Has anyone noticed that Wachovia has a 12-month CD at 4.25%? I just found it today... it's the best I've seen in some time. Any thoughts?
Ginger

On edit: I'm a novice in this area, however, I am guessing Wachovia is trying to pull in money in a hurry. I had noticed that was what happened with IndyMac. I wonder if anyone has knowledge of the status of Wachovia. I've done some searching, but was not able to turn up anything other than speculation.

This message has been edited. Last edited by: Westies,

From last week's Washington Post:

http://www.washingtonpost.com/wp-dyn/content/article/20...65.html?hpid=topnews


Wachovia's stock fell to a 17-year low yesterday after an analyst warned that the commercial bank, which holds more deposits than any other in the Washington region, will face two years of losses arising from the credit crisis and a dramatic restatement of troubled assets on its books.

The amount of the bank's bad loans is growing faster than what the company is stashing away, and its reserves are markedly lower than the industry average, according to bank officials and regulators. Wachovia has enough money to cover about 84 percent of its non-performing loans, the bank said yesterday.

As fears mount over the health of the nation's banking system, Wachovia will have to take exceptional steps to raise enough capital to meet its obligations, analysts said. This does not mean that the bank will fail anytime soon or that depositors face imminent danger.

"Wachovia is a fundamentally strong and stable company on solid footing . . . and is well-capitalized," said spokeswoman Christy Phillips-Brown.

Company officials disclosed yesterday that the bank was raising enough money to add $4.2 billion to its reserves and $1.3 billion more to cover losses in the second quarter. Those sums are in the same league as the provisions made by the biggest banks in the country to cover losses due to the credit crisis.

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Also this:

http://www.reuters.com/article/ousiv/idUSWEN674920080717

Securities regulators from six U.S. states mounted a surprise inspection Thursday of the headquarters of Wachovia Corp's (WB) brokerage affiliate, as part of a probe into the firm's sales of auction-rate debt.

The office of Missouri Secretary of State Robin Carnahan said a team of 10 regulators went to the St. Louis headquarters of Wachovia Securities, seeking information about sales practices, internal evaluations of the auction-rate securities market and marketing strategies.

The move came after Wachovia Securities failed to comply with information requests from Missouri securities regulators, state officials said. More than a dozen subpoenas were also issued, according to the state.

Missouri said it subpoenaed more than a dozen Wachovia Securities agents and executives after receiving more than 70 complaints over four months, concerning in excess of $40 million in frozen investments.

Wachovia owns 62 percent of Wachovia Securities. Prudential Financial Inc (PRU) owns the remainder. The St. Louis headquarters were known as A.G. Edwards Inc before Wachovia acquired it last October 1.

"What's scary is this is one more piece of evidence that Wachovia may have ignored the best interest of its customers, although this could have gone on before Wachovia bought A.G. Edwards," said Tony Plath, an associate professor of finance at the University of North Carolina at Charlotte. "It erodes the company's reputational capital even more in the eyes of its customers. It's more news the company doesn't need."

The 24/7 Wall St. Bankruptcy Odds Watch (AMR)(UAUA)(NWA)(GHS)(DAL)(LHS)(LEH)(CAL)(WB)(F)(MNI)(AIG)
There are the 24/7 Wall St. odds that several companies will have to file for Chapter 11 between now and the end of the year. These will become a permanent part of the website and the list will be updated once a week.

AMR (AMR) 1 in 2
Lee Enterprises(LEE) 1 in 15
Ford (F) 1 in 35
UAL (UAUA) 1 in 4
Lehman (LEH) 1 in 25
McClatchy (MNI) 1 in 35
Northwest (NWA) 1 in 5
Continental (CAL) 1 in 25
AIG (AIG) 1 in 35
Gatehouse (GHS) 1 in 5
Wachovia (WB) 1 in 25
Delta (DAL) 1 in 10
General Motors (GM) 1 in 30

http://www.247wallst.com/2008/06/the-247-wal-st.html

George

Hi George,

With the new SEC rules on "naked short selling" going into effect Monday, that may change a few odds of company's going bankrupt. From what I read in Wednesday news, the new rules will only be for 19 company's (mostly banks) and will only last for 30days.

