Well now. It looks like banking on illegal immigration isn’t paying off for Wachovia. The bank’s massive losses and job cuts are the big news rocking the financial sector today:
Wachovia Corp., the U.S. bank that hired Treasury Undersecretary Robert Steel as chief executive officer two weeks ago, reported a record quarterly loss of $8.9 billion, slashed the dividend and announced 6,350 job cuts. The stock slumped as much as 10 percent in New York trading.
The second-quarter loss of $4.20 a share compared with net income of $2.3 billion, or $1.23, a year earlier, the Charlotte, North Carolina-based company said today in a statement. The loss included a $6.1 billion charge tied to declining asset values.
The writedown, job cuts and second dividend reduction in three months reflect Steel’s response to the worst housing market since the Great Depression, which cost former CEO Kennedy Thompson his job after eight years. Wachovia has dropped more than 75 percent since it spent $24 billion two years ago to buy Golden West Financial Corp. just as home prices were peaking.
“Steel is clearly trying to get his arms around this,” said Joseph Gordon, president of Gordon Asset Management in Durham, North Carolina, which owns Wachovia shares and manages more than $200 million. Even so, “We aren’t advising any clients to buy until they fess up and go full transparency on Golden West and their commercial lending problems.”
Wachovia shares have declined 65 percent this year, the second-worst performance on the 24-company KBW Bank Index behind National City Corp., Ohio’s largest bank. The stock fell $1.18, or 9 percent, to $12 at 9:55 a.m.
Perhaps if the company had spent more time making sound business decisions and less time pandering to the National Council of La Raza/The Race and chasing the open-borders market, it wouldn’t be in as deep a hole as it is today.
Related item: Who would benefit the most from the latest housing bailout proposal?
Subprime loans – loans made to homebuyers with less-than-perfect credit – were responsible for a large share of the foreclosures that started last year. And minorities received a hefty share of those loans. Just over half of African-Americans and 4 in 10 Hispanics who got a mortgage in 2006 had a subprime loan, according to a 2007 analysis by the Center for Responsible Lending.
Also, the areas hardest hit by home-loan crisis are heavily Hispanic. In seven of the 10 metro areas with the highest foreclosure rates last month, they represent at least one-third of the population; in two of them – Merced and Salinas-Monterey, Calif. – Hispanics make up more than half of the population. Their rates of home ownership are also high: More than half of Hispanic households owned their home in eight of the top 10 foreclosure cities, according to the latest census data.
African-Americans are also hit hard by the crisis, although they aren’t concentrated in cities with the highest foreclosures. In only two of the top 10 metro areas – Fort Lauderdale, Fla., and Vallejo-Fairfield, Calif. – did they make up more than 10 percent of the population. Their homeownership rates also trailed those of Hispanics in all but Vallejo-Fairfield.
Still, African-Americans made up more than 20 percent of the population in metro Detroit, No. 13 on the list of top foreclosure cities by RealtyTrac, and in Miami, No. 15.
It is cities such as these – along with Cleveland, which felt the brunt of the housing crisis early – where the pressure is building for local politicians to come up with a solution.
Activist groups say this racial dimension to the problem puts a special responsibility on the federal government to relieve distress in these neighborhoods.
Flashback: Open borders and the mortgage mess.