Wachovia stock gets hit hard

Early B.

Wachovia's stock tumbled yesterday after Oppenheimer rated the stock to "underperform." Of course, Wachovia is taking a hit from mortgages. Analysts expect Wachovia to post significant losses in 2008 and 2009. A new CEO just started last week.

What does all of this mean to someone who banks with Wachovia and has a couple of hundred grand parked there? (no, not me!)

Also, worst case scenario and Wachovia goes under or gets bought out -- what effect does this have on major deposit holders?

Thanks.

ohskigod

Early B. wrote: »

What does all of this mean to someone who banks with Wachovia and has a couple of hundred grand parked there? (no, not me!)

Also, worst case scenario and Wachovia goes under or gets bought out -- what effect does this have on major deposit holders?

.

that means you might want to take out whatever you have in there over 100,000 (limit your covered by FDIC)

FDIC insures deposits up to 100g, so if you have less than that in a bank, there is no need to panic.

if you own there stock? well thats a different story..LOL

billbillw

If it gets bought out, there should be no effect to depositors, but shareholders could take a hit. The other scenario is that the bank could collapse and get taken over by the FDIC, just like what happened with IndyMac last week.

If this happens, deposits over $100k are not insured. However, the FDIC usually sells the bank off and uses the money to pay out the uninsured depositors, but with some loss (usually 15%-30%).

MikeC78

From my understanding... If it's a "joint" account, you are covered to $200,000. $100,000 per person on the account.

billbillw

MikeC78 wrote: »

From my understanding... If it's a "joint" account, you are covered to $200,000. $100,000 per person on the account.

Its $100,000 per account no matter if joint or not. However, a married couple could have 3 insured accounts with the same bank. One in each name and a joint account for a total of $300,000.

shack

The chance of Wachovia failing is very slim. They are one of the top 10 Money center banks in the US at $808 BILLION dollars in assets. Compare that to the IndyMac bank that just failed and it was $32 Billion in assets. That was the 2nd largest bank failure in US history.

If it were to happen most depositors would be covered by FDIC insurance which is $100,000 per DEPOSITOR which can be up to about $500,000 per family depending on the way the accounts are structured and understanding the definition of a depositor.

IRA accounts in banks are insured up to $250,000.

Typically the FDIC or the OCC would find them a "white knight" to take them over...but the problem all the players who might be interested are in the same boat and don't have the capital to purchase Wachovia. I think what will happen is the Feds will attempt to keep the big banks afloat until the storm is over and then partner them with someone else if they can't raise capital. If the bank is bought or merged with another there is no risk to the depositors...there is only risk if it fails.

As a side note...to the best of my knowledge there has never been a bank failure that was insured by the FDIC where a depositor lost money...even if it was over the insured limit. Stockholders have lost the value of their investments...but I think they have always been able to return 100% of deposits. That is the past...and this is a whole new ballgame.

NotaSuv

billbillw wrote: »

Its $100,000 per account no matter if joint or not. However, a married couple could have 3 insured accounts with the same bank. One in each name and a joint account for a total of $300,000.

Very true..thats why we have 3 accounts..... and a mattress full of cash...gold bars buried in the back yard.....

polktiger

Deposits are only one problem - Wachovia is on the hook for many letters of credit and they guarnatee a lot of paper. IF a bank the size of Wachovia failed, we would be talking about a wave affect not a ripple affect. IndyMac can fail it reminds all the small firms to stay in line. Wachovia can't fail so it reminds all the super large that they can do whatever they want. (cough, Bear Stearns, cough)

billbillw

shack wrote: »

As a side note...to the best of my knowledge there has never been a bank failure that was insured by the FDIC where a depositor lost money...even if it was over the insured limit. Stockholders have lost the value of their investments...but I think they have always been able to return 100% of deposits. That is the past...and this is a whole new ballgame.

Oh yes there has, and since the S&L debacle, things will be worse this time around.
www.marketwatch.com

shack

billbillw wrote: »

Oh yes there has, and since the S&L debacle, things will be worse this time around.
www.marketwatch.com

Those takeovers and liquidation are not yet complete. Even that article talks about a substantial portion of the uninsured deposits being covered. Whether or not all the deposits are covered is up in the air and will be determined at a future date. The FDIC has made it a priority to cover all deposits in the past...the future is not so certain.

Shizelbs

Early B. wrote: »

What does all of this mean to someone who banks with Wachovia and has a couple of hundred grand parked there?

