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    Repiglican Roast

    A spirited discussion of public policy and current issues

    Location: The mouth of being

    I'm furious about my squandered nation.

    Monday, September 29, 2008

    Wachovia Option-ARM Mortgage Losses May Force Merger

    hree days after Chief Executive Officer Robert Steel told employees Wachovia was ``strong and performing well,'' the Wall Street Journal reported today that the Charlotte, North Carolina- based bank was in advanced takeover talks with Wells Fargo & Co. Citigroup Inc. also may make a bid, the paper reported. Wachovia fell 52 percent to $4.88 in German trading.

    Wachovia's plight stems from the $24 billion acquisition of Golden West Financial Corp., a California lender that specialized in payment-option adjustable-rate mortgages. Former CEO Ken Thompson told shareholders in May 2007 the loans would help propel earnings to new highs. Instead, Wachovia now expects losses on 12 percent, or $14 billion, of the $122 billion option- ARM portfolio. Analysts at Fitch Ratings predict default rates on such loans packaged as securities may reach 45 percent.




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