My Friday's post, September 26, Credit Default Swaps (CDSs): The Next Financial Crisis?, stated, "The four most active banks in the Credit Default Swaps (CDS) market are as follows: JP Morgan Chase, Citibank, Bank of America, and Wachovia (WB). (I would definitely keep an investment eye on Wachovia.) Indeed, according to the "Time" article, the top 25 banks hold more than $13 trillion in credit default swaps, or approximately 22% of CDS market."
Well, we did not have to wait long, because Wachovia has just been acquired by Citigroup. The FDIC stated that Wachovia did not fail. Technically, that is correct, but it was just a matter of time before failure would have been a reality. Wachovia made two bad investments, which precipated it demise. First, it acquired Golden West Financial in 2006. Even at that time Golden West Financial had "tons" of toxic loans on its balance sheet. Second, Wachovia acquired A.G. Edwards, a regional brokerage company with headquarters in Florida. A.G. Edwards brought it own set of problems to Wachovia.
Who is next on the so-called "hit parade?" My guess is National City Bank (NCC) out of Cleveland, Ohio, which could happen within the week (probably sooner rather than later). My best guess is that National City Bank will be acquired by Wells Fargo and Company (WFC).
1 comment:
Well, for now, Wall Street isn't getting a bailout. What does this mean for the rest of us? We can't get car loans. People can't retire because their 401k has deflated in value. I was really looking forward of getting out of a recession too. Bummer!
Post a Comment