Start buying more audio gear.

billbillw

shack wrote: »

Those takeovers and liquidation are not yet complete. Even that article talks about a substantial portion of the uninsured deposits being covered. Whether or not all the deposits are covered is up in the air and will be determined at a future date. The FDIC has made it a priority to cover all deposits in the past...the future is not so certain.

I listened to an interview with the Chairman of the FDIC yesterday on NPR an she indicated that IndyMac customers will most likely end up losing 20% or more of their uninsured deposits after all the fallout.

Things are going to get worse too. Probably nothing like the S&L stuff in the late 80's/early 90's, but with all the consolidation of banks these days, there aren't really as many out there to collapse either. The number of banks may not be as significant, but the number of depositors affected could be very significant if one of the larger banks does fold.

sucks2beme

The guys at these banks whose job was to set policies(management)
and the loan underwriters screwed up big time. Seems that the industry
as a whole went asleep at the wheel. What happens when there are no longer
any buyers, and Uncle Sam's pockets empty out? FDIC was put into place
to stop bank runs. They don't have the ability to bail out very many
modern "superbanks". In the past, a couple of bank failures could be handled.
But when a couple of these modern Goliaths go under, who's going to
cough up the cash?

Mike Kozak

I used to work for Wachovia for 12 years and just got hired back as a Contractor!! They are way too expensive for a takeover

Systems

What Shack said. Very slim chance Wachovia will go belly up. I called my GF who works for Merrill Lynch (she's pretty high up the food chain) and asked her to look into it. Immediately she said they aren't going anywhere. I do know that Wachovia has a yearly average of around $50 a share and is sitting at about $10 today. But this really means nothing. Everybody has dropped including Merrill Lynch. She'll give me the skinny tonight. I'll let you know what she says.

Chuck

shack

Most banks are trading anywhere between 20-33% (some even lower) of their 52 week high. It is the industry and not necessarily the individual banks. All are being lumped into the same category...regardless of how well or how bad they are doing. Most are trading below book value. That says the market believes they will have to take substantial write downs which will lower both assets and capital. Many will, some won't. If we let the market do it's thing and not panic...when it is all said and done...some of the big guys will be medium size banks, some of the medium size banks will be small, some of the small will be gone and the investors who own stocks in the "right" banks will see their values soar. By "right" I mean those that had good loan portfolios, managed their risks well and stay on top of the problems...but their stock got hammered along with the rest of the problems. Once the market sees they are ok, they will be good investments again and their value will reflect that.

The one thing that can screw the whole thing up is panic. The economy is stuggling, but most of the world would love to have OUR economy...problems and all. It will get better.

mrbigbluelight

RE: FDIC insurance for depositors.

The $100,000 insurance is for each depositor, PERIOD, correct ?

So if I had a million, split among 10 FDIC insured banks at $100,000 per, and 5banks go belly up, I don't get $500,000, I only get a max of $100,000, correct ? And that $100,000 is a LIFETIME limit, isn't it ?

I'm not talking about the probability of 5 out of 10 banks crashing, I'm just saying that splitting money up among banks doesn't necessarily guarantee that you get all your money back, FDIC insurance or not.

I think. But than again, I think I may know what I'm talking about here, too.

shack

mrbigbluelight wrote: »

RE: FDIC insurance for depositors.

The $100,000 insurance is for each depositor, PERIOD, correct ?

So if I had a million, split among 10 FDIC insured banks at $100,000 per, and 5banks go belly up, I don't get $500,000, I only get a max of $100,000, correct ? And that $100,000 is a LIFETIME limit, isn't it ?

I'm not talking about the probability of 5 out of 10 banks crashing, I'm just saying that splitting money up among banks doesn't necessarily guarantee that you get all your money back, FDIC insurance or not.

I think. But than again, I think I may know what I'm talking about here, too.

Sorry...you are wrong. Don't take my word for it. Here is the FDIC's web site.

http://www.fdic.gov/deposit/deposits/insured/basics.html

The important language is near the middle of the page.

How much insurance coverage does the FDIC provide?
The basic insurance amount is $100,000 per depositor, per insured bank.

The $100,000 amount applies to all depositors of an insured bank except for owners of certain retirement accounts, which are insured up to $250,000 per owner, per insured bank.

Deposits in separate branches of an insured bank are not separately insured. Deposits in one insured bank are insured separately from deposits in another insured bank.

If you care to go to the FAQ section and go to #10 you will find this:

Can I increase my insurance coverage by placing deposits with different insured banks?

