POST SCRIPT: Looking at the deal I think the FDIC has done better than I thought plausible... it will probably get out whole. That said - if anyone believes that if they had not done WaMu on Thursday they would be doing Wachovia on Monday believes things different to me.
There is little doubt in my mind that Wachovia had more time if the FDIC gave WaMu more time.
The FDIC call on WaMu doomed Wachovia.
The deal - just coming at the moment - has the FDIC essentially issuing guarantees on a very thin balance sheet - and that will probably cost it money.
The FDIC got out of its WaMu problem (and I do not doubt there was a WaMu problem) by confiscating the "run-off value" of many WaMu securities.
But in the process it has made it very difficult to lend to American banks because if you lent in the form of anything other than an FDIC insured deposit you had “fear of government”. The Government could – with minimal evidence and no appeal – confiscate your assets. There is no appeal against pressure applied by the FDIC/OTC and you can have your bank confiscated when it has adequate capital and is still liquid.
Anyway – Wachovia is only the first of many banks that required wholesale funding and which the FDIC has doomed. There are many more.
I don’t want to pick on too many. As