Honestly this is the best outcome…we are rid of WB which was where all the negativity was…and getting sold to Citi would have been much worse…I am very happy being a brokerage firm again…granted we could still get bought by another bank…but I am not unhapy at all over the outcome.

If I were still in your shoes I would feel the same way.

I think Danny need to change his universal model mantra, rename the firm AG Edwards, and let us model ourselves after Ray Jay. And how exactly do you confirm his “we are well capitalized” claim. Wasn’t Steel saying that last week about WB?

Why does WB think they can make it as a stand alone brokerage house? Are they planning on riding the returns from Evergreen? Not likely.

Many shops with much stronger names, have already gone by the board. Others are barely hanging on. Some are only making the grade by becoming banks in order to get access to Fed Funds to shore up their capital positions.

I just do not understand why Wachovia feels it is so different that it can be a viable entity going forward.

So what is represented by WB stock? And who’s on the hook for preferreds?

"Moody's lowered Wachovia's preferred stock rating to Ba3 from A3 and
placed it under review with direction uncertain. Moody's also placed
the B financial strength rating of Wachovia's bank and thrifts on
review for possible downgrade. The Prime-1 rating on the bank, and the
Prime-1 commercial paper rating on Wachovia Corporation were affirmed.

and :

"The severe downgrade of Wachovia Corporation's preferred stock to Ba3
from A3 reflects the expected substantial increase in leverage at the
holding company, whose major assets will be the operations of the
retail brokerage Wachovia Securities and Evergreen Asset Management.
The review with direction uncertain reflects the uncertainty regarding
the future financial profile of Wachovia Corporation. Key
considerations that will determine the future rating direction for the
preferred stock include the strategic and financial plans for the
newly constituted holding company, its capital structure, and the
operating earnings of this entity given its new business mix

and :

Separately, Fitch has placed Wachovia Bank on Rating Watch Evolving
and downgraded Wachovia Corporation's long-term IDR to 'BB-' from 'A
+'. A complete list of affected ratings follows the end of the
release.
In exchange for all its bank operations, Wachovia Corporation will
receive approximately $2.2 billion in Citigroup stock. In addition,
Wachovia Corporation is expected to be left with two operating
businesses, Wachovia Securities (retail brokerage, including AG
Edwards) and Evergreen Asset Management. The balance sheet is expected
to be funded with the remaining $9.8 billion in outstanding preferred
stock and several billion in equity. There is a meaningful possibility
that the earnings of the remaining businesses will be strong enough to
service the preferred dividends. Alternatively, it is possible that a
merger partner may emerge for the residual Wachovia Corporation.
However, the downgrade of Wachovia Corporation reflects Fitch's view
of the considerable uncertainty surrounding these assumptions,
particularly as Wachovia Securities would be carved away from the bank
and no longer benefit from existing synergies.
Fitch expects Citigroup to post bottom line losses yet again in third-
quarter 2008 (3Q'08) as U.S. consumer problems and other charges weigh
on results. If Citi's losses continue in future quarters and asset
quality problems continue to escalate, notwithstanding the acquisition
of Wachovia, then Fitch will likely downgrade Citi's ratings, though
likely not below the 'A+' level. On the other hand, if profitability
is restored and asset quality issues begin to stabilize, then there is
the possibility that the Rating Watch Negative could be removed.
For Wachovia bank creditors, the Citigroup transaction strengthens
their credit position although Wachovia Corporation preferred holders'
position will hinge on the retail brokerage business, which will
comprise most of Wachovia's remaining operations if this transaction
is completed.
The FDIC-assisted transaction is expected to close on Dec. 31, 2008
and is subject to approval by Wachovia shareholders and the Federal
Reserve. FDIC approval has already been received.
This acquisition is considered a net strategic positive by
substantially increasing Citi's retail and middle market banking
franchises in the United States. Citi's deposit share in the U.S. is
estimated to increase from 3.4% to 9.8% once this deal closes.
Worldwide, total deposits are expected to exceed $1.2 trillion and
total assets are expected to reach $2.9 trillion. Integration of
operations will be challenging given the scope of this transaction,
but potential expense synergies are considerable.
As part of the deal, Citi will receive loss protection from the FDIC
on a pool of Wachovia's assets totaling $312 billion, consisting of
$156 billion of residential mortgages (including the option ARM
portfolio), $100 billion of commercial real estate, and $56 billion of
other assets. At closing, a purchase accounting adjustment of $30
billion will be taken on this pool. Thereafter, Citi's losses on that
portfolio will be capped at a total of $12 billion, up to a maximum of
$4 billion per year for the next three years. The FDIC is responsible
for any losses exceeding this amount.
To compensate the FDIC for its loss protection arrangement, Citi is
issuing preferred stock and warrants to the FDIC with a fair value of
$12 billion. In addition, Citi plans to issue $10 billion of common
stock to the public markets and cut the common dividend by 50%. On a
proforma basis, the Tier I ratio would stand at 8.8% and the Leverage
ratio at 5.2%. These ratios factor in regulatory capital relief on the
$312 billion asset pool noted above. The pending sale of Citi's German
retail operations would add approximately 50 basis points to the Tier
I ratio.
Most Wachovia bank level ratings have been placed on Rating Watch
Evolving, reflecting potential credit improvement if this transaction
closes as proposed, as well as potential downside if the transaction
does not close and absent a similar or better transaction. Under the
proposed transaction, depositors and other creditors, including all
senior unsecured, subordinated debt and trust preferred holders, of
Wachovia's bank subsidiaries will become depositors and creditors of
Citigroup or one of its subsidiaries. If shareholders fail to approve
the transaction, absent a competing offer, ratings for most bank
obligations would likely deteriorate significantly. Similarly, because
in the proposed transaction, Citigroup would assume all senior and
subordinated debt of Wachovia Corporation, those obligations are also
placed on Rating Watch "