I think it will be how far the SEC changes the rules and what stocks they include and if they leave any loop holes uncovered.

I can't believe our gov't is letting our largest company's be a target of bankruptcy by letting our world enemies short there stocks until it's worthless.

I have a feeling huge changes are coming to the
way our stock exchange system works.

I would like to hear somebody explain how a short seller can force a company into bankruptcy. It sounds good, but one has nothing to do with the other.

As to the Wachovia CD, that is a good rate if you can get it. As long as you stay below the 100k insured limit (including accrued interest), you won't lose money. If Wachovia does fail, the fed may not honor the interest rate going forward, in which case you will be given the option to accept a new rate or cash out without penalty.

I would too. but I suspect if all the holders, shorted, the others would get a message and not participate in the stock, thereby lowering the value, creating an upside down effect on assests and debts, such at our recent example .

According to financial site Mish http://globaleconomicanalysis.blogspot.com/2008/07/tossed-to-dogs.html

Wachovia is not on the short-restricted list. He thinks it's being "Tossed to the dogs".

He also quotes this item:

In a letter to Mr. Cox [the SEC chairman], the American Bankers Association, a trade group that represents the interests of 8,500 banks, said it fears short sellers will now focus on banks not covered by the new rules, many of which are already big targets of short sellers.

"The emergency order could further exacerbate a loss of confidence in the safety and soundness of this country's banking industry," the ABA wrote, as it called for an expansion of the order to including stocks of banks and bank holding companies.

quote:

Originally posted by Tom & Rocki:
I would like to hear somebody explain how a short seller can force a company into bankruptcy. It sounds good, but one has nothing to do with the other.

As to the Wachovia CD, that is a good rate if you can get it. As long as you stay below the 100k insured limit (including accrued interest), you won't lose money. If Wachovia does fail, the fed may not honor the interest rate going forward, in which case you will be given the option to accept a new rate or cash out without penalty.

I appreciate all the input, however, I must confess that most of it seems Greek to me! Try as I might, I don't know if I will ever get this financial stuff. But I do get the percentages, and the quote above is the one that seems to ring a bell.

Indeed, I don't see how one could go too wrong with either a 7-month CD at 4.1%, or a 12-month at 4.25. This is what Wachovia is currently offering, and with only a 5K minimum, there is certainly no concern of going over the FDIC limits. I'm justing thinking of "parking" until things become more clear as to what the best next step should be.

Is there any reason that does not make sense?
G

Reasons not to do it:

1. there's another bank in less trouble with nearly as good interest rates

2. you think inflation is going to take off due to all the bailout money the government is throwing around.

3. you don't want the hassle of waiting for your money if the bank needs a bailout.

4. you don't approve in principle of giving your money to mismanaged banks.

But if you've already decided to chase the extra interest, go ahead. It is supposedly insured.

quote:

Originally posted by Tom & Rocki:
I would like to hear somebody explain how a short seller can force a company into bankruptcy. It sounds good, but one has nothing to do with the other...

Hi Tom,

A short on a stock is totaly different than a naked short.

A short position has to borrow a long position before shorting a stock. If one can NOT borrow the long position then a short can NOT be placed.

Naked shorts are short positions that do NOT need to borrow a long position stock before shorting the stock.

So if I wanted too bankrupt a company, I could get several thousand of my rich buddies (if I had any) together and "naked short" that stock. We could put a "unlimited" number of naked shorts on that stock thus there would be more down bets than long bets "available" thus driving down the stocks price and the longs could do nothing to stop us.

Too stop a short position from starting, all the longs have too do is too ask that a stock certificate be issued. You can NOT short a stock that can not be borrowed and once a stock certificate is issued it can NOT be borrowed without premission of the owner.

That's the way I understand the naked short positions. A truley complicated subject for my simple mind.

I understand what a naked short is, however driving down the price of a stock has no material effect on the financial condition of the company. You can't short a company into bankruptcy.

quote:

Originally posted by michaelg:
Reasons not to do it:

1. there's another bank in less trouble with nearly as good interest rates

2. you think inflation is going to take off due to all the bailout money the government is throwing around.

