Man of Steel?

Wachovia seems to have slipped away from an FDIC-assisted Citigroup buyout that would have wiped out shareholder value and instead entered a deal with Wells Fargo, which will buy the bank for about $15.1 billion. The move has humbled Cramer, who on Monday lambasted Wachovia CEO Bob Steel for what looked like the bank’s collapse into Citigroup.

When the news broke Monday that Citigroup would be acquiring both Wachovia’s deposits and debt, with the help of the FDIC, Cramer couldn’t believe it. Barely two weeks prior, Bob Steel had appeared on Mad Money, telling viewers that his loan portfolio was solid. Only $10 billion out of $500 billion total were troubled assets. Then it turns out Wachovia’s situation was so dire that the FDIC had to get involved? Did Steel really come on the show and lie to Cramerica? Cramer was so beside himself he immediately added Steel to the Mad Money Wall of Shame, an honorary list of the market’s worst CEOs.

What a mistake. It turns out the whole time Steel was working to get his shareholders a better deal. He couldn’t say so publicly because it might have either ruined the possibility of such a deal or caused more problems if one never materialized. But the bottom line is that Steel was doing whatever he could to save Wachovia. And when you consider that WB was trading at about $2 Monday and the Wells Fargo deal values the bank at $7 a share, Steel has done right by holders of Wachovia stock. So Cramer was a bit red-faced Friday. He realized he should have given Steel the benefit of the doubt.

The FDIC, on the other hand, doesn’t deserve such confidence, Cramer said. An important tax law passed on the very day that the FDIC was pushing a Citigroup-Wachovia merger that would allow an acquirer to deduct the entire amount of embedded, unrealized losses from the institution that it’s acquiring. So a Wachovia, which carried such losses, actually becomes a good investment because a suitor like Wells can now deduct tens of billions of dollars in taxes. Wells no longer needs government help to deal with Wachovia’s troubled assets. The law plays such an important role in making Wachovia a much more attractive takeover target that Cramer said he wouldn’t be surprise if a bidding war erupts between Citi and Wells.

Way to go, Bob Steel.

If Wells Fargo does end up the winner, Wachovia is a great compliment to Wells’ already-strong business. Now Wells’ will have a national rather than regional footprint and strong set of brokers and financial advisers. Not to mention that Wachovia’s securities business alone was recently valued at close to $10 billion. Once this crazy market evens out, that division, if run well, might pay for the entire $15 billion transaction, Cramer said, given Wells the bank it wanted for free. And by taking losses on Wachovia’s portfolio, Wells won’t have to pay taxes for years to come.

So if Bob Steel is off the Wall of Shame now, who takes his place? Cramer said that honor goes to Senator Harry Reid of Nevada. Reid announced at a press conference this week that he’d heard there a chance of a major insurer – a household name, he said – was in danger of failing, and that in turn sunk virtually every insurance company trading on the open market as investors tried to guess who it was.

Prudential dropped 18%, MetLife 24%, Hartford Financial Services 35%, just from Wednesday’s opening to Thursday’s close.

Harry Reid should have known better, Cramer said. For that reason, he’s the newest member of the Mad Money Wall of Shame.

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