Banks and investment banks who watched Bear Stearns, Washington Mutual, and Lehman go down in flames have learned a lesson. Bank of America (BAC) moved too fast to buy Merrill Lynch (MER). If it had held off a few days, it could have gotten the broker at a much lower price. Investors were driving its shares down relentlessly. Of course, BAC might have risked another company picking off Merrill. That is probably its excuse for buying too early and wasting shareholders’ money. JPMorgan (JPM) got an extraordinary deal on WaMu’s asset by letting the bank reach the point of failure.
Wall St.’s largest financial companies are now gambling that they can get Wachovia (WB) for a few cents on the dollar by letting it go under. According to Bloomberg, "potential buyers Citigroup Inc., Wells Fargo & Co. and Banco Santander SA may wait to see whether regulators will seize the bank, then buy the best assets and let the government sort out the rest."
The vultures run the risk of getting nothing at all. If the government’s bank bailout package is signed early in the week, Wachovia will be first in line to turn in its toilet paper for real cash from the Treasury.
Wachovia shares may have fallen from a 52-week high of $52 to $8, but they are not going any lower. The bottom-feeders waited too long.
Douglas A. McIntyre
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