3. you don't want the hassle of waiting for your money if the bank needs a bailout.

4. you don't approve in principle of giving your money to mismanaged banks.

But if you've already decided to chase the extra interest, go ahead. It is supposedly insured.

Michael
1) I am not aware of another bank that has a CD anywhere near "close" to the rate I quoted.
2) I'm not sure how runaway inflation will worsen this deal if there is still no other better option.
3) I'm not talking about money I need to have available, and I don't believe that FDIC would hold it for more than a week or two.
4) In principle, I don't feel responsible for the mismanagement of a bank.

I have not made a decision to "chase" the extra interest. That is why I have posted here. I was hoping to get some informed ideas before making a decision. I have no financial background (obviously), but am trying to learn. I'm only at baby step one.

Most of these comments are way over my head... so much so that I'm not sure if they are even relevant. I only wish I could understand more, but I'll take what I do understand and try to make an informed (but not life-changing) decision.

Respectfully,
G

I think it would have been a good deal... and I think I would have gone ahead. But upon checking a bit more carefully, I found that you have to open a checking account to get their "featured" CD! Not interested!
G

Here's the latest, announced today:

http://biz.yahoo.com/rb/080721/wachovia_mortgages.html?.v=1

NEW YORK (Reuters) - Wachovia Corp (NYSE:WB - News), the fourth-largest U.S. bank, on Monday said its main mortgage unit will stop offering home loans through brokers this week, joining a growing number of lenders to curb wholesale lending.

"We thought it was important to focus on customers who have relationships with the bank, and in geographies where Wachovia has branches," spokesman Don Vecchiarello said. "Based on that, we've decided to discontinue doing business through our wholesale mortgage channel as of July 25."

Wachovia is assessing how many jobs will be affected by the decision, Vecchiarello said.

The Charlotte, North Carolina-based bank is scheduled to report second-quarter results on Tuesday. It has projected a $2.6 billion to $2.8 billion loss, citing mounting credit problems tied to mortgages.

Naked shorting adversely affects those companies that need to raise either capital or that have borrowing covenants that require a certain share price. Many of the mortgage banks and MReits got caught in that. The corrupt shorts drive the share price down and the company can't raise ongoing capital or has outstanding loans called or can't get new loans. Add to that the silly GAP rules on marking to market assets that have no real market and you have bigger issues too. As I understand it, Goldman Sachs made tons of money naked shorting the Collatoralized Debt Obligation (CDO) bond index market, which caused many of the banks and creators of CDOs to have to write down their assets and take the paper loss. This then triggers all kinds of other measures with negative results. The mortgage borrowers may be paying with the loss rates expected, but the mortgages have been put into larger bonds and since the market for those bonds has dropped due to naked shorting, the banks that hold the bonds have to write down the asset and take the loss. It should all ultimately reverse itself if the company doesn't have to sell assets at fire sale prices because of the artificial loss. I hear that the hedge funds are now naked shorting ETF stocks too.

Naked shorting is selling something you don't own or possess and is fraud, illegal under the securities laws and yet the SEC allows it. And getting paper shares does nothing to stop it because the bookkeeping operations of the Prime Brokers (the DTCC as I understand it) just net things back and forth. There are many cases of more shares being voted in annual meetings than there are shares. That is because in many instances, the shares being sold are phantom and don't exist.

Sorry for the rant, but I have been burned on this issue big time. Only now that some of the biggest offenders are getting nailed themselves does the SEC think something should be done for them. Even then they want to keep the "market maker exemption". Sure, like you need sell side liquidity when a stock is falling. That exemption allows all kinds of options selling that serve the same purpose when the option market maker sells a naked short to cover his options position.

Here is a site that covers this issue deep capture Two stocks that have been hit by this are OSTK and NOVS. Two different industries. Other companies have been hit. Delta Airlines for one. The SEC is a captured regulator beholden only to the hedge fund foxes who now own the hen house. This is one of the reasons many foreign companies no longer want to be listed on US markets. Our markets have all the appearances that they are corrupt to the core. That is evidenced by the idea that the SEC feels that it should be OK to sell phantom shares into the market.

Sorry for the rant. It is a hot button with me.