What if WB, C, or MER goes BK?

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Jul 13, 2008 7:37 pm

Might be a slim chance but what are the implications for clients?  SIPC insurance is out there, does that kick in?

Jul 14, 2008 11:59 am

The market is clearly telling us that someone IS going down.  Did you see WB stock at 10 bucks??  The FNMA/FRE debacle last week is just the tip of the iceberg. I wouldn't try to pick a bottom in any of these.  Point and Figure chart indicates WB at 5.  Not picking on them or making any predicitons.

Jul 14, 2008 1:26 pm

They will be undercapitalized before they go BK. That is when the regulators will take action. 

Jul 14, 2008 6:32 pm

C at $15.00.  Soon to be single digits. The s#*t is hitting the fan....

Jul 14, 2008 7:02 pm

It sure is, the three I mentioned claim they are well capitalized. In this market, when a company has to say that it's all over but the crying. When was the last time a brokerage failed and SIPC had to take over?  Bear Stearns never got to that point.

Jul 14, 2008 7:27 pm

It is my understanding (and i'm sure that if i'm wrong, someone will be glad to correct me) that SIPC has never been used. There is an SEC rule (i forget the number of the code) that states that all securities held in street name must be segregated from b/d assets and are not available to creditors of the b/d. The only exception is securities that are held on margin.

Jul 14, 2008 9:00 pm

Do you really think these companies would go under before being bought out at low prices?


What amazes me is the shrinking market cap....
 
Jul 14, 2008 10:30 pm

By who?  Foreign companies are most interested in good investmest opprtunities (like in our beer companies.) 

Sovereign wealth funds are shell shocked from their investments in U.S. financial companies in the past year.  Don't count on it.

Jul 14, 2008 11:29 pm

It is indeed possible that one of the aforementioned companies could go BK. Their clients would do well to keep this possibility in mind, find out all the facts about the possible reprocusions and take the appropriate actions for themselves and their investments. As a privately-owned indy, FC whose firm has ZERO investment banking, mortgage lending nor any other similar exposure, it is a converation I am already having with my wirehouse prospects (of which I have MANY).

Jul 14, 2008 11:45 pm
YHWY:

It is indeed possible that one of the aforementioned companies could go BK. Their clients would do well to keep this possibility in mind, find out all the facts about the possible reprocusions and take the appropriate actions for themselves and their investments. As a privately-owned indy, FC whose firm has ZERO investment banking, mortgage lending nor any other similar exposure, it is a converation I am already having with my wirehouse prospects (of which I have MANY).


Sometimes being the slowest horse in the race can pay off lol!

Jul 14, 2008 11:54 pm

Keep laughing, d*psh*t.  After all, your firm offers both you and your client stability, strength and security.....at least unless they go bankrupt. After many months away, the same half-dozen pikers are still posting daily here. Don't worry, I probably haven't been prospecting many of your clients. I'll check back in another six months to see how you assholes are doing. See ya.

Jul 15, 2008 10:39 am

FYI, talk with your clients to make sure that they don't have more than the FDIC limit at their local bank. I bank with Washington Mutual, and even they are making me nervous (they are at $3.40/share!).  If you really want to know for sure how much FDIC covers, you can visit (or tell your client to visit):

http://www.fdic.gov/edie/
 
They can put in their bank holdings (savings, IRAs, etc.) and it will tell them if they are covered.  Of course, if they are not covered, they should bring that cash right to you.
Jul 15, 2008 6:54 pm

FDIC is batting a thousand in making defunct bank clients whole. SIPC has yet to be tapped but is supposedly a good safety net. Hooray, I can now just focus on the cruddy market and load up in WASCX as it's the only thing working these days.

Jul 15, 2008 9:00 pm

What would happen if Wachovia did go under?  What happens to the FC's??  Do they become free agents automatically or do you think someone would buy Wachovia or the brokerage unit before something like that would happen?

I left AGE awhile back and have plenty of friends still there...
Jul 15, 2008 10:26 pm
iceco1d:

I think the brokerage is the most profitable piece of the company.  If they went under, I'm sure that piece would get bought up ASAP.

 
 
What would it be worth though?  If you saw the people lined up at Indymac to withdraw funds, imagine the assets that would leave WS SIPC, FDIC or not.
Jul 16, 2008 6:30 am

WacSec is a separate company owned by WB and PRU. It is booking record profits each QT. Dont worry about WB going BK.

Jul 18, 2008 10:52 pm
iceco1d:

Gordon,

 
SIPC will cover any securities a customer loses if their BD goes bust.  SIPC petitions a federal judge to appoint a trustee to oversee the transfer of investor assets to solvent BD.  SIPC only replaces the lost securities (as in, shares, or in bonds, etc.).  It does not write you a check for any market value you lose because of the event (although, if you lose say, 1,000 shares of Walmart, and in the interim, Walmart shares go up, SIPC still replaces the 1,000 shares of Walmart). 
 
$500k coverage per social security number.  $400K of securities.  $100K of cash.  Cash is covered in similar fashion as FDIC insurance on a bank account.  Money market mutual funds are not considered cash.



And then there's "excess SIPC" insurance on some firms (including Wachovia Securities):

http://www.capcoexcess.com/USA/index.html


Jul 19, 2008 10:34 pm

Just keep up the 401k DCA into your company stock (WB).  The stock will go back up eventually, especially when the next buyout/takeover comes, which may not be long.  Who could it be?  Goldman or JPM?  They would be a better fit and name for us legacy AGE folks than Wach is.   Either way, bring on the next retention pay and cancel the existing contract....

Jul 19, 2008 10:36 pm

Do you honestly believe that you would get a whole new retention package and the last one would just be cancelled?  The contract would transfer and the new firm (if a buyout would occur) would likely tell you "You just got a retention package, and we have a signed contract."

Jul 19, 2008 10:48 pm

The contract is with Wachovia securities and them only. There is language in the contract that nullifies the contract if a material change in the firm occurs.  i.e. buyout/merger with wachovia being the target.  Someone correct me (nicely please) if I am mistaken in this interpretation.