Follow-up: Wachovia's bailout loan to Republicans came during record losses
Two weeks ago, we published an in-depth piece looking into Wachovia's $8 million loan bailing out the cash-strapped National Republican Congressional Committee.
Wachovia's last-minute loan to the GOP was notable for several reasons: One, it was made at a time when Wachovia was denying credit to thousands of other customers. Two, the NRCC wasn't exactly an ideal customer, having just come off a major financial scandal.
And lastly, Wachovia made the loan while in the midst of considering a FDIC rescue package -- raising questions about whether Wachovia's loan to Republicans was being backed by U.S. taxpayers.
Today we got a clearer picture of the financial hole Wachovia was in when the loan to the GOP was made. This week, the bank announced a whopping $23.9 billion in 3rd-quarter losses across all pieces of its operations.
What's more, Wachovia estimated it will lose another $26.1 billion in mortgage-related losses in 2009. As The New York Times reports, Wachovia also is still paying for past mishaps:
Wachovia also took a list of charges to resolve previous troubles. The bank paid $497 million to settle allegations that it improperly sold auction-rate securities and absorbed about $397 million in securities sales, including the evaporation of its Fannie Mae and Freddie Mac stock holdings. It also set aside $515 million in severance charges after it announced the elimination of more than 10,000 jobs to cut expenses.
Even facing these crushing losses, it's not necessarily odd that Wachovia would have made a loan to the NRCC, a client they've had for 30 years. Wachovia needs to keep making loans to stay afloat, as long as the customers are reliable.
True, NRCC didn't have a great track record -- they took two years to repay a 2006 Wachovia loan, and their treasurer had recently embezzled $725,000. But a source tells me Wachovia demanded a special audit and review panel for the 2008 loan to the NRCC.
The most questionable aspect of Wachovia's loan is the timing: The loan was made at the very time Wachovia was being kept afloat by the assurance of federal backing.
Also, the thousands of Wachovia customers in good standing who were denied credit may want to know why the Republicans got special treatment near the elections. As we noted, Wachovia's heavy support of Republicans through campaign contributions opens it to such criticism.
As for the National Republican Congressional Committee, The Hill reports they have just announced a $4 million ad campaign -- about half the amount of their Wachovia loan -- targeting eight Congressional districts:
Those ads were launched in the districts of Reps. Don Cazayoux (D-La.), Paul Kanjorski (D-Pa.), Dave Reichert (R-Wash.), Jean Schmidt (R-Ohio) and Randy Kuhl (R-N.Y.) and in the open-seat races for the seats of Reps. Jim Ramstad (R-Minn.), Tom Reynolds (R-N.Y.) and Jim Saxton (R-N.J.).
If Republicans win any of those seats, they can in part thank the federal government.