Had a bad day? Wachovia is having a bad month!

On April 14 the bank announced it had lost $350 million or $0.20 per share during the first quarter of 2008. The losses, which were much higher than had been expected, were due primarily, or course, to problems in the mortgage markets.  T

hen this past Friday Wachovia got hit with a double whammy.  In the morning it was announced that Wachovia Corp. had agreed to a settlement with The Office of the Comptroller of the Currency (OCC) of as much a $144 million to end an 18 month investigation into its role in a telemarketing scheme that allegedly affected between 350,000 and 500,000 Wachovia customers, many of them elderly.

The OCC was investigating claims that the bank, over an approximate period of June 2003 to December 2006, had relationships with several telemarketers and payment processing companies that had marketed identity-theft certificates, discount travel vouchers, and other products or services, targeting a largely elderly and/or low-income clientele. The telemarketers obtained bank account information from respondents and used it to draw up a "remotely created check" which doesn't require a signature. These remotely created checks would then be deposited into the telemarketing companies' Wachovia accounts and Wachovia would withdraw the funds from the consumers' bank accounts. Consumers frequently complained that they did not authorize the withdrawals or did not receive the services/merchandise ordered.

The OCC alleged that some Wachovia officials were aware of the telemarketing practices but failed to take quick action to resolve the problem but instead profited from the relationship because of fees collected and balances maintained in the telemarketers' and payment processors' Wachovia accounts.

I'm sure that Wachovia will get it straightened out.  They have too much on the line not to.  However, in the meantime, they've greatly reduced the comp plans of their originators and are facing strong challenges in protecting their loan officers who are now being pressed by other top teir mortgage lenders.

In perspective, I think Wachovia will get it together, but boy have they had a bad month.