Regulators raid Wachovia Securities

[NightWatcher]

Regulators raid Wachovia Securities
Investigators look for documents revealing the company's sales practices.

http://money.cnn.com/2008/07/17/news/companies/wachovia_raid.ap/index.htm?cnn=yes

CHARLOTTE, N.C. (AP) -- Securities regulators from several U.S. states on Thursday raided the St. Louis headquarters of Wachovia Securities, seeking documents and records on the company's sales practices.

The move is part of a broad investigation into questionable practices involving auction rate securities, Missouri officials said.

Missouri Secretary of State Robin Carnahan's office said the "special inspection" at the Wachovia division, the former A.G. Edwards, concerned the $330 billion auction-rate securities crisis. Wachovia Securities is part of the Charlotte-based bank, Wachovia Corp. (WB, Fortune 500)

"Hundreds of Missouri investors have called my office because of inability to access their money," Carnahan said in a statement. She added that she aims to take actions to "to make these investors whole."

The action, which also sought information on internal evaluations and marketing strategies, comes after more than 70 formal complaints were filed with the Missouri Securities Division over the last four months, representing more than $40 million of frozen investments.

How far away are we from more and more stories of investors and customers trying to gain access to their money in huge numbers (i.e runs)? Our money is insured by "faith" that the US govt will be able to pay. What happens when people loose faith and run to the banks?

This is not a "bank run post" advocating anything, but I just wonder how far away we are from thousands of lemmings losing their minds. I was in my local branch of a BIG bank (cashing a check, not cashing out my account) and I hear three different conversations about FDIC coverage of money. Two couples were meeting with reps to move their money around from one account to several dift options.

[WannaJumpMyScooter]

1. ooops, I am sure the rest of

us will eat this loss too

[libnnc]

2. whoa

wha happened?

[NightWatcher]

4. looks like regulators are starting to look hard at several banks

to ensure that they are operating correctly in order to prevent further failures or other problems that stem from improper conduct on the part of the banks.

from the story

In April, the Securities Division launched a full-scale investigation, requesting documents, e-mails, transcripts and other records from Wachovia Securities and other banks.

Wachovia Securities has not fully complied with these requests, prompting Thursday's onsite inspection, Missouri officials said.

However, a Wachovia spokeswoman said, "Most securities firms, including Wachovia, are responding to inquiries from regulators about the auction-rate securities industry."

[freethought]

3. Great! This is the bank where my deposits are!n/t

[WCGreen]

5. I guess they truly need someone to Watchoverya....

[NightWatcher]

7. I thought their name was "Walk over ya"

[WCGreen]

8. No, that's the way they treat small depositors...

[whistle]

6. Wow, Wachovia Securities has a tie in with this story from earlier in July

<snip>
Thursday, July 5, 2007
Wall Street Journal on Crooked Mortgage Broker


Today's Wall Street Journal, in "Mortgage Mess Shines Light on Brokers' Role," tells the sorry tale of one Altaf A. Shaikh, who frequently used the name Zak Khan and left a path of financial devastation in his wake as a subprime mortgage broker.

This isn't a great job of reporting. By focusing on one, and only one, likely criminal mortgage broker (civil and criminal suits are pending), the Journal creates the impression that, to the extent there were abuses in subprime lending, they were the doing of a few sharks like Shaikh who were able to operate freely in a rapidly growing and lightly regulated industry, in which many of the players were not well managed.

The piece fails even to acknowledge that at some firms, the practices that have been called "mis-selling" and might less charitably be called "ripping off ignorant customers" have more than occasionally occurred at the institutional level. And not just at Orange County bucket shops either.

For example, in 2002, Household International entered into a $484 million settlement for predatory lending practices involving subprime mortgages. Mortgage broker Ameriquest reached a $325 million settlement in early 2006 for deceptive consumer lending practices and was also required to adopt many new practices, including scripted language for oral disclosures. Even so, affordable housing expert Doug Smith noted that the cost of the Ameriquest settlement was a mere slap on the wrist and provided an average recovery of only a few hundred dollars each to defrauded customers, many of whom had lost their homes. And Argent, Ameriquest's biggest subprime subsidiary, was exempt from the reforms . The State of Ohio charged now bankrupt mortgage lender New Century with a variety of violations of consumer sales and mortgage brokerage regulations, including making false and misleading statements, accepting loan processing payments even though the company knew it did not have the money to fund them, and failing to act in good faith.
<MUCH MORE>

http://www.nakedcapitalism.com/2007/07/wall-street-journal-on-crooked-mortgage.html

[Snarkoleptic]

9. Wachovia Securities has it's own little-known mortgage company.

It's called Vertice Lending.
www.verticelending.com/
Below is a not-so-cheery snip from an e-mail my Vertice Rep sent me today.

In these days of bad/negative news bombarding us about our industry it becomes very overwhelming at times.....I understand, and hope that partnering with Vertice makes your job a little more refreshing and easier.

On a daily basis I get the question about how long is Vertice going to be around, I wish I had a crystal ball, but as I told my wife over 25 years ago, 'I don't read minds nor do I know the future'.

Wachovia is obviously having some tough times with the World Savings Pick-a-pay loans, but as I hope your aware they have dropped the Pre-Pay on all of them, so if you have a previous client that used this loan they don't have to wait to re-fi out of it.

So the next time you're wondering where to send your loan, please remember Vertice is here to serve you as best as we can. As many of my brokers have gone out of business over the past few months...

[TexasObserver]

10. "Walk Over Me" is what their investment customers call them.

I'm familiar with one recent instance of churning by them on a large account maintained for a large non profit. They were creating fees for themselves four times the fair market rate for a level of such transactions. They got away with it because the guy in charge for the foundation was a well meaning idiot who didn't shop around.