Wachovia's Rise and Fall in the Financial World

Wachovia was founded in 1879 in Winston-Salem, North Carolina, by L. Melville Broughton.

It started as a small bank but grew rapidly over the years.

Wachovia's success can be attributed to its strategic acquisitions, including First Union in 2003, which more than doubled its size.

The bank's expansion into the southeastern United States was a key factor in its growth.

By the mid-2000s, Wachovia had become one of the largest banks in the United States, with over 3,000 branches and 5,000 ATMs.

Its assets had grown to over $700 billion.

Wachovia has a rich and complex history that spans over two centuries. The company's roots date back to 1865 with the establishment of First Atlanta, which was formerly known as Atlanta National Bank.

The company's name Wachovia is derived from the Latin form of the Austrian name Wachau, given to the land acquired by Moravian settlers in Bethabara, North Carolina, in 1753.

Wachovia's major mergers and acquisitions include the 2001 merger with First Union, which was established in 1908. This merger led to the creation of a new logo, a square with wave-like lines, featuring the green color of First Union and the blue color of the main company.

Here's a brief overview of Wachovia's major mergers and acquisitions:

By the end of 2008, Wachovia, excluding subsidiaries, was the fourth largest bank in the country.

Wachovia's merger with First Union in 2001 marked the beginning of a new era for the company. The two banks merged to create the largest bank in the southeast United States.

Wachovia went on to acquire several other financial services companies between 2001 and 2006, aiming to become a national bank and comprehensive financial services company. This period saw significant growth and expansion for the company.

Some notable acquisitions include the purchase of SouthTrust Corporation for $14.3 billion in 2004, and the acquisition of Westcorp in 2006, which gave Wachovia a presence in Southern California. However, not all deals were successful, as the company's attempt to purchase MBNA in 2005 fell through.

Here's a list of some of Wachovia's major acquisitions:

First Union Corp was established in 1908.

The company merged with Wachovia in 2001 to form Wachovia Corporation.

First Union Corporation was formed in 1958, following the merger of Union National Bank.

CoreStates Financial, which dates back to 1781, was also a predecessor to First Union.

Wachovia Bank & Trust was formed in 1911 through a merger.

Wachovia National Bank was established in 1879, originally as the Bank of Salem.

Wachovia Loan & Trust was established in 1893.

First Atlanta, which was originally Atlanta National Bank, was established in 1865.

During the merger, the Wachovia logo was changed to a square with wave-like lines, with green representing First Union and blue representing the main company.

A new logo was also accompanied by new merchandise, such as t-shirts, retractable keychains, cups, and coffee mugs, to celebrate the merger and the company's success in the years leading up to its acquisition by Wells Fargo.

Wachovia's acquisition of Westcorp was a significant move in its expansion strategy. In September 2005, Wachovia announced the proposed acquisition of Westcorp, the parent company of Western Financial Bank's parent company, WFS Financial Inc.

The acquisition made Wachovia the ninth largest auto finance lender in the competitive U.S. auto finance market. This was a major milestone in Wachovia's growth as a financial services company.

Wachovia completed the merger with Westcorp on March 1, 2006, after shareholders approved the acquisition on January 6, 2006. This marked a significant step in Wachovia's expansion into new markets.

The acquisition provided Wachovia with a small retail and commercial banking presence in Southern California. This was an important addition to Wachovia's network of branches and services.

In February 2007, the 19 Western Financial Bank branches opened under the Wachovia name, marking the beginning of a larger Wachovia presence in California. This was a key step in Wachovia's integration of the acquired businesses.

Wachovia's merger with First Union in 2001 was a significant event in the company's history. The two companies merged to create one of the largest banks in the US.

Wachovia's merger with First Union was not its first major acquisition. The company had a long history of mergers and acquisitions, dating back to the 19th century.

One notable acquisition was the purchase of CoreStates Financial, which dated back to 1781. This acquisition was part of Wachovia's efforts to expand its presence in the financial services industry.

Wachovia also acquired several other companies, including First Atlanta, which was established in 1865. The company's acquisition of First Atlanta helped to expand its presence in the southeastern US.

Here is a list of some of Wachovia's major acquisitions:

Wachovia's acquisition of SouthTrust Corporation in 2004 was a significant event in the company's history. The acquisition created one of the largest banks in the southeastern US.

