Customers never lined up in front of the doors of Wachovia branches and average deposits actually grew year-over-year. But more sophisticated customers had indeed begun to pull money out of Wachovia, which may indicate that a panic driven run on the bank was just underway when the government stepped in the arrange a buyout.
In a period when many investors were fleeing to the safety of cash and Treasuries, Wachovia’s commercial customers had started to pull their money from the bank. So while average deposits over the third quarter were 4% higher than a year ago, by the end of the quarter actual deposits were 2% lower than a year ago. In short, the trend of growth had done a dramatic turnaround “driven by a significant decline in higher cost commercial deposits,” according to Wachovia.
So was this a run on Wachovia? That’s one way to interpret it. Wachovia lost a lot of money last quarter and commercial customers may well have begun to fear for its financial health. Another possibility is that customers needed to withdraw cash to meet operating expenses as short term borrowing markets froze.
Earlier: Wachovia Books $23.9 Billion Loss