Wachovia CEO gets his walking papers ... another bank fails ... and more
* We just learned that the CEO of Wachovia, Ken Thompson, is "retiring at the request of the board" of directors of the fourth-largest bank. The less PC way of describing this event is that Thompson was shoved out. Why? Wachovia's losses have been rising fast. The company bled $708 million in red ink in the first quarter thanks to life insurance policy losses, credit losses, and massive writedowns.
But it goes deeper than that. Wachovia made what I consider to be one of the biggest blunders in the history of modern banking -- purchasing Golden West Financial in 2006. Golden West was the mortgage industry's biggest champion of option ARMs -- those "pick a payment" loans you've probably heard about. It had heavy California exposure at the time of the merger. I simply couldn't understand why the bank agreed to dramatically increase its mortgage exposure after the national housing market had already topped out.
* Speaking of banks, a small one based in Minnesota -- First Integrity, N.A. -- became the latest to fail this year. The bank had $54.7 million in total assets. First International Bank and Trust of North Dakota is assuming its deposits and branches, as well as roughly $35.8 million of its assets. First Integrity is the fourth FDIC-insured institution to fail this year, compared with only three in all of 2007. More such failures are coming.
* Big bank and brokerage firm accounting got you confused? You're not alone. But you have to love this Bloomberg story, which chronicles how banks are generating revenue from the declining price of their own bonds.
* Lastly, if you needed more proof that the "subprime mortgage crisis" has never really been just a subprime problem, the New York Times had a nice piece this weekend. It talks about how higher-end homeowners and borrowers are also having trouble selling their homes and paying their mortgages.