Bank rescue came too late for Wachovia

Charlotte ObserverOctober 15, 2008 

A day after the federal government laid out a sweeping plan to buy into the country's banks, a top regulator said Tuesday that Wachovia might have been saved as a stand-alone bank if the government had acted sooner.

The latest plan calls for the government to spend $125 billion to buy stakes in nine major banks in hopes they will increase lending to consumers and businesses.

“It definitely would have made a difference,” Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., said of Wachovia. Speaking to a small group of reporters in Washington, she added that Washington Mutual, which went bust last month, would not have been spared that fate, even if government had moved earlier on the new plan.

A previous plan had called for the government to buy troubled mortgage assets from banks. That strategy was unveiled Sept. 19 – more than a week before Wachovia's weakening finances forced it into a quick sale.

The question – would earlier government intervention have saved Wachovia? – has been gnawing at shareholders and employees of the Charlotte bank. The bank, hobbled by its 2006 purchase of mortgage lender Golden West, is being sold to San Francisco-based Wells Fargo. Though Wells is seen as a good fit for Wachovia, culturally and geographically, the sale is still a blow to Charlotte, which is sure to lose jobs and its prestige as the home of two major banks.

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