Former Wachovia CEO Ken Thompson is the latest casualty of the mortgage crisis, following the high-profile ousters of Stanley O’Neal and Chuck Prince from Merrill Lynch and Citigroup, respectively, late last year.
The missteps at Wachovia, the fourth-largest bank in the US, reach beyond the mortgage mess, though the company finds itself neck-deep in it. That’s due in large part to some $10 billion worth of new home construction loans amid an industry-wide slow down and exposure to adjustable-rate residential mortgage loans in the crummy California market, acquired in Wachovia’s 2006 buyout of Golden West Financial.
Wachovia has also struggled to integrate the operations of A.G. Edwards into its Wachovia Securities unit after acquiring the venerable retail brokerage and asset manager last year, alienating many long-time A.G. Edwards customers in the process. Wachovia has also been embroiled in alleged money laundering and telemarketing scams.
Thompson, who had been serving as the company’s chairman and CEO, got his first no-confidence vote when the company split the roles last month. He was out of a job a little more than three weeks later. Lanty Smith was named Wachovia’s chairman and ended up succeeding Thompson as CEO on an interim basis.
Meanwhile, Washington Mutual (WaMu) made a similar move on Monday in splitting the chairman and chief executive positions, with independent director Stephen Frank to take over the chairman function from CEO Kerry Killinger. If the goings-on at Wachovia are any indication, Killinger shouldn’t get too comfortable in his new, reduced role.
With both Wachovia and WaMu foundering, takeover rumors are rampant, and one of the few financially healthy big banks around, JPMorgan Chase, has been mentioned as a possible suitor for one or the other.
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