While out last week on my “staycation”, my wife and I took our three boys to navy pier in Chicago. It was a beautiful summer day in Chicago and the Chicago Air and Water Show was going on, providing some impressive sights and sounds to our trip to the lake.
We were disappointed that we could not walk all the way out on the pier because a private party had rented the fancy ballroom at the end of the pier and blocked off the public walkway as well. I noticed that Wachovia had rented the space and made a mental note that things must be improving for the bank. Maybe all those analysts claiming that the worst is over for the investment banks are right after all. If you make the same claim every few months you will eventually be right.
I did a good job of avoiding financial news while away and had a couple of hundred e-mails waiting for me on Monday. I would be lying if I said I was surprised that there was another round multi-billion dollar adjustments from banks tied to poor and or questionable strategies. This time it was the so called auction rate securities that banks had been peddling and that all of a sudden have become illiquid along with nearly all of these new fangled securities created over the last decade.
Merrill Lynch, Citigroup and UBS had already been forced to buy back roughly $40 billion of these instruments with the help of investigations by the New York Attorney Generals’ office as well several other states and the Securities and Exchange Commission (why are state Attorney General’s offices always ahead of the SEC on this things. The SEC however, was on top of diverting blame from the investment banks and blaming short selling rumor mongers for the collapse of Bear Stearns).
I was amused to see that on Friday, while Wachovia officials were partying in style with clients at Navy Pier, they had agreed to buy back $8.8 billion in auction rate securities.
Party on.