Soon after the Treasury Department proposed buying up distressed mortgage assets in September 2008, a Wachovia lobbyist was working to make sure the Charlotte bank's troubled loans would be included, an email obtained by the Charlotte Observer shows.
In a message to a staffer for then-Sen. Elizabeth Dole, lobbyist Walter Price asked for the N.C. Republican's help in making sure "whole loans" were part of the plan. Wachovia likely wanted its struggling adjustable-rate mortgage portfolio to be eligible for the government bailout, a mortgage expert said.
The "issue is treasury is saying they are not going to prioritize whole loans," Price wrote in a Sept. 20 email to Dole staffer Robbie Boone. "Want to make sure we are eligible to get these in the mix."
The email exchange offers a window into the high-stakes lobbying that occurred at the peak of the financial crisis. It also offers insight about the loans causing the most concern for the bank's executives, who would forge deals with Citigroup, then Wells Fargo in coming days.
The email string, obtained by the Observer under a nearly three-year-old Freedom of Information Act request, came during a hectic period when Wachovia was talking to multiple merger partners in the aftermath of Lehman Brothers' bankruptcy filing. The fate of the bailout plan, which became known as the Troubled Asset Relief Program, ran parallel to the bank's effort to stabilize itself.
As the financial meltdown flared in the fall of 2008, then-Treasury Secretary Henry Paulson proposed a $700 billion plan to buy up distressed assets from banks to boost confidence in the financial system and free up their balance sheets to make more loans. Treasury provided a bare-bones, three-page proposal that Congress began mulling on Saturday, Sept. 20.
The legislation defined "mortgage-related assets" as "residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued before September 17, 2008."
Wachovia's proposal would have inserted the word "loans" to make the plan apply to "residential or commercial mortgage loans and any securities, obligations, or other instruments that are based on or related to such mortgage loans, provided that each mortgage loan was originated on or before September 17, 2008."
Five months earlier, Wachovia had begun to report increasing losses in its $120 billion portfolio of option adjustable-rate mortgages, which allowed borrowers to choose from multiple payment options each month. The bank had inherited these loans in its 2006 acquisition of Golden West Financial and continued to make them on its own.
Many of the loans were made to borrowers in California housing markets that saw huge price declines in the housing bust, raising concerns about the total losses the bank would ultimately absorb. Analysts saw the bailout plan as a possible way for the bank to offload that exposure.
Wachovia was likely concerned that its option ARMs wouldn't be considered for the program, said Guy Cecala, publisher of Inside Mortgage Finance, a Bethesda, Md.-based publication that closely tracks the industry.
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