Power Struggles
Citigroup lawyers up: sues Wachovia and Wells Fargo for $60 billion
Citigroup has filed a lawsuit in New York against Wachovia and Wells Fargo as it continues its fight to purchase Wachovia’s assets. Citigroup has asked for $20 billion in compensation and $40 billion in punitive damages. Yeah, right.
More info: Yahoo Finance
As a former employee of World Savings (Golden West) I am shaking my head wondering who in the hell thinks its a good idea to buy this bank. Lets see if Wachovia has estimated the pick a pay loans aquired in the deal with Golden West at 121 Billlion dollars that is probably the amount lent. The loans all llowed negative amortization to 125% of the original loan amount, So 100% of people make the minimum payment (Id bet on it), that makes the 121 Billion dolllar in loans explode to over 151 billion in loans ( amount lent & deferred interest), but GDW also let the PAP(pick a pay) make minumum payments for the first 10 years even if they exceeded the 125% original loan amount.
Golden West loans were concentrated in Florida and California, the 2 states hit hardest in this bust. . Golden West was a sound company, World Savings did not lend over 80% on iffy deals, they sent in house appraisers who slaughtered the exagerated appraisals that licensed appraisers were padding to hit the necessary values, and they did not specialize in what has been coined subprime lending. In fact the smartest move made by the Sandlers was selling when they did, and we in the know- knew -it meant the Sandlers had reason to believe they wanted out to save thier name not because of money. As many people know they were very wealthy, and the sole owners of Americas most admiored lender, one of a few Savings and Loans that weathered the scandals of the 80s. They were quoted saying they would never sellout, they planned on letting the company run long after they were gone. . Imagine the suprise when the annoucement came they sold to Wachovia, after Citi said no. , I know people were saying it was the signal the end of the lending boom. In hindsight I must admit I hated working for the company but truly admire the way it was run. The likes of New Century, Encore, First Franklin, Greenpoint, Accubanc, National City copied Worlds PAP loans, then allowed 2nds up to 95% with no income or assetts, so the first loan amount grew while the 2nd was interest only payments and this is why we are in this mess. Brokers sold the products, the banks funded the deals, the investors gave the ok to make the outrageous loans because interest and margins were huge. I
I still cant help but wonder who at Wells Fargo decided buying Wachovia was a good idea, unless they plan on being to big to fail the fed has to save them.