It’s hard to feel sorry for someone who makes a $24B mistake.  Wachovia’s former chief Ken Thompson was quoted as saying “It’s a dream come true” when the bank came to an agreement to buy Golden West in mid 2006. 

Golden West was a well known thrift that had been around for some 20 years in the western markets.  The empire was built almost solely on one product known as an “Option ARM” or “Pick a pay”.   In fact, 99% of the mortgage portfolio was this one program.  But they had branches and deposits that evidently blinded Thompson.

Golden West was the baby of a Herbert and Marion Sandler.  The Sandler’s were made famous recently in a skit by Saturday Night Live.  The Sandler’s reaped a profit of more than $2B on the sale. 

There was a lot of housing bubble talk in mid 2006 and accusations after the agreement that the Sandler’s were selling out knowing their portfolio was going down the tubes.  The talk was dismissed as a “bunch of garbage”.

An old time banker like me could clearly see that times were a changing and borrowers were becoming more and more stressed.  Although no one predicted a complete meltdown, the riskier mortgage products were going to be in trouble. 

What really peeves me off is the need for taxpayers to shoulder the burden of such outrageous decisions made by so small a number of people.  Ken Thompson was the driver of the deal for Wachovia eventually writing off more in losses than they paid for Golden West.  And the portfolio is still losing money today.

Of course, Wachovia wasn’t the only bank who made a disastrous entrance into various mortgage markets but it illustrates the stupidity that created such a huge meltdown.  Now the once 4^th largest bank in the nation will be just a memory and a mistake the tax payers will pay for.

___________________________