Wachovia's CDO's

Wachovia Credit-Losses Reach $1.7 Billion in October

Comment: I am learning something new every year - or in the case of CDO's (collateralized debt obligations) every quarter. Until just recently, I had never heard of the term.

Excerpt:

Nov. 9 (Bloomberg) -- Wachovia Corp., the second-largest regional bank, said mortgage-related losses total $1.7 billion so far this quarter, more than the lender reported for the previous three months.

Wachovia declined in New York trading after the Charlotte, North Carolina-based bank set aside as much as $600 million for bad loans in the fourth quarter and said in a regulatory filing that securities linked to subprime mortgages lost $1.1 billion last month. The company's $1.3 billion of writedowns in the third quarter prompted its first earnings decline in six years.

The world's biggest banks have written down more than $40 billion after late payments on U.S. home-loans rose to a five- year high and foreclosures set a record. Morgan Stanley, the second-largest U.S. securities firm, reported Nov. 7 that its subprime mortgage-related assets lost $3.7 billion in the previous two months, and said its outlook for credit markets was bleaker than in September.

``Any financial institution holding any of this paper doesn't really have a good grasp on what the true value is,'' said Michael Nix, who helps manage $800 million at Greenwood Capital Associates, in Greenwood, South Carolina, including 116,864 Wachovia shares. ``We'll see continued writedowns that come out of the fourth quarter.''

Comments: For all CDO posts click here. It is of great interest to me to see how Wells Fargo sorts out with their CDO's!

More (updated):

Wachovia Chief on the Hot Seat

Excerpt:

... chief executive Ken Thompson may be the next CEO brought down by Wall Street's mortgage binge.

So says analyst Dick Bove of Punk Ziegel & Co. Bove, who rates the stock market perform, says Thompson was among the most aggressive executives in pushing his bank to take on more risk as it delved deeper into the world of nontraditional mortgages.

Wachovia didn't comment, but Bove's remarks come on the heels of a regulatory filing in which the Charlotte, N.C., bank said it plans to take a $1.1 billion writedown on collateralized debt obligations that are backed by subprime residential mortgage-backed securities.