Details of Wachovia's rescue outlined in Financial Crisis panel hearing

Regulators defended their efforts to rescue Wachovia in fall 2008 on Wednesday, while newly revealed documents showed concerns about the Charlotte bank's management in the years leading to its near collapse.

In the documents released as part of a Financial Crisis Inquiry Commission hearing, regulators criticized Wachovia's board and top executives for lax risk management, "questionable strategic decisions" and a slow reaction to changing market and business conditions.

Regulators confirmed that Wachovia entered into a supervisory agreement in August 2008 that required Wachovia to improve corporate governance, risk management and other practices. The hearing, which included testimony from former Wachovia CEO Bob Steel, also shed new light on the frenzied effort to rescue the tottering bank in fall 2008.

The panel's focus Wednesday was the issue of "too big to fail" — the fact that banks became so large and interconnected that they spurred costly government bailouts when they stumbled.

Though many Charlotte shareholders have complained about Wachovia's ultimate sale to Wells Fargo at the peak of the crisis, the panel members made it clear they considered Wachovia to be one of the rescued banks. Commission members contrasted the government's efforts to stabilize Wachovia with Lehman Brothers' bankruptcy filing weeks earlier.

"One was in, one was out," said commission chairman Phil Angelides, referring to the two banks discussed in the hearing. "... Why were some institutions deemed too big to fail and others weren't?" (Related story, 10A.)

Congress created the government-appointed panel last year to examine what caused the financial crisis. The commission has until Dec. 15 to report on its findings.

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