One who intends to leave others better off for his having existed.


An Open Letter to Wachovia and Wells Fargo Current and Former Shareholders

I believe many Wachovia shareholders lost as a few insiders profited from material undisclosed information.

When Wachovia Bank's stock price last traded at $27.07, the firm borrowed $3.5 billion from the Federal Reserve’s Term Auction Facility (TAF) which was not disclosed to the firm’s shareholders or reported in the company’s legally required SEC securities filings.

In my view, if Wachovia had disclosed it had borrowed billions with billions more on their credit line, confidence in the company would not have suffered to the extent that occurred, meaning if they had told the truth as was required by law, a whole lot of local shareholders wouldn't have lost so much money.

About six months before the merger with Wells Fargo, Wachovia’s new CEO Robert Steel, formerly the principal adviser at the U.S. Treasury Department on matters of domestic finance under Hank Paulson, purchased 1,000,000 shares of Wachovia’s stock as the company’s TAF borrowing reached an undisclosed $12.5 billion.

$42,672,115,305 of Wachovia's market capitalization disappeared between the first undisclosed TAF loan and the Wells merger.

The Wall Street Journal reported "about $100 billion in wealth disappeared from the Carolinas alone when Wachovia collapsed", meaning thousands of Wachovia shareholders appeared to have suffered from not knowing what Robert Steel and other top executives at multiples of other Wall Street firms knew.

After not reporting Federal Reserve loans and purchasing shares while in possession of undisclosed material inside information, the Wachovia’s CEO wrote "I, Robert K. Steel, certify that: I have reviewed this Quarterly Report ...of Wachovia ...this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading..."

The Sarbanes-Oxley Act requires executive officers and directors to personally attest that SEC securities filings have been personally reviewed and financial statements fairly present, in all material respects, a company’s financial condition.

I believe not reporting the Federal Reserve material borrowings, credit lines, terms and interest rates was a violation of Sarbanes-Oxley.

Wells Fargo also borrowed from the Fed's TAF program and didn't report it, which was finally disclosed to the public subsequent to congressionally mandated legislation and civil legal action.

On Nov 28, 2011, Bloomberg published “Secret Fed Loans Gave Banks Undisclosed $13B,” which stated “The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. ...Bankers didn't mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy.”

Bloomberg estimated the profits from the undisclosed Federal Reserve Loans was $878.2 million for Wells Fargo, and $149.4 million for Wachovia.

After most of Wachovia’s shareholders were locked into losses on completion of the merger, Mr. Steel ended up far better off knowing what most didn’t. In 2010, Steel was appointed Deputy Mayor for Economic Development by New York City Mayor Michael Bloomberg, whose news division initially reported the secret loans. According to Morningstar data, Mr. Steel owned 601,903 shares of Wells Fargo in 2010, which was worth more than $20 million in 2012.

For those wondering why they are relatively unfamiliar with all this, I found our local press was uninterested in telling the public. After collaborating on the story with Rolling Stone's Matt Taibbi, News & Record then Editor, now Publisher Jeff Gauger wrote in a back page of the local section "Hartzman ...had been peddling his story for months. He called me at least twice last spring to press for action... I listened, but didn’t bite. The Rolling Stone article, “Secrets and Lies of the Bailout,” is a harangue against the big banks and the government officials and regulators... About the big banks, Hartzman pressed his case when few, including me, would act."

A few months later U.S. Attorney General Eric Holder stated under oath "I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy."

In my view, Holder threw Wachovia's shareholders who lost money under a bus by choosing to not enforce the law.

And from then till now just about nothing. Losses for the little locals and profits for those who remained at the top. No accountability. No prison sentences. No apologies. Very little if any news industry coverage. Even Bloomberg didn't bother to follow up on their own story.

Welcome to the new America. Two sets of rules, and most of the folks who are supposed to tell you about it don't.

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