Sad State of Affairs: Wachovia Calls in Goldman to Evaluate Its Loan Portfolio

How comfortable would you feel with your plumber if he had to call another plumber to fix his own running toilet? How about a CPA who hired another accountant to do her taxes? What if your pediatrician didn't feel competent enough to examine his own child?

These are the questions that immediately came to mind Tuesday when I read that Wachovia (WB) has just hired Goldman Sachs (GS) to "perform analytics on our loans to evaluate various alternatives." I think Saturday Night Live's Seth and Amy can probably sum it up best. "Really?! Wachovia. Really?"

I wonder how the good folks at Wachovia are responding today to customers walking into their branches around the country.

"You'd like to open a savings account? Um, can you hold on a minute while I call the teller over at Bank of America (BAC) to find out what our rates are?"

"Yes, we can offer auto loans, but would you mind running over to Vinnie's Used Cars and Bait Emporium to see what size loan we can offer you?"

"A personal loan? Well, let me see if I can get in touch with the CEO who I think plays golf with one of the senior bankers over at Morgan (MS). I'm pretty sure that guy has a gardener who knows a personal trainer who thinks he heard some rumor about whether we're still offering those."

"A mortgage? No, we don't do those anymore."

This is just sad. I'm embarrassed for Wachovia and its employees. If you're a large bank with a large securities and investment banking division and you don't feel qualified to evaluate your own balance sheet or market your own portfolio, isn't it pretty much time to just hang it up and go into the dog grooming business? No offense to dog groomers.

The only thing cushioning my pain is that I've been short Wachovia these past few months. I was thinking it might be time to cover. Now I'm not so sure.

Disclosure: The author is short Wachovia and long dog groomers and emporiums.

Comments

[jazz9650:]

I think hiring GS suggests they are clearly on the block----that is more the reason.

2008 Jun 25 07:11 AM

[ziz:]

2 points
1. Tips on Dog Grooming stocks ?

2. Jazz9650 is a smart guy with a very impressive analytic brain ... is he one of the staff that JP Morgan didn't hire with BS ?

3. Most major banks are going to enter their Balance sheets in the Booker Fiction Prize this year, they may not win but they wil be up there in the rankings.

2008 Jun 25 08:14 AM

[greenback 1972:]

This is sad. Can't believe Wachovia has forgotten all there is to know about its portfolios. My how times have changed. If GS is going to represent the portfolios to potential suitors, what does that say for Wachovia's reputation in the banking community?

2008 Jun 25 08:25 AM

[:-D:]

good grief ken. is there no quality control for these articles? in the future, save us all some time by writing your short target price in the title, all the rest is buffoonery. GS' inspection just tells me WB is treading carefully and recognizes the value of a fresh second opinion, as well they should. do me a favor, short WB with every nickel you have.

2008 Jun 25 10:45 AM

[ggbbppl:]

wb is dead!!!!!!!!! what next regional banks ? yea regional bank.

2008 Jun 25 10:58 AM

[douglogic:]

I kind of agree that it is probably a good thing they are getting an outside opinion because I don't believe that a doctor should treat his own child, a cpa do his own taxes or a lawyer represent himself. It is always good to have a fresh set of eyes examine a situation. Probably some of the same insiders you are suggesting should be examining the portfolio are probably some of the same people that recommended the the World Savings deal. Thus a good reason to bring in outsiders to evaluate what is probably a really bad situation.

2008 Jun 25 11:21 AM

[jazz9650:]

Jazz is a woman,my friend,not a man.

2008 Jun 25 01:13 PM

[User 216358:]

Ken, I'm glad you're writing this article for your own benefit. Obviously you're looking to gain a couple extra dollars by scaring people into selling Wachvoia more and profitting off your shorting. Considering the recent changes in executive level positions at Wachovia, they are obviously just bringing in a reputable consultant to evaluate their numbers and give advice...ADVICE. Would you have a problem if you asked your brother for advice on your fiancial investments?

2008 Jun 25 07:50 PM

[mallarde:]

I have taken a hit on this stock and feel good holding at these levels. Very different company, but the negative feeling towards WB reminds me of AAPL when its stock crashed in 2000 or 2001. It seemed like it could not get worse.

I don't think WB is nearly as good a brand or company, but there is value there that is not being calculated into the price. The hull of the ship is scraping the bottom of the sea and I think it will have to rise.

If this comes on the form of a purchase, I hope WB holders get a one-time gain that offsets their losses to a large degree.

2008 Jun 26 04:39 PM

[UserY:]

Let me guess, you're long BS, because they didn't bring a second pair of eyes to take a fresh look at their startegy and balance sheet?

2008 Jun 26 09:23 PM

[Honesty is ...:]

Like you said clearly at the end of the article...you're a short and that you would not recover...how can your articles even be allowed to be published? Unbelievable and sad to see you trying to manipulate individuals to keep selling. After reading this article, I understand why I chose to read less of this nonesense. What you're doing is clearly robbing people the legal way. Maybe you should have stated that you were a short in the beginning of the article instead of the end. But who of read it then, right? Maybe you need to be in the dog grooming business, but wait a minute, no offense to dog groomers.

2008 Jun 29 03:06 PM