Chief executive officer of Wachovia Corp., Kennedy Thompson, has stepped down (at the board’s request) after being blamed for losses costing the lender more than half of its market value this year. Thompson’s departure comes less than a month after his title was officially removed, making him the latest CEO to be ousted during the housing market chaos. Chairman Lanty Smith temporarily replaces him as CEO and Ben Jenkins is the interim chief operating officer.
Thompson’s title was removed after the annual meeting in April where shareholders, upset with the company’s first quarterly loss in seven years, requested his termination. Wachovia’s stock fell four percent and their shares dropped over 40 percent this year.
Even before his removal, Thompson’s standing with Wachovia was feeble. He recently admitted Wachovia’s $24 billion acquisition of Golden West Financial Corp. in 2006, in hopes to expand business during the housing boom, was “ill-timed”. The increased mortgage defaults and write downs due to subprime home loans caused the fallout.
Thompson slipped up again early this May. According to David Mildenberg and Hugh Son in their Bloomberg.com article Monday, the bank reported a first-quarter loss of $708 million, 80 percent more than Wachovia previously reported, due to the write-downs for bank-owned insurance policies. As a result, the bank had to cut its dividend by 41 percent and raised around $8 billion in new capital.
Wachovia formed a four-person search committee headed by Smith to find a permanent replacement for Thompson. Many wonder if his removal means more problems for Wachovia. The company has suffered a serious of setbacks, including their recent losses and investigations.
Washington Mutual Inc. seems to be on a similar path. They reported yesterday CEO Kerry Killinger was also stripped from his CEO title. The recent changes in many companies are occurring due to the credit losses from the current housing crisis and $386 billion in asset write downs.