Deposits with each FDIC-insured bank are insured separately from any deposits at another insured bank. If an insured bank has branch offices, the main office and all branch offices are considered one insured bank – a depositor cannot increase insurance coverage by placing deposits at different branches of the same insured bank. Similarly, deposits held with the Internet division of an insured bank are considered the same as deposits with the "brick and mortar" part of the bank, even if the Internet division uses a different name. If two banks are affiliated, such as having a common holding company, but are separately chartered (indicated by having two different FDIC Certificate numbers), deposits in each bank would be separately insured.

mrbigbluelight

So the thing to make sure of is to have you separate funds in banks with different FDIC Certificate numbers then.

Shack, didn't there used to be a "lifetime limit" clause on FDIC funds though ? Even though the insurance policies treated different FDIC Certificate institutions as separate, I thought there was some sort of lifetime limit ?
My basis for thinking this is from some bit of trivial knowledge loaded so far back in the memory stack I can't get to it (mainly because I don't have to worry about that problem ever occuring here ).

....I did go to the linked site, and attempted to look up the info myself, but ..
.... I got a headache and had to lay down.

shack

mrbigbluelight wrote:

Shack, didn't there used to be a "lifetime limit" clause on FDIC funds though ? Even though the insurance policies treated different FDIC Certificate institutions as separate, I thought there was some sort of lifetime limit ?

Not that I'm aware of.

sucks2beme

Looks like the feds are going to examine Countrywide.
It's about time. They pretty much led the charge for
sub-prime lending. They'd set up the loan with a
crappy interest rate and ungodly closing costs, then sell
off the loan a couple of months later.

AndyGwis

gold bars buried in the back yard.....

If this were true, you'd be sitting pretty right now. Gold's on fire, baby!

Most financials are way up today. BOA and CMA to name a couple. Stupid energy stocks and commodities that have been carrying me as of late are in the crapper this week, though.

DollarDave

---

July 17, 2008
FDIC fact sheet
What Does the FDIC Insure?
The FDIC insures all deposits at insured banks, including checking, NOW and savings accounts, money market deposit accounts, and certificates of deposit (CDs), up to the insurance limit.
The FDIC does not insure the money you invest in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if you purchased these products from an insured bank.

Basic Insurance Amount Is $100,000
The basic insurance amount is $100,000 per depositor per insured bank. Certain retirement accounts, such as Individual Retirement Accounts, are insured up to $250,000 per depositor per insured bank.
If a family has $100,000 or less in all of your deposit accounts at the same insured bank the deposits are fully insured.

Coverage Over $100,000
The FDIC provides separate insurance coverage for deposit accounts held in different categories of ownership.

A person may qualify for more than $100,000 in coverage at one insured bank if they own deposit accounts in different ownership categories.

Common Ownership Categories
The most common ownership categories are:

Single Accounts
Certain Retirement Accounts
Joint Accounts
Revocable Trust Accounts
Single Accounts
These are deposit accounts owned by one person and titled in that person's name only. All of your single accounts at the same insured bank are added together and the total is insured up to $100,000. For example, if you have a checking account and a CD at the same insured bank, and both accounts are in your name only, the two accounts are added together and the total is insured up to $100,000.
Note: Retirement accounts and qualifying trust accounts are not included in this ownership category.

Certain Retirement Accounts
These are deposit accounts owned by one person and titled in the name of that person's retirement plan. Only the following types of retirement plans are insured in this ownership category:
Individual Retirement Accounts (IRAs) including traditional IRAs, Roth IRAs, Simplified Employee Pension (SEP) IRAs, and Savings Incentive Match Plans for Employees (SIMPLE) IRAs
Section 457 deferred compensation plan accounts (whether self-directed or not)
Self-directed defined contribution plan accounts
Self-directed Keogh plan (or H.R. 10 plan) accounts
All deposits that an individual has in any of the types of retirement plans listed above at the same insured bank are added together and the total is insured up to $250,000. For example, if an individual has an IRA and a self-directed Keogh account at the same bank, the deposits in both accounts would be added together and insured up to $250,000.

Naming beneficiaries on a retirement account does not increase deposit insurance coverage.

Joint Accounts
These are deposit accounts owned by two or more people. If both owners have equal rights to withdraw money from a joint account, each person's shares of all joint accounts at the same insured bank are added together and the total is insured up to $100,000.
If a couple has a joint checking account and a joint savings account at the same insured bank, each co-owner's shares of the two accounts are added together and insured up to $100,000, providing up to $200,000 in coverage for the couple's joint accounts.

