Golden West Financial
Encyclopedia
Golden West Financial was the second largest savings and loan in the United States, operating branches under the name of World Savings Bank.
. Golden West Financial's subsidiary, World Savings, was established in Madera, California
, in 1912.
, through their newly created corporation, Golden West Financial. Some of the capital for the acquisition came from bank loans, with the balance coming from Marion's family money. Marion Sandler, a former Wall Street
analyst, and Herbert, a real estate attorney, would operate the company in tandem. In 1968 the Sandlers took Golden West Financial public. In 1969 Modesto Savings was acquired and became part of Golden West Savings.
Lessening restrictions on savings and loans by the United States Government in the early 1980s saw a rapid growth in the industry, and Golden West profited from it by careful examination of the market as it fluctuated and not over-extending its reach during the savings and loan crisis
. Golden West continued to expand its portfolio, and remained marginally profitable for its investors.
company, with 5 women and 4 men.
At the same time, the United States Government set up Freddie Mac to provide assistance for first time or low income home buyers who may not have received assistance from the private banking system. With diligence, Herbert Sandler devised an adjustable-rate mortgage system for Golden West's holdings to provide as alternative to the other options available. The system and implementation was enormously successful.
In 2000 the bank was one of the highest rated stocks in the industry. Golden West was mentioned industry-wide in a positive light, once described as "They are in a sweet spot right now in the mortgage business, and that is driving extraordinary earnings compared to other thrifts. They are the best ARM lender, and they have superior interest rate management". As with the late 1980s and early 1990s, Golden West continued to expand assets and lending opportunities during the market decline after a burst of refinancing
.
In 2006, Golden West Financial was named the "Most Admired Company" in the mortgage
services business by Fortune magazine. By the time Wachovia
announced its acquisition in 2006, Golden West Financial had over $125 billion in assets and 11,600 employees.
In 2006, they agreed to acquisition of Golden West Financial and its thrift, World Savings, by Wachovia Bank, The acquisition gave Wachovia an additional 285-branch network spanning 10 states. Wachovia greatly raised its profile in California, where Golden West held $32 billion in deposits and operated 123 branches. Wachovia also picked up about $122 billion in option adjustable rate mortgages.
The acquisition was announced on on 7 May 2006, with a price of a little under $25.5 billion. The merger was completed in mid-2008.
The subprime mortgage crisis
caused the timing of the acquisition by Wachovia to harm that company's financial situation.
World Savings lending volume dipped again in 2006 shortly after the sale to Wachovia was initiated. This prompted World Savings to attract more borrowers by taking a step which the company had been resisting for years: it began to write loans at an annual interest rate of just 1%, with correspondingly low monthly payments. World Savings previously did not allow rates so low.
While World Savings continued to scrutinize borrowers’ ability to manage increased payments, the move to rock-bottom rates lured customers whose financial reliability was harder to verify.
Wachovia CEO G. Kennedy "Ken" Thompson described Golden West as a "crown jewel".But investors did not react positively to the deal at the time.
After the takeover was completed in 2008, some analysts said that Wachovia purchased Golden West at the peak of the US housing boom, and that its mortgage-related problems were the ultimate factor in Wachovia's fall.
On the October 4, 2008 episode of Saturday Night Live
the show lampooned the Wachovia takeover of Golden West Financial as part of a segment on the financial bailout. Darrell Hammond
, as Herb Sandler, states that "My wife and I had a company which aggressively marketed subprime mortgages, and then bundled them as securities to sell to banks such as Wachovia. Today, our portfolio's worth almost nothing, though, at one point, it was worth close to $19 billion." In response to the show, the real Herb Sandler said that he's been "listening to this crap for two years" and "we are being unfairly tarred."
History
The business was founded in 1929 as Golden West Savings and Loan Association, a small savings and loan in Oakland, CaliforniaOakland, California
Oakland is a major West Coast port city on San Francisco Bay in the U.S. state of California. It is the eighth-largest city in the state with a 2010 population of 390,724...
. Golden West Financial's subsidiary, World Savings, was established in Madera, California
Madera, California
Madera is a city in and the county seat of Madera County, California, United States. It is a principal city of the Madera–Chowchilla Metropolitan Statistical Area, which encompasses all of Madera County, and Metropolitan Fresno. It is located in California's San Joaquin Valley. As of the 2010...
, in 1912.
Golden West Financial
Golden West Savings and Loan Association was purchased in 1963 for $4 million by Herbert Sandler and Marion SandlerMarion Sandler
Marion Sandler is the former co-CEO of Golden West Financial Corporation and World Savings Bank. In 2004, after 43 years running Golden West Financial Corporation, she was described by the Columbia School of Journalism as “the first and longest-serving woman chief executive officer in the United...
, through their newly created corporation, Golden West Financial. Some of the capital for the acquisition came from bank loans, with the balance coming from Marion's family money. Marion Sandler, a former Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
analyst, and Herbert, a real estate attorney, would operate the company in tandem. In 1968 the Sandlers took Golden West Financial public. In 1969 Modesto Savings was acquired and became part of Golden West Savings.
