An Independent Wachovia Bank Helps Raleigh Real Estate
posted by Tim Burrell - Wachovia Bank is in merger talks with several financial institutions, apparently because there is concern about their portfolio of sub prime loans. Their stock price has fallen dramatically, and they are talking with potential suitors. I do not see anything wrong with Wachovia's financial situation, but I have seen where unfounded concerns have caused big problems for our financial institutions. With a little help from their friends, Wachovia will stay independent.
It is better for North Carolina if Wachovia remains independent. The firm is a large employer in North Carolina, and it is one of the highlights of the Charlotte economy. I do not work for Wachovia, and I live in Raleigh, so neither of these affrect me directly. I want the financial crisis to stabilize, and for our employment to increase, not decrease. If Wachovia merges, you know Charlotte will be hurt and many North Carolina jobs will be lost or transfered elsewhere.
The people of North Carolina always help their neighbors stay out of trouble. It looks like Wachovia is not in fact in trouble, as the financial information reveals that the bank is stong. But, perception is critical in these times of bad financial news. I do not want the media coverage of the merger talks, with the tag line that implies that there is a problem with their portfolio of sub prime loans, to give Wachovia the same problem that happened to Washington Mutual. If the depositors support Wachovia, there should be no reason to merge, particularly with the imminent signing of the bail out plan that will solve some of the issues with sub prime loans. I want us to learn from the experience of Washington Mutual.
Washington Mutual was in fact well funded, until the public got worried about them. It is true that Washington Mutual had a "Memorandum of Understanding" with the Office of Thrift Supervision, a part of the Treasury Department, so there was something for the depositors to talk about. There is nothing like that with Wachovia. When the Washington Mutual depositors paniced and took billions out of the bank, it could not survive. Remember the scene from the movie, Its a Wonderful Life, where George Bailey barely keeps the bank open by using all but two dollars of his honeymoon money during a run on the bank. The run on the bank is what happened to Washington Mutual, only they did not have George Bailey.
Washington Mutual was taken over last Thursday by the FDIC, and sold at a fire sale price to JP Morgan Chase. The sale price for the assets was $1.9 Billion, which is a lot of money, but it is nothing for one of the largest financial institutions in the United States.
What did the WAMU failure do? The people who left their money on deposit did not notice any change, as the bank opened the next day and all their money was there. So, everyone who took their money out of Washington Mutual and participated in killing the institution, did not have any advantage from withdrawing their money. My personal hope is that they misplaced some of their cash, so they lost something, while all of the people who left their money in Washington Mutual still have every cent. There should be some "bad karma" from being the cause of further problems in our economy.
What eles did the death of Washington Mutual do? All the stockholders lost everything. The WAMU employees who had lots of WAMU stock in their retirement plans were wiped out. So, the working people just lost a major part of what they worked for. In the meantime, JP Morgan Chase is going to have a huge profit. So, the rich get rich, and the working people get wiped out. Also, the rest of us get less competition in the financial market, so there is less competition when we want to get a loan.
What do I want you to do? Do not take any money out of Wachovia. Those of us in North Carolina want to stand by our major institutions, and Wachovia, and the banks that are now part of Wachovia, have been a part of this state for a long time. In fact, I want you to put money in Wachovia so North Carolina can show our neighbors that we want them to be an independent part of our community. Most of my money is in Bank of America, and they have been gobbling up Countrywide and Merrill Lynch, so they will be fine without me. I have some small Wachovia accounts. Monday morning, the money comes out of Bank of America and goes into Wachovia. I want to be like the friends in the movie Its a Wonderful Life who contribute to the success of my neighbors and the bank we need in North Carolina. I do not want to say it is unpatriotic if you particupate in a run on the bank, but you sure are not helping your country or your neighbors if you do.
If you know someone at Wachovia, please let them know we want them to remain independent. If you have any money in Wachovia, it is safe so long as it is within the limits of the FDIC insurance. So, leave it there. Even better, take whatever you have in your mattress and put it in Wachovia. If North Carolina shows them that we care, I hope they will show us they have the strength to remain independent.
If you are wondering why I am doing this, financial stability is partially in my best interest. I am a Realtor, so if banks remain strong, then my clients can get loans and buy real estate in Raleigh. However, I sell foreclosed properties, the ones that banks have taken back, we call them REOs. So, if there are more financial problems, I make more money because I sell more REOs. I am not doing this for the money, I am doing this because it is good for North Carolina and the people who buy homes here.
I will see you at Wachovia on Monday morning, putting money in the bank.
