Wachovia takes a big loss, hits the markets up for $7 billion

I never understood why Wachovia bought California-based Golden West Financial after the housing market was already showing signs of topping out. Golden West's star product is the option ARM, or "pick a payment" mortgage. A large percentage of those loans were made in California, one of the states with the most bubbleicious housing markets. But acquire GDW it did ... and now, it's paying a heavy, heavy price. Because of problems at the former GDW, and its own credit issues, Wachovia announced today that:

* It would lose $393 million, or 20 cents per share, in the first quarter. That's a gigantic swing from the year-ago period, when Wachovia earned $2.3 billion, or $1.20 per share. It's also well below the 40 cents in earnings per share that analysts were expecting. The firm increased its provision for credit losses to $2.8 billion from $408 million a year earlier.

* Net charge-offs jumped to 0.66% of average loans from 0.15% from a year ago. Nonperforming assets as a percentage of loans, foreclosed property and loans held for sale quadrupled to 1.7% from 0.42% in Q1 2007.

* Wachovia is also slashing its quarterly, per-share dividend to 37.5 cents from 64 cents. And it's hitting the market up for about $7 billion by selling common and convertible preferred shares.