Wachovia Chief on the Hot Seat

Wachovia(WB Quote) chief executive Ken Thompson may be the next CEO brought down by Wall Street's mortgage binge.

So says analyst Dick Bove of Punk Ziegel & Co. Bove, who rates the stock market perform, says Thompson was among the most aggressive executives in pushing his bank to take on more risk as it delved deeper into the world of nontraditional mortgages.

Wachovia didn't comment, but Bove's remarks come on the heels of a regulatory filing in which the Charlotte, N.C., bank said it plans to take a $1.1 billion writedown on collateralized debt obligations that are backed by subprime residential mortgage-backed securities.

In taking big losses, Wachovia follows in the footsteps of Citigroup(C Quote), Merrill Lynch(MER Quote) and Morgan Stanley(MS Quote), each of which took multibillion-dollar bad debt writedowns in recent weeks.

The big-dollar bungling has already cost Merrill Lynch's Stanley O'Neal and Citigroup's Charles Prince their CEO posts. Bove says Thompson is vulnerable because Wachovia, like Merrill and Morgan Stanley, moved aggressively into riskier mortgages in the last stages of the recent housing boom.

He points out that Wachovia bought residential mortgage lender Golden West in late 2006 -- a deal that Deutsche Bank analyst Mike Mayo warned came at "the wrong time of the cycle." The housing market peaked in 2005, by most economists' estimates, and has since gone into a free fall that the Federal Reserve believes will continue at least well into 2008.