US Financial Crisis: The Takeover of Wachovia by Wells Fargo



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Code : ECC0006

Year :
2008

Industry : Banking, Insurance and Financial Services

Region : US

Teaching Note:Not Available

Structured Assignment :Not Available

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Abstract: Fargo In mid-2008, on the Wall Street, events took place at a breath taking pace the financial institutions that were bidding for other banks dramatically became prays in a matter of days. One such victim was Wachovia Corp. (Wachovia), which in late October 2008 bid to acquire Merrill Lynch, but could not close the deal. By November 2008, however, it could not sustain alone and Wells Fargo gobbled it after a fierce battle with Citigroup. This case study focuses on the circumstances that forced Wachovia to take a decision of selling itself to Wells Fargo. It discusses the success story of Wachovia, which rose from a small financial institution to the third-largest banking chain (based on total deposits and the fifth-largest bank by market capitalisation) in US. The case analyses the internal and external factors that encouraged Wachovia to enter into the mortgage business which victimised the bank through subprime lending. Evaluating the radical measures adopted by Wachovia to save itself from the repercussions of the acquisition of Golden West Financial Corp. and of the credit market disturbances, the case study also helps in debating the alternative strategies that would have saved the bank in the crisis.

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Pedagogical Objectives:

  • To discuss the origin, growth and scope of the activities of Wachovia.
  • To analyse the internal and external factors that enticed Wachovia to enter into the mortgage business that victimised the bank.
  • To discuss the measures adopted by Wachovia to save itself from the financial crisis.
    Keywords : Financial Crisis, Subprime Mortgage Business, Mortgage Backed Securities (MBS), Credit Default Swaps (CDS), Collateral Debt Obligations (CDOs), Subprime Mortgage Crisis, Citigroup, Wells Fargo, Wachovia, Golden West Financial Corp, Diversified Financial Services, Pick-A-Payment Loans, Adjustable Rate Mortgages (ARMs), Negative Amortisation, Federal Deposit Insurance Company

    Contents :
    Corporate Background
    Wachovia's Entry into Subprime Mortgage Market
    Final Strife in the Financial Waterloo
    Thundering Invasion by Wells Fargo


    Case Introduction >>


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