Banking

Wachovia: Decision to sell troubled portfolio preceded Steel's arrival

Wachovia Corp. said this week that its new chief executive, an alum of the U.S. Treasury, was not involved in the bank's decision this summer to sell its preferred shares in Fannie Mae and Freddie Mac.

CEO Bob Steel said Tuesday that the bank had sold $509 million worth of Fannie and Freddie preferred shares, liquidating the portfolio as of July 21. The bank took a loss of $171million by doing so but eliminated its exposure to the problematic shares. Bloomberg News estimates Wachovia saved $300million; the shares have lost almost all their value since the two mortgage giants were taken over by the government Sunday.

Later this week, Wachovia clarified that it had decided to liquidate the Fannie and Freddie portfolio June 2 – “well before Mr. Steel's July 9 arrival,” said spokeswoman Christy Phillips-Brown. That process started immediately and was completed July 21, she said. Wachovia also decided June 2 to liquidate all of its perpetual preferred securities, not just those in Fannie and Freddie, she said.

“Mr. Steel had nothing to do with the decision to liquidate these securities and he had nothing to do with the timing or manner in which that decision was executed by Wachovia,” Phillips-Brown said.

Before Steel came to Wachovia, he was the Treasury's undersecretary of domestic finance. He has said that while at the Treasury he recused himself from matters involving Wachovia when he began discussing the Charlotte job.

On Wednesday, Bank of America's Brian Moynihan said his bank would take a loss on its preferred shares in Fannie and Freddie, which he quantified as “less than half a billion” dollars. Other banks also have been specifying their exposure to Fannie and Freddie since Sunday.

Christina Rexrode

BofA, Wachovia close branches, prepare for hurricane's arrival

As Hurricane Ike approached the Texas coast, Bank of America Corp. and Wachovia Corp. shuttered their branches around Houston and Galveston on Friday and planned to keep them closed through today.

Both banks said they were prepared to deploy mobile ATMs to storm-stricken areas and were routing some work, such as call center operations, to other parts of the country.

Countrywide Financial Corp., a mortgage lender that was bought by Bank of America this summer, issues insurance in Texas and Louisiana and has been communicating with customers to make sure they know how to file claims, said bank spokeswoman Britney Sheehan.

Christina Rexrode
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