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Wachovia to Be Charged in Mortgage CDO Scandal

SEC says bank, now owned by Wells Fargo, overpriced CDOs

By Kevin Spak,  Newser Staff

Posted Apr 4, 2011 9:07 AM CDT
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(Newser) – The SEC is getting ready to bring civil charges against Wachovia for allegedly jacking up prices on its CDOs, even as the loans underlying them fell in value, sources tell the Wall Street Journal. The charges come out of a larger SEC probe into Wall Street’s shady CDO practices, which were a major contributor to the financial crisis. CDOs are securities created by packing together a bunch of mortgages—including, often, subprime ones.

According to an SEC source, Wachovia slapped big markups on its CDOs regardless of the value of those mortgages. Former Wachovia controller Robert Kraus also reportedly told SEC investigators that the bank hid its losses while selling its CDOs, and that it failed to take proper write-downs when its properties fell in value, but those allegations aren’t included in the “imminent” charges. Wachovia is now owned by Wells Fargo, which would have to pay any fines.

A Wachovia sign hangs on a branch bank October 22, 2008 in New York. Wachovia today reported a record quarterly loss of nearly $24 billion.
A Wachovia sign hangs on a branch bank October 22, 2008 in New York. Wachovia today reported a record quarterly loss of nearly $24 billion.   (Getty Images)
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COMMENTS
Showing 3 of 5 comments
yoeydude
Apr 6, 2011 5:43 AM CDT
Think of the Banks and Insurance Companies Taxpayers Bailed Out last year ,... these very same , .... Predators , that have been devouring our children dreams for the last decade ,.... HEADS MUST ROLL ,.... JAIL TIME FOR CRIMINALS ,.... or blood in the streets
zdaydream
Apr 4, 2011 10:37 AM CDT
I love hearing these inspiring stories about the American Corporations that take the time and really screw Americans. <:-)
Mad
Apr 4, 2011 9:42 AM CDT
Fuck Wells Fargo. My best friend was trying to refinance her home loan thru those dicks and they just kept on prolonging her month by month - requesting paperwork they already had, requiring multiple inspections - that she asked her CU about a loan, and was approved within a month.

 
Wachovia • Wells Fargo • SEC • CDO • collateralized debt obligations • Securities and Exchange Commission

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