Besides - as is now clear - my views are worth little. I thought WaMu was ultimately better than Wachovia and preferred the preferreds of WaMu to many less risky bets. I did not (and would not) own the common of either institution. I would not - as I think at best they wind up diluting themselves massively. I am fond of shorting commons against preferreds - but that trade is difficult to do these days.
Anway I was wrong. WaMu was confiscated first.
In the past Wachovia has looked worse than WaMu. Does anyone other than me remember the Money Store?
It will not be long before Wachovia's numbers are as bad as WaMu was last quarter.
I have no position in Wachovia but if I could I would short the common now. The way the FDIC acted makes me think Wachovia is toast too.
If you were the CEO of Wachovia you would be looking for a bride-groom or suitor now. You would take a bid at a discount to market so the common is just awful.
The prefs in Wachovia would just be a bet on a willingness of someone to pay 50c a share for the common - and now the FDIC appears willing to confiscate the bank and even wipe out the senior debt there appears no reason to do that.
The FDIC decision might be right - but the public information needed to justify it is simply not there. The FDIC has some explaining to do. [I am - I note - inclined to believe that the decision was well thought through - even if at the moment it looks like a shoot-from-the-hip ambush.]
This is important because if the decisions to wipe-out the claims of debt holders appear arbitrary you ensure that nobody is willing to be a debt holder.
And that - more than anything else - spells big problems for Wachovia. Ultimately it might even spell problems for Bank of America or for America itself.