Golden West Financial
|Predecessor||Golden West Savings and Loan Association|
|Founder||Herbert and Marion Sandler|
|Headquarters||Oakland, California, USA|
|Total assets||$124.6 billion|
Number of employees
|Subsidiaries||Atlas Securities; World Savings and Loan|
Golden West Financial was the second largest savings and loan association in the United States, operating branches under the name of World Savings Bank.
The business was founded in 1929 as Golden West Savings and Loan Association, a small savings and loan in Oakland, California. Golden West Financial's subsidiary, World Savings, was established in Madera, California, in 1912.
Golden West Financial
Golden West Savings and Loan Association was purchased in 1963 for $4 million by Herbert Sandler and Marion Sandler, 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.
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. 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 500 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.
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.
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."
- Golden West Financial (2005), 10-K filings for Golden West (PDF), retrieved April 22, 2010
- "Golden West Financial Corporation", Funding Universe, retrieved April 22, 2010
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- Stevenson, Richard W. (September 9, 1990). "Inside the Nation's Best-Run S.&L.". The New York Times. Retrieved April 27, 2010.
- Golden West Financial. "Golden West Club Savers get all this (advertisement)". The Modesto Bee. pp. A3. Retrieved April 27, 2010.
- Perry, Gerald (August 3, 1975). "Golden West May Merge With World Savings". The Modesto Bee. pp. B–10. Retrieved April 27, 2010.
- Bryant, Adam (October 1, 1997). "Women Hold 10.6% of Fortune 500 Board Seats, Study Says". The New York Times. Retrieved April 27, 2010.
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- Moss, Michael; Fabrikant, Geraldine (December 24, 2008). "Once Trusted Mortgage Pioneers, Now Scrutinized". The New York Times. Retrieved December 25, 2008.
- David Litterick (9 May 2006), Wachovia pays $25bn for 'jewel' - Telegraph, London: The Daily Telegraph, retrieved 2010-08-16
- Moore, Heidi N. (July 8, 2008). "Wachovia-Golden West: Another Deal From Hell?". The Wall Street Journal. Retrieved December 25, 2008.
- Ross, Andrew S. (October 7, 2008). "Human Rights Watch gets $15 million offer / Pledge comes from bankers in Oakland". The San Francisco Chronicle.
- "Show Tracker". Los Angeles Times.