Wachovia gets surprise inspection!

[SirNitram]

Link

KANSAS CITY, Missouri (Reuters) - Securities regulators from six U.S. states mounted a surprise inspection Thursday of the headquarters of Wachovia Corp's <WB.N> brokerage affiliate, as part of a probe into the firm's sales of auction-rate debt.

The office of Missouri Secretary of State Robin Carnahan said a team of 10 regulators went to the St. Louis headquarters of Wachovia Securities, seeking information about sales practices, internal evaluations of the auction-rate securities market and marketing strategies.

The move came after Wachovia Securities failed to comply with information requests from Missouri securities regulators, state officials said. More than a dozen subpoenas were also issued, according to the state.

The $330 billion auction-rate securities market normally allows issuers such as municipalities to borrow money for the long term, but at lower, short-term rates.

Roughly half of the market remains frozen after a February meltdown in which brokerages abandoned their role as buyers of last resort. Investors flooded dealers with paper backed by bond insurers whose credit ratings were in question, forcing many issuers to pay uncommonly high interest rates.

"Hundreds of Missouri investors have called my office because of inability to access their money," Carnahan said in a statement. "They were told these investments were safe and easy to cash in, but now they cannot run their business, make medical payments, or pay school tuition."

Missouri said it subpoenaed more than a dozen Wachovia Securities agents and executives after receiving more than 70 complaints over four months, concerning in excess of $40 million in frozen investments.

Wachovia spokeswoman Christy Phillips-Brown said most securities firms are responding to regulatory inquiries into the auction-rate securities industry, and Thursday's events were part of that process.

NEW HEADACHE

Thursday's inspection provides a fresh headache for new Wachovia Chief Executive Robert Steel, who is trying to preserve capital and slash costs as a $121 billion portfolio of "option" adjustable-rate mortgages deteriorates rapidly.

The fourth-largest U.S. bank has said it expects to report a $2.6 billion to $2.8 billion second-quarter loss on July 22, and several analysts have said it might need to lower its dividend for a second time this year.

Wachovia owns 62 percent of Wachovia Securities. Prudential Financial Inc <PRU.N> owns the remainder. The St. Louis headquarters were known as A.G. Edwards Inc before Wachovia acquired it last October 1.

"What's scary is this is one more piece of evidence that Wachovia may have ignored the best interest of its customers, although this could have gone on before Wachovia bought A.G. Edwards," said Tony Plath, an associate professor of finance at the University of North Carolina at Charlotte. "It erodes the company's reputational capital even more in the eyes of its customers. It's more news the company doesn't need."

In May, Wachovia said it had received inquiries and subpoenas from federal and state regulators, including the U.S. Securities and Exchange Commission, into underwriting and sales of auction-rate securities.

WIDER PROBES

Regulators from Missouri, Illinois, Massachusetts, New Jersey, Pennsylvania and a sixth state that asked not to be identified were part of the team entering Wachovia Securities' headquarters, Missouri officials said.

The Missouri Securities Division is also reviewing Massachusetts' fraud complaint against UBS AG <UBSN.VX> affiliate UBS Securities last month. It is examining auction-rate complaints involving other financial firms as well.

Steel joined Wachovia last week from the U.S. Treasury Department, where he was deputy under secretary for domestic finance.

He replaced Ken Thompson, whom Wachovia ousted in early June following several financial and legal setbacks, including a $24.2 billion purchase in 2006 of Golden West Financial Corp that saddled the bank with the adjustable-rate mortgages.

Wachovia shares traded up $1.84, or 17.4 percent, at $12.38 in afternoon trading on the New York Stock Exchange, as financial stocks advanced broadly. Through Wednesday, Wachovia shares had fallen 80 percent from their 52-week high of $53.10 set last September 19.

[J]

Well it's nice to see them do something productive for a change, hopefully the audit ends with convictions and a parade of bankers being frog marched into jail. Every troubled bank should be getting a full audit and SEC investigation for their actions in the past year, specifically, securities fraud for releasing blatantly false statements to pump their stock prices.

Bank CEO: We're well capitalized and don't need to raise funds.

And the next day they make huge share offerings and sell off assets.

[Davis 51]

We're with Wachovia....

Well, fuck. Time to diversify.

[Invictus ChiKen]

So Bank of America and Wachovia... What banks are okay to invest with?

I'm strongly considering the Royal Bank of Scotland...

[Metatwaddle]

Regulators from Missouri, Illinois, Massachusetts, New Jersey, Pennsylvania and a sixth state that asked not to be identified were part of the team entering Wachovia Securities' headquarters, Missouri officials said.

