Charlotte-based Wachovia Corp., the nation's fourth largest bank, announced that it lost $8.9 billion in the second quarter of this year. It will cut 6,350 jobs in response to mortgage-related losses. Wachovia is pointing to problems caused by its California affiliate, Golden West Financial Corp., which it purchased in 2006. Golden West is being hit hard by their once highly touted "Pick a Payment" loan option, which let customers pay less-than-full interest payments on new loans. These mortgages were issued to new borrowers with shaky credit and, understandably, are pushing default rates up. These type of "innovative" loans are one of the keys to understanding why the credit industry finds itself in so much trouble.
But there is some good news here. Someone is finally accepting responsibility.
Wachovia Chairman Lanty Smith issued a statement saying, "These bottom-line results are disappointing and unacceptable." He added, "While to some degree they reflect industry headwinds and weaker macroeconomic conditions, they also reflect performance for which we at Wachovia accept responsibility."
I could be wrong, but I suspect the "performance" he's referring to involves the team that recommended purchasing Golden West for $25 billion in 2006.
Regardless, in a "Don't Blame Me" culture embraced by George Bush, Alan Greenspan, and industry executives, Lanty Smith's comments are a breath of fresh air.
- Mark
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