For Wachovia, it’s SURVIVAL. The bank’s appointment of Paulson’s right hand man, Robert K. Steel, demonstrates the bank’s acute awareness that survival depends on playing by the Streets rules. The gutting of Bear Stearns showed everybody that the only way out is the Street’s way: bribery, kickbacks and connections.
The choice of Steel strikes some analysts as interesting, given that Wachovia had hired Goldman to analyze its loan portfolio and “evaluate various alternatives.”
Steel talked up a good game. Like a newly-acquired superstar quarterback at a press conference he spat off at the yap about changes:
Introducing himself to investors in a conference call Thursday, Steel, 56, says he plans to focus on the residential mortgage portfolio at the nation’s fourth-largest bank. The portfolio contains $120 billion in option-arm adjustable-rate mortgages, or pick-a-payment loans, which the bank has said it will discontinue. Steel says he also plans to look carefully at the bank’s exposure to commercial real estate, where Wachovia is a big player.
There is absolutely nothing Robert K. Steel can do about that portfolio, the expected after-tax loss of $2.8B, or the massive write-downs and losses beyond second quarter. And if anyone could do anything about them, it would definitely not be Steel:
During much of his time there, Steel was involved in capital-markets work, and he says questions about his lack of retail- or commercial-banking experience are fair. The depth of retail-banking experience that already exists at Wachovia will more than make up for those deficiencies, …
Dick Bove, a bank analyst with Ladenburg Thalman & Co. Inc., says he is also surprised Wachovia would name a CEO with no retail-banking experience. He believes Steel needs to take at least six months to learn the business before making any big strategic changes at Wachovia, which has $809 billion in assets.
“What he’s got to do is take the visibility of this company way down, and he’s got to learn it and learn the business,” he says.
With the depth of retail-banking experience that already exists at Wachovia what need have they of you, Mr Steel? There is nothing anyone can do; the bank sealed it’s fate with the purchase of Golden West Financial for $24B at the height of the housing bubble. The blunder led to the firing of former Wachovia CEO Ken Thompson. Current chairman Lanty Smith declined to say whether heads would roll on high at the bank’s board of directors, which approved the deal, but the fact that the board decision to get Steel was unanimous makes it a safe bet that no one will feel any consequences.
So we have an under-qualified, yet well-connected retail-banking ignoramus taking over a sinking ship that can’t be righted save for an outright sale. Street has it’s own rules, and no one rules the Street like Goldman Sachs:
Analysts have suggested JPMorgan Chase & Co. might be one potential buyer of the Charlotte-based bank. JPMorgan CEO Jamie Dimon has made no secret of his desire for a retail-banking network in the Southeast.
“From that standpoint, the Goldman Sachs connection might make a lot of sense,”
Another fact making sense is that,
Among his recent accomplishments, Steel is credited with helping to engineer JPMorgan Chase & Co.’s recent purchase of Bear Stearns Co.
The Golden West option ARMs program is gone , but the reseting ARMs are still coming, and another bailout of JP Morgan via Wachovia ala Bear Stearns certainly adheres to Street rules.
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