Wachovia in play
Last week proved to be a rollercoaster ride for Wall Street and Washington as Congress anguished over the Emergency Economic Stabilization Act or “bailout bill.” The House finally approved the $700 billion financial rescue package on Friday after initially rejecting the bill. Wachovia, a Winston-Salem institution since the 1890s, endured an equally tumultuous ride.
In the span of four days, Wachovia’s board of directors changed course on selling the bank’s assets. On Friday, Wachovia — whose assets total $812.4 billion with a market capitalization estimated at $33.5 billion — announced its intention to accept a proposal from Wells Fargo after the San Francisco bank agreed to acquire Wachovia for $15.1 billion in stock. Wells Fargo offered to purchase each share of Wachovia stock for 0.1991 shares of Wells Fargo common stock, representing a value of $7 per share, based on Wells Fargo’s closing stock price on Oct. 2.
However, on Oct. 4, New York State Supreme Court Justice Charles Ramos issued an order at the request of Citigroup to block the Wells Fargo deal by invoking an exclusivity clause in its original agreement with Wachovia. Then, on Sunday, US District Judge John Koeltl blocked Ramos’ order, setting the stage for a hearing in federal court Tuesday in Manhattan.
“We are pleased that Judge Koeltl granted our motion for expedited resolution of the exclusivity agreement between Wachovia and Citigroup,” said Wachovia spokesperson Christy Phillips-Brown. “Wachovia continues to believe its agreement with Wells Fargo, which involves no government assistance, is proper and valid. The agreement is in the best interests of shareholders, employees, creditors and retirees as well as the American taxpayers and it imposes no risk to the FDIC fund.”
On Sept. 29, Wachovia announced its intention to sell its retail bank, corporate and investment bank and wealth management businesses to Citigroup for $1 a share, a transaction that would have included assistance from the U.S. government. If upheld, Wachovia’s agreement with Wells Fargo would require no FDIC involvement and effectively nullify the Citigroup deal. The legal dispute between Wells Fargo and Citigroup will have to be resolved before the deal can go forward. Wells Fargo’s offer to buy Wachovia shares still requires shareholder and regulatory approval.
Last week, Wachovia spokesperson Christine Shaw said it would be too early to speculate on the ripple effects of the proposed buyout on the more than 3,000 Wachovia employees in the Winston-Salem area. Last week, Shaw acknowledged the company has not shared all pertinent information with its employees due to ongoing negotiations with Wells Fargo. Wachovia has not announced any layoffs or branch closures in the Piedmont Triad area at this time, Shaw said.
Financial bailout package passes on second try
On Oct. 3, the US House of Representatives approved a $700 billion financial rescue package that will bring the greatest intervention of the federal government into the private sector since the Great Depression. Three US representatives representing the Piedmont Triad area — Rep. Mel Watt (D-12th District), Rep. Howard Coble (R-6th District), and Rep. Brad Miller (D-13th District) voted in favor of the measure, while Rep. Virginia Foxx (R-5th District) opposed it. Coble’s vote represented a reversal from earlier in the week, when he joined a 2-to-1 majority of legislators that defeated the original proposal.
Coble said the defeat of the first House bill convinced him that Main Street and not just Wall Street was in trouble. “The unstable financial markets are causing substantial losses to the retirement accounts of working Americans and current retirees,” Coble said in a statement. “If steps are not taken to protect these investments, it is likely that retirees will have insufficient funds to remain independent of government programs such as subsidized housing, Medicaid, food stamps and other health care needs. Hopefully, this legislation will bring some stability to the credit markets and give business and individuals the certainty they need during this tumultuous time.”
Foxx stuck to her original opposition of the bailout bill during Friday’s vote. Phone calls to Foxx’s Washington office and local campaign office went unreturned as of press time.
Coble said this was one of the most controversial issues he has faced since he has been in office. “When we add up all of the phone calls, emails, faxes, and personal visits,” Coble said, “the 6th District was about evenly divided in how I should vote. When I cast my first vote, the sentiment was 9-1 in opposition. In a representative democracy, we should listen to the voice of the people, and I have heard those many opinions. I also owe them my best judgment, and in my opinion, this was a better bill than the one we defeated, and one that I can and should support.”
Forsyth Commission to consider request for state funds
The Forsyth County Commission will act on a resolution passed by the Winston-Salem/Forsyth County Schools two months ago regarding the school system’s request for $6.6 million from the NC Education Lottery fund during the council’s Oct. 13 meeting. The money will be utilized to pay debt service arising from the 2006 school bond issue. A draft resolution states that the $6.6 million has been allocated to the school system and is not necessary for planning, construction, expansion, renovation or repair of current school facilities, but on Election Day Forsyth County voters will decide on an educational facilities bond referendum that would raise $62.1 million for Forsyth Tech to purchase and renovate existing facilities from the public schools. The bond referendum will also benefit the county school system, paying for acquisition of new facilities and renovation of existing facilities. In November 2006, Forsyth County voters passed a $250 million school bond referendum and approved $25 million for community college bonds.