For some reason this made me laugh. It never occurred to me that an entire state could ask not to be identified.

[SirNitram]

Regulators from Missouri, Illinois, Massachusetts, New Jersey, Pennsylvania and a sixth state that asked not to be identified were part of the team entering Wachovia Securities' headquarters, Missouri officials said.

For some reason this made me laugh. It never occurred to me that an entire state could ask not to be identified.

'Is this the State that raided your accounting department, ma'am?' 'I don't know.. Could they all walk around and inspect papers a bit?'

[Aratech]

We're with Wachovia....

Well, fuck. Time to diversify.

Ahhh, crap. I second that.

[SirNitram]

If your accounts are FDIC insured(And they should be), just make sure you're under the insured limit. 100,000 in your name(Any number of accounts/investments), 200,000 for a joint account, and IIRC, 250,000 for an IRA. If your money there is under that and FDIC insured, you're okay.

[Davis 51]

If your accounts are FDIC insured(And they should be), just make sure you're under the insured limit. 100,000 in your name(Any number of accounts/investments), 200,000 for a joint account, and IIRC, 250,000 for an IRA. If your money there is under that and FDIC insured, you're okay.

We're well aware of the FDIC insurance limits. We're trying to rearrange everything so we all fit in it, but my mother thinks we need to take it a step further and put our investments in other banks. I have to say I agree.

[J]

A member of another forum I frequent keeps a chart of troubled banks which has some basic information on them. If the bank is in the red, you don't want to give them your money, note how all 3 failed banks were in the red zone when they went under. The list is by no means comprehensive, but it gives you an idea of what to look for. Find the stats for banks you're thinking of doing business with and compare them to the chart, that should give you a fair idea of how well they're doing.

[Col. Crackpot]

If your accounts are FDIC insured(And they should be), just make sure you're under the insured limit. 100,000 in your name(Any number of accounts/investments), 200,000 for a joint account, and IIRC, 250,000 for an IRA. If your money there is under that and FDIC insured, you're okay.

FDIC also allows for an additional 100K of insurance for a beneficiary of a simple (Totten) trust account. Provided the beneficiary is a: spouse, parent, sibling, child or grandchild. Furthermore, kinship is not required for additional coverage on many Fiduciary account relationships... i.e. successor trustees of certain types of trusts.

[Metatwaddle]

A member of another forum I frequent keeps a chart of troubled banks which has some basic information on them. If the bank is in the red, you don't want to give them your money, note how all 3 failed banks were in the red zone when they went under. The list is by no means comprehensive, but it gives you an idea of what to look for. Find the stats for banks you're thinking of doing business with and compare them to the chart, that should give you a fair idea of how well they're doing.

Hmm, I notice Bank of America isn't on that list anywhere (there's a Providence-based Bank of America, but AFAIK the nationwide bank is in Charlotte). I thought they were in bad shape. It seems like a pretty big omission.

Okay, I admit it, I desperately want them to fail. I have reasons to hate BoA.

[Col. Crackpot]

Hmm, I notice Bank of America isn't on that list anywhere (there's a Providence-based Bank of America, but AFAIK the nationwide bank is in Charlotte). I thought they were in bad shape. It seems like a pretty big omission.

Okay, I admit it, I desperately want them to fail. I have reasons to hate BoA.

Bank of America Rhode Island, NA is former Fleet-Boston. It is now the New England subsidiary of Bank of America, NA.

[Mayabird]

Holy dang but there are a lot of banks from Georgia in that list. It even looks disproportionately large. Also I even recognize a few of those names. One of the banks from my hometown is on there.

Might it be a better idea to drop regular banks altogether and have accounts in credit unions instead?

[Mayabird]

Ghetto edit: I used to be with Wachovia but I got out of it almost a year ago and have an account at a credit union now.

[Col. Crackpot]

Ghetto edit: I used to be with Wachovia but I got out of it almost a year ago and have an account at a credit union now.

Careful with small credit unions. Generally they have relaxed underwriting guidelines for lending to members. Most will (still to this day) write mortgages and home equities with mid 500 FICO scores. When times get tough they are usually among the first to go. In 1990 several DOZEN Credit Unions went belly up at once in Rhode Island and crippled the state for years.

[Glocksman]

Ghetto edit: I used to be with Wachovia but I got out of it almost a year ago and have an account at a credit union now.

Careful with small credit unions. Generally they have relaxed underwriting guidelines for lending to members. Most will (still to this day) write mortgages and home equities with mid 500 FICO scores. When times get tough they are usually among the first to go. In 1990 several DOZEN Credit Unions went belly up at once in Rhode Island and crippled the state for years.

