Transcripts

Big Bank Shake Ups

SUSIE GHARIB: Financial stocks got pounded today on news of the ouster of Wachovia's CEO and a downgrade by Standard & Poor's of three big Wall Street firms. S&P cut its debt ratings on Lehman Brothers, Merrill Lynch and Morgan Stanley, saying the outlook for large U.S. financial institutions remains negative and there could be more write-offs. Meanwhile, Ken Thompson was forced out as CEO of Wachovia after eight years in that role. Thompson's duties will be assumed by Chairman Lanty Smith, while the bank searches for a permanent replacement. Wachovia more than tripled in size under Thompson's watch, including the purchase of Golden West Financial in 2006. That deal was a big factor in Thompson's departure, according to Morgan Keegan bank analyst Robert Patten.

ROBERT PATTEN, SR. BANK ANALYST, MORGAN KEEGAN: Well, if you look at when they bought out Golden West, since then, they've wrote out (ph) about $50 billion in market cap value. The stock's down 57 percent. Obviously they've leveraged heavily into the California economy, heavily into the mortgage business and with falling home prices and a recession, they're seeing charge-offs from the assets escalate at a much faster rate.

GHARIB: Patten expects more management changes at Wachovia, as the bank continues to post big mortgage-related losses over the next several quarters.

KANGAS: Washington Mutual is also making changes to its top management. The nation's largest savings and loan said today it will split its CEO and chairman roles. As of July 1, Chief Executive Kerry Killinger will lose his chairman title. Stephen Frank will take over that role in April. Shareholders voted in April I should say in favor of separating the posts of chairman and CEO after a first quarter net loss of more than $1 billion.