Wachovia's acquisition of Westcorp in 2006 helped to expand its presence in the auto finance industry. The company's acquisition of A. G. Edwards in 2007 created one of the largest retail brokerage firms in the US.

The merger with First Union also brought about a change in Wachovia's logo. The company introduced a new logo featuring a square with wave-like lines, with green representing First Union and blue representing the main company.

The merger also led to the creation of new merchandise, including t-shirts, retractable keychains, cups, and coffee mugs. These items were released to celebrate the success of the merger and Wachovia's growing presence in the financial services industry.

Wachovia's financial struggles during the 2007-2009 financial crisis were significant. The company exposed itself to risky loans, such as adjustable rate mortgages acquired during the acquisition of Golden West Financial in 2006.

These loans led to heavy losses in Wachovia's loan portfolios during the subprime mortgage crisis. The company reported a massive $8.9 billion loss in the second quarter of 2008, much larger than anticipated.

Wachovia's CEO, Ken Thompson, was forced to retire on June 2, 2008, after being head of the company since 2000. He was replaced on an interim basis by Chairman Lanty Smith.

The board had already replaced Thompson as chairman a month earlier. This change in leadership was likely an effort to address the company's financial difficulties.

Wachovia hired Treasury Undersecretary Bob Steel as chief executive on July 9, 2008, in hopes that his experience would help the company recover from its financial struggles.

Wachovia's share price reached as high as $59.85 in April 2006, only to plunge by more than 90 percent to $5.80 when federal regulators approved Wells Fargo's deal.

Wells Fargo acquired Wachovia for $7 a share, a fraction of its estimated value, and removed the FDIC from the picture entirely due to the strength of Wells' balance sheet.

The IRS announced that companies that bought troubled banks, like Wells Fargo buying Wachovia, would receive enormous tax benefits as a reward for helping stave off a collapse of the entire global banking system.

Wells Fargo's share price has recovered since 2009, and those who owned shares at the time are now sitting on enormous earnings power.

Wachovia's share price reached as high as $59.85 in April 2006, only to plunge by more than 90 percent to $5.80 when federal regulators approved Wells Fargo's deal.

Between 2001 and 2006, Wachovia bought several other financial services companies in an attempt to become a national bank and comprehensive financial services company. This was a strategic move to expand its operations.

In 2008, Wachovia's share price sank to $5.80, wiping out nearly all of its value. This was a devastating blow to the bank's employees and customers.

Wells Fargo offered almost 7x as much money to Wachovia's stockholders as Citigroup, which was funding Wachovia at the time. This was a major factor in the bank's decision to merge with Wells Fargo.

The IRS announced that companies that bought troubled banks, like Wells Fargo buying Wachovia, would receive enormous tax benefits. This was a significant incentive for Wells Fargo to pursue the acquisition.

Wells Fargo's share price has recovered since 2009, and the bank is now sitting on enormous earnings power.

Putting customers first was a key strategy for Wachovia officials during their transition. They prioritized customers' needs over their own personal worries, which helped them navigate the challenging time.

Trying to control the uncontrollable was a major dilemma for Wachovia employees as the bank collapsed 10 years ago.

Wachovia attempted to purchase MBNA in June 2005, but the deal ultimately fell through due to disagreements over the purchase price.

The failed purchase led to MBNA being acquired by Bank of America just a week later. This was a significant blow to Wachovia, which had been planning to use MBNA as a major player in its credit card business.

In a silver lining, Wachovia received $100 million as a result of an agreement made by its predecessor, First Union, in 2000. This agreement required MBNA to pay the sum if it were ever sold to a competitor.

Wachovia responded to the failed purchase by ending its relationship with MBNA and creating its own credit card division. This move allowed the bank to issue its own Visa cards, giving it more control over its credit card business.

Wachovia's financial data is quite impressive. The company was the fourth largest bank at the end of 2008, excluding subsidiaries.

Wachovia's history is marked by significant mergers and acquisitions. The company merged with First Union in 2001, creating a large financial institution.

Here's a brief overview of Wachovia's merger history:

As you can see, Wachovia's history is complex, with many mergers and acquisitions over the years.