Doesn't the NCUA insure credit union accounts in the same manner the FDIC does standard bank accounts?

[Metatwaddle]

Hmm, I notice Bank of America isn't on that list anywhere (there's a Providence-based Bank of America, but AFAIK the nationwide bank is in Charlotte). I thought they were in bad shape. It seems like a pretty big omission.

Okay, I admit it, I desperately want them to fail. I have reasons to hate BoA.

Bank of America Rhode Island, NA is former Fleet-Boston. It is now the New England subsidiary of Bank of America, NA.

Oh, right, that makes sense. It just didn't occur to me that the New England subsidiary could be in different financial shape than the bank as a whole.

Oh well. They're buying Countrywide, so hopefully it's only a matter of time!

[aerius]

Hmm, I notice Bank of America isn't on that list anywhere (there's a Providence-based Bank of America, but AFAIK the nationwide bank is in Charlotte). I thought they were in bad shape. It seems like a pretty big omission.

Okay, I admit it, I desperately want them to fail. I have reasons to hate BoA.

There's still doing ok, but won't be for much longer now that they've bought up Countrywide. Depending on how the class action lawsuits against Countrywide go, BoA could get murdered.

[The Duchess of Zeon]

I've set a hard date for closing my BOA account by the end of September, even though it's just a single checking account which never has more than $3,000.00 in it, and opening up a student checking account through BECU (Boeing Employees Credit Union, the largest in the state and with branches at other Boeing locations, like Wichita, and open to anyone in Washington State these days) once I'm admitted to WSU. I have no confidence in BOA lasting more than another three months.

[The Kernel]

I've set a hard date for closing my BOA account by the end of September, even though it's just a single checking account which never has more than $3,000.00 in it, and opening up a student checking account through BECU (Boeing Employees Credit Union, the largest in the state and with branches at other Boeing locations, like Wichita, and open to anyone in Washington State these days) once I'm admitted to WSU. I have no confidence in BOA lasting more than another three months.

Not to try and convince you away from moving from BOA (they love to nickel and dime their customers), but you have pretty much zero risk with having $3k in a BOA checking account. Putting aside the fact that BOA is extremely unlikely to fail, the FDIC is there for a reason and they have proven themselves time and again that they know how to move in on a failing bank and keep its deposits safe.

Still, I do recommend moving away from these institutions on principal. These days I've taken all my funds out of retail banks and moved them into my investment accounts, but not because I'm worried about accessing them. I just got sick of all the money making practices of retail banks like BOA, Wells, Wamu, etc and went with Fidelity and UBS to hold my spending accounts because they hold those accounts at a loss with zero fees in order to offer a value add for their investment accounts. Since I already have investment accounts with these guys, why not take advantage of cash accounts that they offer to their customers? My cash account with Fidelity for example has no monthly fees, will refund all ATM fees, has no check fees, no minimum balances and not only gives me a nice money market interest rate, but allows me to quickly move funds into them from my brokerage accounts. Works like a charm.

[SirNitram]

BOA bought Countrywide. Given the trickles coming out about their various bullshit, that's kind of like strapping high explosives to yourself.

[J]

Putting aside the fact that BOA is extremely unlikely to fail, the FDIC is there for a reason and they have proven themselves time and again that they know how to move in on a failing bank and keep its deposits safe.

Well, the FDIC has around $50 billion in assets while BoA has well over ten times that amount in deposits. The math is not very promising for BoA account holders...

[The Duchess of Zeon]

Yes, and I've also heard how the FDIC has been treating people in California, so I sure as hell don't want to be stuck with my money there when BOA does fail, as it will now that it's bought Countrywide.

[Col. Crackpot]

Still, I do recommend moving away from these institutions on principal. These days I've taken all my funds out of retail banks and moved them into my investment accounts, but not because I'm worried about accessing them. I just got sick of all the money making practices of retail banks like BOA, Wells, Wamu, etc and went with Fidelity and UBS to hold my spending accounts because they hold those accounts at a loss with zero fees in order to offer a value add for their investment accounts. Since I already have investment accounts with these guys, why not take advantage of cash accounts that they offer to their customers? My cash account with Fidelity for example has no monthly fees, will refund all ATM fees, has no check fees, no minimum balances and not only gives me a nice money market interest rate, but allows me to quickly move funds into them from my brokerage accounts. Works like a charm.

on principal? You do know that UBS is being called to the mat by congress and the Democratic leadership for helping billionaires hide money in tax havens like Litchenstien? What principals might those be?