Is Wachovia failing? Not in the 'it will close this weekend sense' but things aren't good in Charlotte. Along with Washington Mutual, they're the biggest holder of Option Pay Arms on the West Coast. They bought Golden West for $26 billion in 2006 (by comparison, Bank of America bought much bigger Countrywide for $4 billion in 2008). That, and they kept 100% of the mortgages they originated from bad years 2006-2008 but sold off ~90% originated from good years 2000-2005. They are also active counter-patries on Credit Default Swaps with payout obligations unknown. Their books are loaded with land mines.
On the upside, they own all these loans so they're free to modify them, unlike most other banks.
Just so you dont miss it, that part on the right is the 'company' losing 87% of its value in 9 months. This drop is directly correlated to housing price declines.
Usually when a company goes to zero it's nothing special, they're bankrupt or out of business. What happens when this company (or Fannie Mae) reach zero? Something a smidgit different; the United States goverenment has pretty much said this company can't fail. If it does, then the goobermint will take all their assets/debt onto its books. That figure amounts to about $12 trillion US Dollars.
Let's put this drop into perspective...here's a chart for Indymac Bank that looks pretty similar.
Indymac has the exact same business model but not government guarentee. Indymac went under on Friday. Following the curves, I'll give Freddie Mac 4-6 more months.
***TRAY DEE UPDATE***
