Takeover By Wachovia
The Sandlers, who had run the company for forty-three years, were ready to retire and focus on philanthropy.
In 2006, they agreed to acquisition of Golden West Financial and its thrift, World Savings, by Wachovia Bank, The acquisition gave Wachovia an additional 285-branch network spanning 10 states. Wachovia greatly raised its profile in California, where Golden West held $32 billion in deposits and operated 123 branches. Wachovia also picked up about $122 billion in option adjustable rate mortgages.
The acquisition was announced on on 7 May 2006, with a price of a little under $25.5 billion. The merger was completed in mid-2008.
The subprime mortgage crisis caused the timing of the acquisition by Wachovia to harm that company's financial situation.
World Savings lending volume dipped again in 2006 shortly after the sale to Wachovia was initiated. This prompted World Savings to attract more borrowers by taking a step which the company had been resisting for years: it began to write loans at an annual interest rate of just 1%, with correspondingly low monthly payments. World Savings previously did not allow rates so low.
While World Savings continued to scrutinize borrowers’ ability to manage increased payments, the move to rock-bottom rates lured customers whose financial reliability was harder to verify.
Wachovia CEO G. Kennedy "Ken" Thompson described Golden West as a "crown jewel".But investors did not react positively to the deal at the time.
After the takeover was completed in 2008, some analysts said that Wachovia purchased Golden West at the peak of the US housing boom, and that its mortgage-related problems were the ultimate factor in Wachovia's fall.
On the October 4, 2008 episode of Saturday Night Live the show lampooned the Wachovia takeover of Golden West Financial as part of a segment on the financial bailout. Darrell Hammond, as Herb Sandler, states that "My wife and I had a company which aggressively marketed subprime mortgages, and then bundled them as securities to sell to banks such as Wachovia. Today, our portfolio's worth almost nothing, though, at one point, it was worth close to $19 billion." In response to the show, the real Herb Sandler said that he's been "listening to this crap for two years" and "we are being unfairly tarred."
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Famous quotes containing the word takeover:
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—Joseph Brodsky (b. 1940)