I think Bob Steel will give Danny Boy the boot, merge up with MS, become CEO of MS, and cut the bottom feeding 25-30% producing WB(AGE) brokers.  Maybe substitute the MS with WFC.  Forget about the AGE name ever coming back since the son had opened his B/D in STL.

The return of the AGE name is wishful thinking. It will never happen, I agree. I’d be curious to see the defection list now!

What do you mean by ‘when the gettin’ was good’? Solid producers have options all over the place and nobody is tightening up the purse strings to make things happen… at least not yet. 

The return of the AGE name is wishful thinking. It will never happen, I agree. I’d be curious to see the defection list now!

I have to agree. The mass defection is underway as guys are ‘talking’  Takes 1-3 months to make the move happen. I predict 2 surges out the door… Thanksgiving and Xmas. 10%+ leave in Q4 I say. They’re all getting blitzed and deals are still strong.

Holidays are pretty popular, aren’t they? Especially end of the year. I hae not rec’d a ton of calls, sort of shocked. Maybe Mer, SB, MS are too busy dealing with their own crud.

From what I hear sale has to be done soon, as clients are fed up with the b.s.  They wait too long and its worth nothing.

As a guy who is at ML, I am happy right now.  BOA gives us an anchor in a terrible time, plus Mr. Thain was able to get .8586% per BOA share for every ML share.  Thus taking care of the shareholder and the FA.  He made a good move and I am glad I moved last year.

I think Danny need to change his universal model mantra, rename the firm AG Edwards, and let us model ourselves after Ray Jay. And how exactly do you confirm his “we are well capitalized” claim. Wasn’t Steel saying that last week about WB?

To the Preferred question: I read that C IS taking the “equity” preferreds but leaving the trust preferreds to WB. That puts a serious burden on WB. Plus, PRU has a right of first refusal stake in WB and they can declare their stake due at any time (although I doubt they would do it right now). WB is not an easy take out candidate. C feels the same way. I feel sorry for my brethren of AGE. But - if you are good, you are indeed marketable. There are deals still out there for the right folks. Line up the support though and understand how it will work. Get the deal in cash, versus stock or only take stock on the back end.



Next, who is in the cluster F of integration. BAC/MER will be a mess (my opinion). C has been a problem for a while (balance sheet excluded). MS is running around trying to find a date at any price (and all the analogy suggests). UBS is quietly sitting fighting obscure battles. Everyone has their issues. Who has the balance sheet and the organization which is proven to make it through this storm?

So as someone who left, what can WS nail you for? I can only think of not paying the loan and taking client information. Any way to avoid either?

I think the “troubles” at the major wirehouse are being grossly exaggerated here, but consider this; why would ANY of them want to buy WB when it’s cheaper to simply lure away the biggest producers there and let the balance die on the vine? None of the wirehouses, imho, needs WB’s infrastructure, so why invest in it and the management that comes with it and still end up risking that much of the talent slips away anyway?

[quote=Gordon Gekko]So as someone who left, what can WS nail you for? I can only think of not paying the loan and taking client information. Any way to avoid either?[/quote]

Gordon,
Leaving has actually gotten easier in the past year or so do to the Recruiting Protocol, assuming the firm you are going to is a signatory to the Protocol, which many are.  WB is a signatory, so they are supposed to honor its terms, and usually do.  However, you have to be very clear on how to do it properly, and it slows you down a touch compared to the old days when everyone just took all the info and copied statements and then fought TROs and other lawsuits. 

So done properly, your chances of encountering legal problems from WB are greatly reduced (not eliminated) and in exchange you have to start with less information brought over from your old firm.  In a nutshell, you are allowed to take non-public info only such as client names, address, phone numbers, etc.  No SSNs, no account numbers, no copies of statements - all of those need to be provided by clients again. 

You will of course need to pay back any retention loan/unvested payments, but if you follow the Protocol your odds of avoiding legal problems -
including non-solicitation restrictions - are dramatically reduced.

You need to ask if your new firm is a member of the Protocol (or you can access it online yourself and see which firms have signed it) and get advice (an attorney might be needed or adviseable) on how to adhere to its terms. 

Just a heads up, don’t plan on leaving your BD between Christmas and New Years day, as the people that handle your license transfer are eating turkey.

the news this morning with WFC coupled with a possible additional retention package might help a small percentage of this week’s agony for WS fc’s. Still will have brokers doing their homework. What a friggin week!