According to the FDIC, all Wachovia’s depositors are protected and the Deposit Insurance Fund will incur no cost. Wachovia’s takeover by Citicorp comes just days after the government's seizure of Washington Mutual, a mortgage lending giant and the largest bank fiasco in the history of the US.
The crisis in the mortgage market caused by declining home values and depreciating mortgage backed securities has affected multiple lending institutions across country, and Wachovia has failed as partially a result of such financial crisis, and partially due to Wachovia’s latest acquisition of Golden West Financial, a mortgage lender at the spike of the housing boom in 2006. Wachovia’s acquisition of the mortgage lender resulted in acquiring a large mortgage portfolio of Pick-A-Payment loans, whereas the home owner can chose what kind of payment he wants to make each month, whether it is an interest only payment, minimum payment amount, a payment at a variable or at a fixed rate.It is no surprise that this type of loan which is very volatile in the current economic and housing situation may cause the lender substantial losses.
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