Bailout fighting growing public economic fears
Wake up and good morning. Lots of news and views to start what may once again be a very rocky week for Wall Street and one of fundamental change, including the possible departure of still more companies once thought to be the pillars of our U.S. economy. Let's get started.
First, to set the overall scene: Disturbing survey findings on America's confidence. In a sign that anxiety is growing, 33 percent of 1,011 adults surveyed over the weekend said the economy already is in a depression. (Don't read over the "D" word. That's "depression -- not "recession.") Just 12 percent said that 10 months ago. This reveals how critical it is to get the $700-billion bailout package right the first time. Separately, a new USA Today/Gallup poll indicates 78 percent of Americans say Congress should approve a historic bailout of the nation's financial markets, but most want lawmakers to significantly modify the Bush administration's $700-billion plan.
And on the bailout front: Proposed legislation (here's the actual legislative proposal) is scheduled for a vote today in the House. It would authorize Treasury Secretary Hank Paulson to kick start what may become the biggest government bailout in U.S. history, allowing him to spend up to $700-billion to relieve faltering banks and other firms of bad assets backed by home mortgages, which are falling into foreclosure at record rates. The plan also would give Paulson broad latitude to purchase any assets from any firms at any price and to assemble a team of individuals and institutions to manage them. Focus on the House Republicans. Are they in or out on this deal?
One promising piece of this package: CEOs of firms seeking the bailout would have their pay packages capped. The proposal seeks to rein in compensation at participating companies by limiting their tax deduction on executive salaries exceeding $500,000. (Not exactly a bulletproof way to limit clever designers of compensation packages but still a deterrent.) Tell us what you think. Take the poll on CEO pay on this Web site.
If fixing WaMu (Washington Mutual) was last week's practical task, now we are looking at Wachovia Corp. The North Carolina banking giant was in advanced discussions over the weekend to sell itself to Wells Fargo & Co., the Wall Street Journal reports today. Wachovia also held talks with Citigroup, but by late Sunday Wells Fargo appeared to be the preferred bidder, the newspaper reported. Details of the proposed deal weren't clear and the talks could still fall apart, the report added. Spain's Banco Santander had also expressed an interest in Wachovia, but that deal now seems less likely.
UPDATE*** With FDIC aid, Citigroup will acquire tha banking operations of Wachovia. Here are the basics. More to come this morning!
A loss of Wachovia is rattling Charlotte. The North Carolina banking city that has for years delighted in saying it boasts more banking assets than New York City. That claim will disappear if Wachovia is acquired. A Wall Street Journal story today reminds us all of how temporary corporate tradition and clout are these days. "The name Wachovia used to evoke a very special feeling among customers and competitors and investors and the people who worked at the bank," said L.M. "Bud" Baker Jr., chief executive of the former Wachovia when it agreed in 2001 to a takeover by First Union Corp. The merged company kept the Wachovia name. "They used to belong to something that was truly special in the lineup of American corporations," says the story. I interviewed Bud Baker at Wachovia in Winston-Salem long before he was CEO of that bank and long before Wachovia erred -- my opinion -- in merging with troubled First Union. Rarely have I ever seen someone (or a hometown) as intensely loyal and proud of an institution. That's become a rare commodity.
-- Robert Trigaux, Times Business Columnist