who deserve every penny they earn because of their innovative thinking and extraordinary leadership and all the credit is theirs.

But when it all goes to shit they turn into grade scool dropouts running around crapping their pants screaming how it's all so complicated and they never saw the train coming down the tunnel and it's someone else's fault.
posted by PenDevil at 11:38 PM on December 21, 2008 [5 favorites has favorites]

"As a legal entity, a corporation has as its edict one and only one goal, to create profits for its shareholders, without legal or moral obligation to the welfare of workers, the environment, or the well-being of society as a whole. Corporations have successfully hijacked governments, promoting free-market solutions to virtually all of the concerns of human endeavor. Competition and self-interest dominate, and other aspects of human nature, such as creativity, empathy, and the ability to live in harmony with the earth, are suppressed and even ridiculed."

From an editorial review of the book The Corporation pretty much sums it up for me. I've worked in IT at both big banks in Charlotte and any pride or partnership has long since been wrung out of the people that work there. Its pretty much the Borg only not as effiecient or friendly
posted by ElvisJesus at 5:17 AM on December 22, 2008

Love the 1 : 0.199 split their stock did for the Wells Fargo 'merger'. Pathetic. After years of being one of the most conservative and dividend paying stocks they tank. Pfff.
posted by buzzman at 9:21 AM on December 22, 2008

Sorta on topic:

I worked for 15 years at World Savings (main business owned by Golden West) and my mum was there for over 20 years. I'm so very glad we both got out before any of this happened. The bad news is that my mum had stock options with WSL which got changed into Wachovia stock when they bought GWF. My mum is retired now and that's gonna hurt financially.
posted by deborah at 1:55 PM on December 22, 2008

I love how when the market is on a bull run these guys are super geniuses who deserve every penny they earn because of their innovative thinking and extraordinary leadership and all the credit is theirs.

But when it all goes to shit they turn into grade scool dropouts running around crapping their pants screaming how it's all so complicated and they never saw the train coming down the tunnel and it's someone else's fault.
posted by PenDevil at 2:38 AM on December 22

Well I think it's safe to say, by and large, the outsized-pay-by-default paradigm in the finance industry is going the way of the Dodo.
posted by jckll at 10:11 AM on December 30, 2008