Herbert Sandler of Golden West Financial Corp. describes the days since Wachovia Corp. announced it would buy his thrift as being filled with mixed emotions.
"I find the analytical work [by Wall Street] extremely disappointing, and on the other hand, the personal stuff extremely emotional," he said Tuesday.
In a wide-ranging two-hour interview in his in Oakland, Calif., office, he and his wife, Marion, his co-chief executive, talked about the importance of business ethics, why their monoline company's days were numbered, the regulatory climate, and their plans for life after their "jewel" is sold.
They plan to "give away everything that we are getting on the transaction," Mr. Sandler said.
But before they can devote more time to their charitable foundation's social, medical, and political goals, he said, they must ensure that the deal closes, their employees are taken care of, and the transition after the close goes smoothly.
Wall Street has frowned on the proposed marriage of the $542 billion-asset Wachovia and the $128 billion-asset Golden West, an adjustable-rate mortgage specialist. Since the deal was announced May 7, Wachovia's stock has dropped 9%.
Mr. Sandler commended the patience of Wachovia's chief financial officer, Thomas Wurtz, in devoting two hours May 12 to answering analysts' "foolish, silly questions" during a specially convened conference call to stem the selloff in Wachovia shares.
The Sandlers bristle at criticism of their branches by analysts dissecting the $25.5 billion deal; the notion that Wachovia is overpaying; and remarks that they are unloading their portfolio of adjustable-rate mortgages as the economy heads into a real estate slump.
The branch criticism is "the one that drives us crazy the most," Mr. Sandler said.
Mrs. Sandler said the couple put a lot of thought into branch building.
"Our branches are developed on time-and-motion studies," she said. "We don't give an architect a piece of land and say, 'Go build the building.' We say, 'This is what it will look like, this is how it's going to function, this is where the parking is going to be, this is how it is going to be signed.' So they are tremendously functional, they win design awards, and the locations are as close to 100% retail locations as we can get."
Frank J. Barkocy, the director of research at Keefe Managers Inc., said he is not surprised to hear rebuttals from the Sandlers, whom he described as "outspoken, to say the least."
In an interview Thursday, Mr. Barkocy said the selloff in Wachovia's stock will likely be short-lived and is natural given investors' uncertainty about the integration of Golden West's successful thrift model into Wachovia's banking franchise.
"You get the sense they are taking this almost as a personal affront to the success that they have had," Mr. Barkocy said. "This has been their life and it's like, 'Why are you saying nasty things about my child?' It's that type of relationship that they have."
Mrs. Sandler, when asked how it feels to sell a company that she and her husband founded over four decades ago, said, "It hasn't penetrated yet." While her husband joked about getting out the box of tissues, she said, "I can't say the words."
Though the decision to sell was emotional, they have no doubts it was time.
"We've always known there were great strengths in this model but there were also weaknesses," Mr. Sandler said. "We leave a lot of money on the table when we don't have a full product line on the savings side, and you leave money on the table when you don't have a full product line of loans to offer."
Mrs. Sandler said diversification was necessary to satisfy customers. "I'm not a big advocate of one-stop shopping, but I do think it is becoming more and more important," she said.
Adding capabilities, as their competitor Washington Mutual Inc. in Seattle has opted to do, just didn't seem practical to the Sandlers.
"When we do things, we do a lot of due diligence, we are very careful," Mrs. Sandler said. "We don't sit around in a room and say, 'Look, you know the business we ought to be in is wealth management!' and then go charging into that. What we would do is market-test it, and we would proceed very slowly. That's the way we do it, so it would take a long time to pick and choose and sort and test and so forth."
Joining Wachovia "is a way of accomplishing that with a tested company that is very, very customer oriented," she said. "It seemed a good way of doing it."
Nor do they have any doubts that Wachovia is the right partner. "The Ken Thompson-era at Wachovia has been a period of focusing on customers, focusing on employees, and then focusing on shareholders," Mr. Sandler said. "When people do that you get a sense of what they are all about."
Such values are at the heart of the corporate culture at Golden West and its 285 World Savings branches.
"We have not cut any corners" Mr. Sandler said. "Business doesn't have to be like it is always portrayed on a movie screen and TV - sharp rapacious, greedy, not caring about human beings. That's not what our company has been about.
"We didn't create this jewel to turn it over in a merger to people who had different sets of standards or outlooks on life than we do. That would have been devastating."
Nor, Mr. Sandler was quick to point out, are they turning it over in anticipation of a collapse of the mortgage market. He considers those comments an affront to his integrity. They are "pure nonsense, pure nonsense," he said.
Besides, the current real estate slowdown is a spring shower compared to the hurricanes that battered the industry in 1980s and 1990s, he said. "There is nothing in this environment that frightens me."
The crisis of the 1980s, which included regulatory "stupidity," was Golden West's most trying period, Mr. Sandler said.
In the late 1970s, expecting rates to rise, Golden West stopped lending, to build up its liquidity. But "we were directed by our regulator, in an act of extreme incompetence and stupidity, that we had to reduce our liquidity" just before the prime rate climbed to 21.5%, Mr. Sandler recalled.
"We were in a trap, at the mercy of an incompetent regulator." Had the company maintained its high liquidity, it could have ridden out the 1980-81 crisis relatively unscathed, Mr. Sandler said.
"That was the toughest period, when incompetent regulators created a problem, not only for us, but for many others as well," he said. "The deregulation of '79-80 was incredibly unplanned and incompetently handled by all the relevant players - Congress, the administration, the Federal Reserve, the Federal Home Loan Bank Administration, and the Office of the Comptroller of the Currency. Every one of them was at fault."
"There are much better regulators today," he added.
Still, not everything that today's regulators are cooking up is to Mr. Sandler's taste. He called Basel II "not right thinking" and said that regulators talking about option ARMs "confuse the product with the underwriting of the product, which is just silly."
The Sandlers' experience in the 1980-81 crisis provided some rules that they have lived by since then.
"What we learned then is you have to run your company in a way so that, no matter what takes place in the external environment, you will be a healthy and strong survivor," Mr. Sandler said. "And that is what we have become.
"We have an incredibly strong balance sheet - totally transparent, no accounting gimmicks, no accounting games, extremely transparent and conservative, strong capital, high-quality assets, low costs. We don't have to ask anybody for anything, because we can come through any environment."
Through the tears in their headquarters this month, the Sandlers have begun to focus on the future.
"Our plan is to give away everything that we are getting on the transaction," Mr. Sandler said.
The Sandler Family Supporting Foundation will become one of the nation's largest grantors, funding medical research as well as human rights and environmental and other progressive causes, including the fight against predatory lending, he said.
"Our hope is that as the latter of the two of us is going down the tubes, we are giving away our last million dollars," Mr. Sandler said. "That will be true success."
