Corner Office Shuffle Not a Good Sign for Wachovia and WaMu

June 4, 2008

On June 2, 2008, Wachovia Bank (WB) and Washington Mutual (WM) announced major changes to top management in response to continued losses and an expected continuation of credit-related losses. Since both institutions had already completed significant capital raising efforts in 2008, the executive shuffle is not a good sign for shareholders, employees, or FinTech suppliers at these institutions.

Wachovia’s board of directors forced CEO Ken Thompson to resign just a few weeks after stripping him of the Chairman’s title. Meanwhile, the board of directors at Washington Mutual (WaMu) reacted to shareholder complaints about its subprime catastrophe by stripping CEO Kerry Killinger of the chairman’s title. How long will these banks operate in a distressed mode? Is either institution now likely to be acquired? If so, by whom and when?

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