Wachovia's financial dealings were marred by scandals and issues, including a secret merger with Wells Fargo that left Citigroup footing the bill. Wachovia secretly agreed to merge with Wells Fargo, who offered a significantly higher price to stockholders than Citigroup.

A 2007 New York Times article exposed Wachovia's negligence in screening and taking action against companies linked with identity theft. The bank accepted $142 million in unsigned checks from companies that made unauthorized withdrawals from thousands of accounts.

Wachovia's failure to conduct suitable due diligence allowed identity thieves to operate with impunity, and the bank was forced to pay up to $144 million to end the investigation. The penalty was one of the largest ever demanded by the Office of the Comptroller of the Currency.

Wachovia's lax anti-money laundering controls allowed Mexican and Colombian drug cartels to launder at least $110 million between 2004 and 2007. The bank's failure to implement effective controls was described as "serious and systemic".

Wells Fargo was able to acquire Wachovia for a fraction of its estimated value, thanks to a secret deal with regulators that allowed Wells to merge with Wachovia despite Citigroup's funding efforts.

The FDIC forced Citigroup to back down, allowing the Wells Fargo merger to be approved. This removed the FDIC from the picture entirely due to Wells' strong balance sheet.

Wells Fargo essentially got Wachovia for free, using tax breaks to its advantage. The IRS announced that companies buying troubled banks would receive enormous tax benefits, making the deal even sweeter for Wells.

Stockholders who bought Wachovia's stock at $38 per share ended up with only 18 to 20 cents on the dollar after the merger. This was a devastating outcome for those who had invested in the company.

If you had owned shares of Wells Fargo & Company, however, you would have been sitting on enormous earnings power. Over the next decade, the bank would have been able to virtually print money from its offices.

Wachovia's negligence in screening and taking action against companies linked with identity theft led to a significant scandal. In 2007, Wachovia accepted $142 million in unsigned checks from companies that made unauthorized withdrawals from thousands of accounts.

These companies were using stolen identities to remove funds from personal Wachovia bank accounts. Wachovia collected millions of dollars in fees from them, despite receiving thousands of warnings about fraudulent checks.

The Office of the Comptroller of the Currency eventually launched an investigation, which found that Wachovia had failed to conduct suitable due diligence. This failure would have been discovered if Wachovia had followed normal procedures.

Wachovia agreed to pay up to $144 million to end the investigation without admitting wrongdoing. This penalty is one of the largest ever demanded by the Office of the Comptroller of the Currency.

In April 2008, federal prosecutors initiated a probe into Wachovia and other U.S. banks for aiding drug money laundering by Mexican and Colombian money-transfer companies.

These companies, also known as casas de cambio, help Mexican immigrants send remittances back to family in Mexico but also present a significant money-laundering risk.

Wachovia viewed this industry as a way to gain a foothold in the Hispanic banking market. It's a lucrative industry that can charge high fees.

In March 2010, Wachovia admitted to having insufficient anti-money laundering controls on $378.4 billion of transfers between 2004 and 2007.

The violations were described as "serious and systemic" and as the "largest violation of the Bank Secrecy Act". This oversight allowed Mexican and Colombian drug cartels to launder at least $110 million.

Wachovia negotiated a deferred prosecution agreement with the Justice Department to resolve criminal charges. It agreed to forfeit $110 million and pay a $50 million fine to the U.S. Treasury.

Reports in Bloomberg Businessweek and The Observer shed light on Wachovia's actions, including ignoring warnings and suspicious activity reports from its London-based director of anti-money-laundering.

Wachovia's collapse was a harsh reminder that book value isn't always a reliable indicator of a company's true worth. It's like trying to determine the value of a piece of fabric by its price tag, without knowing if it's still in style or not.

Strong competitors tend to get even stronger when faced with weaker opponents. This was the case with Wells Fargo & Company, which had a conservative approach that allowed it to absorb Wachovia's profit-earning power and heal its balance sheet.

You can't always anticipate what's going to happen in the market. Wachovia's situation was like a wounded dog that got hit by a semi-truck - it was a perfect storm of bad circumstances.

Here are some key takeaways from Wachovia's meltdown:

These lessons can help you navigate the ups and downs of the market and make more informed investment decisions.