Wells Fargo’s Chief on Wachovia Takeover: “We Used Our Own Money”
Wells Fargo (NYSE: WFC) chairman and CEO John Stumpf has credited the bank’s culture that helped it avoid the worst pitfalls during the housing downturn, which, he said, made it the only company in the US at the time that had the capacity to buy the then ailing Wachovia Corp.
Wachovia, touted as the second largest bank in US based on deposits entering into it, has acquired Golden West Financial Corp. in a $25.5 billion deal in May 2006 which allowed the Charlotte, N.C.-based bank to takeover a 285-branch network that spans across 10 states.
But the acquisition has led to another acquisition. Wells Fargo bought Wachovia after it incurred several losses in its mortgage portfolio trumped up by the acquisition of Golden West, in addition to questions of how it managed risks at the time.
In an audio file detailing his interview with the Financial Crisis Inquiry Commission, Stumpf said Wachovia had weaknesses in its culture that resulted in the bank’s demise, though he added that the company “was a very fine company in many, many respects.”
Stumpf told the commission that during the tumultuous time for Wachovia, Wells Fargo was the only firm in the US that had enough cash on hand to save the company from totally falling off the track. He added that Wells Fargo had used its own money without government backing.
Stumpf also said in the interview that Wells Fargo and Wachovia had something in common on the customer and community level, calling them “Main Street” banks.
Wells Fargo had sustained costs in its market share during the housing boom in 2004 and 2005 to avoid specific residential and commercial products, which aided the bank to ward off problems that felled the other banks like Wachovia, Stumpf said.