Growth in the 1970s and 1980s
The expanding popularity of savings and loan corporations in the 1970s led the Sandlers to acquire World Savings in 1975. World Savings had been growing with other mergers in Colorado, so this acquisition expanded Golden West Financial out of California and 107 offices. The corporation began operating all of its savings and loans offices under the name World Savings.Lessening restrictions on savings and loans by the United States Government in the early 1980s saw a rapid growth in the industry, and Golden West profited from it by careful examination of the market as it fluctuated and not over-extending its reach during the savings and loan crisis
Savings and Loan crisis
The savings and loan crisis of the 1980s and 1990s was the failure of about 747 out of the 3,234 savings and loan associations in the United States...
. Golden West continued to expand its portfolio, and remained marginally profitable for its investors.
The 1990s and 2000s
Marion and Herbert Sandler continued to serve as co-CEOs, with Marion overseeing the operations and Herbert working on the lending practices side. In 1990 The New York Times called the company "the Nation's Best-Run S.&L." saying that "the core of their business is decidedly - some might say refreshingly - old-fashioned". As the mortgage market revived in the mid-1990s, Golden West Financial Corporation expanded its reach to the east coast of the United States as struggling savings and loan associations were put up for sale. By 1995 Golden West held $31 billion in assets, making it the third largest mortgage lender in the country. In 1997 Catalyst, a nonprofit women's research group, found that Golden West Financial had one of the highest percentages of women on their board of directors within any Fortune 500Fortune 500
The Fortune 500 is an annual list compiled and published by Fortune magazine that ranks the top 500 U.S. closely held and public corporations as ranked by their gross revenue after adjustments made by Fortune to exclude the impact of excise taxes companies collect. The list includes publicly and...
company, with 5 women and 4 men.
At the same time, the United States Government set up Freddie Mac to provide assistance for first time or low income home buyers who may not have received assistance from the private banking system. With diligence, Herbert Sandler devised an adjustable-rate mortgage system for Golden West's holdings to provide as alternative to the other options available. The system and implementation was enormously successful.
In 2000 the bank was one of the highest rated stocks in the industry. Golden West was mentioned industry-wide in a positive light, once described as "They are in a sweet spot right now in the mortgage business, and that is driving extraordinary earnings compared to other thrifts. They are the best ARM lender, and they have superior interest rate management". As with the late 1980s and early 1990s, Golden West continued to expand assets and lending opportunities during the market decline after a burst of refinancing
Refinancing
Refinancing may refer to the replacement of an existing debt obligation with a debt obligation under different terms. The terms and conditions of refinancing may vary widely by country, province, or state, based on several economic factors such as, inherent risk, projected risk, political...
.
In 2006, Golden West Financial was named the "Most Admired Company" in the mortgage
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
services business by Fortune magazine. By the time Wachovia
Wachovia
Wachovia was a diversified financial services company based in Charlotte, North Carolina. Before its acquisition by Wells Fargo in 2008, Wachovia was the fourth-largest bank holding company in the United States based on total assets...
announced its acquisition in 2006, Golden West Financial had over $125 billion in assets and 11,600 employees.
Takeover by Wachovia
The Sandlers, who had run the company for forty-three years, were ready to retire and focus on philanthropy.In 2006, they agreed to acquisition of Golden West Financial and its thrift, World Savings, by Wachovia Bank, The acquisition gave Wachovia an additional 285-branch network spanning 10 states. Wachovia greatly raised its profile in California, where Golden West held $32 billion in deposits and operated 123 branches. Wachovia also picked up about $122 billion in option adjustable rate mortgages.
The acquisition was announced on on 7 May 2006, with a price of a little under $25.5 billion. The merger was completed in mid-2008.
The subprime mortgage crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
caused the timing of the acquisition by Wachovia to harm that company's financial situation.
World Savings lending volume dipped again in 2006 shortly after the sale to Wachovia was initiated. This prompted World Savings to attract more borrowers by taking a step which the company had been resisting for years: it began to write loans at an annual interest rate of just 1%, with correspondingly low monthly payments. World Savings previously did not allow rates so low.
While World Savings continued to scrutinize borrowers’ ability to manage increased payments, the move to rock-bottom rates lured customers whose financial reliability was harder to verify.
Wachovia CEO G. Kennedy "Ken" Thompson described Golden West as a "crown jewel".But investors did not react positively to the deal at the time.
After the takeover was completed in 2008, some analysts said that Wachovia purchased Golden West at the peak of the US housing boom, and that its mortgage-related problems were the ultimate factor in Wachovia's fall.
On the October 4, 2008 episode of Saturday Night Live
Saturday Night Live
Saturday Night Live is a live American late-night television sketch comedy and variety show developed by Lorne Michaels and Dick Ebersol. The show premiered on NBC on October 11, 1975, under the original title of NBC's Saturday Night.The show's sketches often parody contemporary American culture...
the show lampooned the Wachovia takeover of Golden West Financial as part of a segment on the financial bailout. Darrell Hammond
Darrell Hammond
Darrell Hammond is an American actor, stand-up comedian and impressionist. He was a regular on Saturday Night Live from 1995 until 2009, the longest tenure of any cast member. Upon his departure, Hammond, at age 53, was the oldest cast member in the show's history...
, as Herb Sandler, states that "My wife and I had a company which aggressively marketed subprime mortgages, and then bundled them as securities to sell to banks such as Wachovia. Today, our portfolio's worth almost nothing, though, at one point, it was worth close to $19 billion." In response to the show, the real Herb Sandler said that he's been "listening to this crap for two years" and "we are being unfairly tarred."