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02/11
Steel Says Wachovia Securities’ Loans Helped Force Bank to Sell
“You have an aspirant in the securities business, Wachovia Securities, and as they are seeking to develop commercial relationships, investment-banking relationships, they are using the balance sheet to get the flywheel going as part of the strategy,” Steel said in an interview with the Financial Crisis Inquiry Commission, according to audio files released yesterday. “Those assets were not at the top of the quality spectrum.”
Richard Kovacevich, then chairman of San Francisco-based Wells Fargo & Co., said the loans caused the bank on Sept. 28, 2008, to demand government assistance in any purchase of Wachovia, according to his interview with the FCIC panel.
“Our people in San Francisco said we are having some problems understanding the risk in the wholesale commercial investment-banking portfolio,” Kovacevich told the commission, which conducted an 18-month investigation into causes of the financial crisis. “When we ask questions, we aren’t getting good answers, the files aren’t complete.”
On Sept. 29, New York-based Citigroup Inc. signed an agreement with Charlotte, North Carolina-based Wachovia to join operations. That bid was trumped by Wells Fargo on Oct. 3 without government assistance because the lender had conducted enough due diligence to feel comfortable, Kovacevich told the panel.
In July 2009, the Wachovia Securities brand was changed to Wells Fargo Securities. Former Wachovia executives Robert Engel and Jonathan Weiss were appointed in January 2009 to lead the group.
Wells Fargo paid $12.7 billion in 2008 for Wachovia to become the fourth-largest U.S. bank by assets. The lender has reported more than $23 billion in profits since it bought the company.