The Five Dumbest Things on Wall Street

2. Wachovia Whacked

Give Wachovia WB CEO Ken Thompson credit for his recent candor.

This week, Wachovia reported a first-quarter loss of $393 million, down from a profit of $2.3 billion in the year-ago quarter. The bank now also finds itself short on money, has promised to raise $7 billion in capital by selling stock and has decimated its dividend, cutting the payout by 41%.

Defaults on Golden West's Pick-a-Payment loans, which allow borrowers to choose their own adventure when their mortgage bill comes each month, are largely responsible for the bank's woes.

When Thompson bought Golden West in 2006 for $25 billion, those adjustable mortgages were still printing money. For months leading into earnings, he had defended the Golden West purchase, and even after this recent earnings disaster said the deal could yet bear fruit.

Now that the bubble has resoundingly collapsed and many homeowners are choosing not to pay, inquiring minds at The Wall Street Journal asked if Thompson had any regrets about the Golden West merger.

"Of course I do, given the result that we're seeing," said the frustrated CEO. "Looking backwards, obviously the timing was terrible."

On a conference call, Thompson assessed the problem of mortgage defaults: "I would just say that what we are seeing is that when equity in the home approaches zero, behavior changes." In other words, Wachovia isn't going to see that money ever again.

Dumb-o-meter Score: 91. Of the Golden West acquisition, Thompson said, "Financially, that deal is not going to work out the way we thought it was."