Wachovia looks like it is changing hands. Credit default swaps are soaring, and it looks like they have a run on the bank.
The NY Times said Wells Fargo and Citigroup were fighting over the carcass and wanted to bid $2, and then supposedly Wells Fargo walked away when they couldn't get the Jamie Dimon deal.
The problem with Wachovia is their paper. It's owned everywhere, and their CD's are jammed in every money market fund in the country.
And you can't continue to do these sweetheart deals where the depositor is saved and shareholders and bondholders get wiped out, and all the benefits accrue to the acquiring bank!
These sweetheart deals cause runs!
Bob Steel, President and CEO of Wachovia put out this letter on their website:
September 26, 2008
Dear Wachovia Clients, Shareholders and Friends,
Financial markets and our industry are undergoing unprecedented change. We are watching these events carefully and must plan and remain flexible. Therefore, we are strategically protecting and managing liquidity and capital in this challenging environment.
Wachovia has many advantages: excellent service across our businesses, an exceptional retail franchise renowned for customer satisfaction, one of the largest brokerage platforms covering the affluent markets and expertise to meet the specialized needs of our many corporate customers.
Our core franchises are extremely valuable and continue to operate well relative to our competition.
We remain optimistic that our leadership in Washington will provide comfort to the markets with a plan to stabilize the housing and short-term funding markets.
For years Wachovia has been a forward-thinking force to help fuel business growth, create and manage personal wealth and build strong communities. We intend to remain focused, continue serving customers like no other competitor and utilize our many skills and talents in order to protect the value of our franchise.
Thank you for your trust in Wachovia.
Robert K. Steel
President and CEO
Anyone think this boilerplate letter will stop the run?