Regional Report Charlotte December 2010
Just how precarious a position Wachovia was in and how close it came to failing. Its leaders initially thought Wells Fargo was going to buy it, but Wells Fargo pulled out, and some of the executives weren’t sure what was going to happen, whether they might fail. They thought Wells Fargo was totally out of the picture, and they knew that Citigroup wanted to break up the company. And [Federal Deposit Insurance Corp. Chairman] Sheila Bair at one point contemplated failing the bank.
Why didn’t she?
She got a lot of pushback from the other regulators. They had already seen how bad it was when Lehman Brothers failed and what that did to the financial system. Washington Mutual’s failure helped unsettle markets even further. Basically, the other regulators were saying Wachovia is much bigger than Washington Mutual, it’s much more interconnected than Washington Mutual was, and that would be too much of a blow to the financial system.
Why did Wachovia go through with the Golden West deal?
One, its CEO at the time, Ken Thompson, is a pretty optimistic guy. The company had become an expert at doing mergers, so I think they were confident they could do it well. They weren’t just buying it because it was a mortgage company. It had a large presence on the West Coast. There are only so many banks that can give you a big presence, and Golden West was one of the last ones out there. Also, Golden West sold Wachovia on the idea that they knew how to do option adjustable-rate mortgages the right way. And you can argue that Wachovia just didn’t dig into it enough. It happened quickly, and there wasn’t enough dissent.
Once that deal was done, how could Wachovia have saved itself?
They handed the mortgage company over to Golden West. If Wachovia folks had been running it, maybe they would have had a different approach. Maybe option ARMs wouldn’t have been as big a product. It’s not just that they inherited these loans from Golden West, they kept making them.
Should Wachovia have booted Thompson sooner? Or kept him?
It would have been hard to let him go too much earlier, because on the outside, at least until early 2008, they didn’t look like they were doing too much worse than everybody else. Some might argue he was the right guy to turn things around. He’d done it before. He certainly would have known what the problems were. The question would be whether he had any credibility left with investors.
Was Ken Lewis stepping down as CEO the best thing for BofA?
He had become such a lightning rod. His personality and mannerisms weren’t all that likeable when things were going wrong. For a bank whose brand is beat up, has a lot of angry customers and has a lot of taxpayers angry about bailouts, he wasn’t the most sympathetic leader to help them turn that image around. The two biggest deals he did at the end were Merrill Lynch and Countrywide Financial. Merrill Lynch is working out OK. Countrywide is looking like potentially the worst move they made. He’d now be facing a second round of questions about why he bought Countrywide. Even though his successor, Brian Moynihan, was at the company at the time, he can more easily say, “Yes, we made mistakes in the past, but now we’re doing things right.”
Compare Moynihan’s relationship with BofA — and Charlotte — with those of his predecessors.
What’s keeping him from moving the company?
It’s much less expensive to operate a big piece of your employee base in Charlotte, so if you moved them all to New York, you’d increase your expense base at a time when the company is trying to save money. And you have built all these new buildings, and you have to fill them up. So I don’t think there’s a big reason to do it. At some point, is it easier to do your job as CEO — is it easier to attract a new CEO down the road — if the company is in New York? That’s a possibility. But right now, I think he’s got bigger issues to worry about.
HICKORY — Carlyle Group, a Washington, D.C.-based investment company, agreed to buy CommScope, a maker of telecommunications cable, for $3.9 billion. CommScope netted $77.8 million on revenue of $3 billion in its latest fiscal year. It employs about 2,000 in North Carolina.
HUNTERSVILLE — German fabric maker Saertex will add 178 jobs at its factory here within three years, bringing employment to more than 300. Its fabric is used to make composites for various industries, including wind energy, aerospace, automobile and shipbuilding.
CHARLOTTE — Blackstone Group, a New York-based private-equity firm, agreed to buy Polymer Group, which makes nonwoven fabric, for $387.5 million. Polymer Group grossed $16.2 million on sales of $882.7 in its latest fiscal year. Most of its 12,500 employees are outside the U.S.
CHARLOTTE — Tom Flynn, the Queen City’s economic-development chief, left for a similar job in Loudon County, Va. Flynn, 57, says the new job will put him closer to his grandchildren. He worked here six years.
GASTONIA — PSNC Energy plans to cut natural-gas rates 6% this winter because of falling prices for natural gas. That translates to a decrease of nearly $6 per month, based on the average customer usage. The company, part of Columbia, S.C.-based SCANA, distributes gas to about 472,000 customers in 28 North Carolina counties.
CHARLOTTE — Duke Energy will team with two other companies to build and finance solar-energy pro-
jects across the country. It will join De Pere, Wis.-based Integrys Energy Services in owning rooftop and small ground-mounted solar units. Mount Kisco, N.Y.-based Smart Energy Capital will arrange financing.
MONROE — Carolinas Medical Center-Union, operated by Charlotte-based Carolinas HealthCare System, requested state permission for a $56 million expansion that would add 25 beds, giving it more than 180. The project would include a tower to house women’s services.