Example: John and Mary have a $220,000 CD at an insured bank. Under FDIC rules, each person's share of each joint account is considered equal unless otherwise stated in the bank's records. John and Mary each own $110,000 in the joint account category, putting a total of $20,000 ($10,000 for each) over the insurance limit.

Account Holders
Ownership Share
Amount Insured
Amount Uninsured

John
$ 110,000
$ 100,000
$ 10,000

Mary
$ 110,000
$ 100,000
$ 10,000

Total
$ 220,000
$ 200,000
$ 20,000




Revocable Trust Accounts
These are deposits held in either payable-on-death (POD) accounts or living trust accounts.

Payable-on-death (POD) accounts – also known as testamentary or Totten Trust accounts – are the most common form of revocable trust deposits. These informal revocable trusts are created when the account owner signs an agreement – usually part of the bank's signature card – stating that the deposits will be payable to one or more named beneficiaries upon the owner's death.

Living trusts – or family trusts – are formal revocable trusts created for estate planning purposes. The owner of a living trust controls the deposits in the trust during his or her lifetime.

Note: Determining coverage for living trust accounts can be complicated and requires more detailed information about the FDIC's insurance rules than can be provided in this publication. If you have a living trust account, contact the FDIC at 1-877-275-3342 for more information.

Deposit insurance coverage for revocable trust accounts is based on each owner's trust relationship with each qualifying beneficiary. While the trust owner is the insured party, coverage is provided for the interests of each beneficiary in the account. The FDIC insures the interests of each beneficiary up to $100,000 for each owner if all of the following requirements are met:

The beneficiary is the owner's spouse, child, grandchild, parent, or sibling. Adopted and stepchildren, grandchildren, parents, and siblings also qualify. In-laws, grandparents, great-grandchildren, cousins, nieces and nephews, friends, organizations (including charities), and trusts do not qualify.
The account title must indicate the existence of the trust relationship by including a term such as payable on death, in trust for, trust, living trust, family trust, or an acronym such as POD or ITF.
For POD accounts, each beneficiary must be identified by name in the bank's account records.
If any of these requirements are not met, the entire amount in the account, or any portion of the account that does not qualify, would be added to the owner's other single accounts, if any, at the same bank and insured up to $100,000. If the revocable trust account has more than one owner, the FDIC would insure each owner's share as his or her single account.

Note: The following example applies to POD accounts only. Coverage may be different for some living trusts.

Example: Bill has a $100,000 POD account with his wife Sue as beneficiary. Sue has a $100,000 POD account with Bill as beneficiary. In addition, Bill and Sue jointly have a $600,000 POD account with their three children as equal beneficiaries.

Account Title
Account Balance
Amount Insured
Amount Uninsured

Bill POD to Sue
$ 100,000
$ 100,000
$ 0

Sue POD to Bill
$ 100,000
$ 100,000
$ 0

Bill & Sue POD to 3 children
$ 600,000
$ 600,000
$ 0

Total
$ 800,000
$ 800,000
$ 0


These three accounts totaling $800,000 are fully insured because each owner is entitled to $100,000 of coverage for the interests of each qualifying beneficiary in the accounts. Bill has $400,000 of insurance coverage ($100,000 for the interests of each qualifying beneficiary – his wife in the first account and his three children in the third account). Sue also has $400,000 of insurance coverage ($100,000 for the interests of each qualifying beneficiary – her husband in the second account and her three children in the third account).

When calculating coverage for revocable trust accounts, be careful to avoid these common mistakes:

Do not assume that coverage is calculated as $100,000 times the number of people –owner(s) and beneficiary(ies) – named on a trust account. Coverage is provided for the interest of each qualifying beneficiary named by each owner. Additional coverage is not provided to the owners for naming themselves as owners. For example, a father's POD account naming two sons as equal beneficiaries is insured to $200,000 only -- $100,000 for the interest of each qualifying beneficiary.
Do not assume that the FDIC insures POD and living trust accounts separately. In applying the $100,000 per-beneficiary insurance limit, the FDIC combines an owner's POD accounts with the living trust accounts that name the same beneficiaries at the same bank.
Helpful links:

Electronic Deposit Insurance Estimator – EDIE

Are my Deposits Insured ?

FDIC Guide to Calculating Deposit Insurance Coverage for Revocable and Irrevocable Trusts

Financial Institution Employee's Guide to Deposit Insurance