Toomre Capital Markets LLC

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Wachovia Ken Thompson is Out As CEO

Toomre Capital Markets LLC ("TCM") previously has written about the perils of Pay Option ARMs in the post Option ARMs Spur New Worries and the troubles of one of its largest portfolio holders Wachovia in the post 'Moment of truth' for Wachovia. Now comes the news on the morning of Monday June 2nd 2008 that Wachovia's CEO Ken Thompson is "retiring" immediately at the request of the bank's Board of Directors. Lanty Smith, the current Chairman of the Board of Directors will be taking over as interim CEO and Ben Jenkins, currently vice chairman and president of the general bank, will serve as interim chief operating officer.

According to the press release, "No single precipitating event caused the board to reach this decision, but a series of previously disclosed disappointments and setbacks cumulatively have negatively impacted the company and its performance." One has to wonder though whether buying a large California thrift with an investment portfolio concentrated in negative amortization ARMs at the absolute top of the housing market had anything to do with his firing?

Or perhaps the recent regulatory sanctions had more of an effect than outsiders fully appreciate? Certainly having to settle charges about money laundering and needing to deal with possible collusion charges in the submission of municipal bond reinvestment hedges suggest that the bank did not have strong internal controls. Coupled with the recent OCC actions about its use of customer data with tele-marketing firms, one has to wonder what changed in approximately the last month since Ken Thompson was stripped of the Chairman role? Reader comments and thoughts are welcome.