Wachovia was once among the most conservative and profitable banks, until it succumbed Monday September 29, 2008 to its bad acquisitions and troubled mortgages. Some have been left wondering, how could this have happened to Wachovia, of all banks?
In 1986, Wachovia bought First Atlanta Bank in GA, after it’s big collapse. Then the bank rejected an offer from SunTrust Bank and jumped into bed with First Union. First Union embraced high risk. Its philosophy was if an acquisition didn’t work out, you simply bought something else.
Between 2003 and 2007, Wachovia became a serial acquirer, buying two security firms, two banks, a finance company and thrift – for more than $50 billion. The went on to acquire California thrift Golden West Financial, which was the second largest savings and loan in the U.S., with $125 billion assets, 283 savings branches and 11,600 employees. It was also heavily loaded with mortgages.
The acquisition of Golden West gave Wachovia a major presence in California with 132 branches and $32 billion of deposits. But before the ink dried on the deal, California’s housing market crashed as if the big one had hit, registering 8.0 on the Richter scale. The aftershock was felt across the country as the housing bubble burst.
Many people in the industry doubt Wachovia would have gotten into trouble if it hadn’t purchased Golden West with its “unorthodox mortgages.”