Wednesday, April 16, 2008

Wachovia: Take Three Steps

In a week in which North Carolina is celebrating the tradition of pirates like Blackbeard; articles are appearing asking if the Wachovia CEO will walk the plank? Ken Thompson the CEO of the Charlotte, North Carolina based bank appears to be stuck between a rock and a hard place.

Despite earlier statements that the bank would not cut dividends and was not facing a wave of mortgage trouble; this illusion was shattered in the recent first quarter report. Wachovia cut the dividend from 64 to 41 cents, while adding write-downs of $2 billion. The highly-touted acquisition of mortgage broker Golden West in 2006; has turned out to be a fiasco.

"Everyone points to the acquisition of Golden West, and I do, too," Townsend said. "Certainly that has to be viewed, in retrospect, as one of the most boneheaded decisions of recent times."

Will Wachovia’s CEO weather the storm or be forced to take three steps down the plank? If thrown overboard, he can join the cast of executives from large banks recently cast adrift.