Wachovia dumped its CEO Ken Thompson after a series of bad moves over the last few years culminated in a punishing year once the credit crisis began—and less than a month after it forced him out as chairman.

The Financial Times’s page-one lede says “The fallout from the credit crisis spread from Wall Street into the US retail banking sector on Monday as Wachovia removed its chief executive.”

Thompson’s ill-fated decisions included buying California mortgage lender Golden West right around the market peak in 2006 for $24 billion, getting heavily into commercial real estate and condos near their peaks, and a $7 billion acquisition it has had a hard time integrating with its other businesses. The Wall Street Journal on page one quotes the acting CEO saying the firing doesn’t signal trouble, but The New York Times on C1 and Bloomberg say the bank’s problems are likely to deepen.

That’s in part cynicism—or realism, to put it uncharitably—about Wall Street’s ways. An old trick by incoming regimes is to overstate losses due to their predecessors so they themselves have an easier time looking good later. Bloomberg quotes an analyst implicitly calling this:

“We figure since he’s leaving there’ll be a big loss provision for the second quarter,” David Hendler, senior analyst at CreditSights Inc., said in an interview. “They need to present a different picture on the company, which is, ‘We’re in the restructuring mode.’”

The WSJ in a Heard on the Street column says investor Michael Price is betting against the bank, saying “they need to fess up” about their credit losses.

The Journal goes high with good context its competitors (besides Bloomberg, partly) don’t get around to:

In recent weeks, Wachovia’s image was tarnished by revelations of a federal criminal investigation into alleged laundering of drug money between U.S. banks and Mexican and Colombian money-transfer companies. Separately, Wachovia paid $144 million to settle another case involving an alleged telemarketing scam conducted by firms that fraudulently obtained bank-account data from elderly Wachovia customers. Wachovia says it is cooperating with the money-laundering probe; it neither admitted nor denied guilt in the telemarketing case, but said the situation was “unacceptable, and we regret it happened.”

Bloomberg goes high with speculation that the bank will be taken over, something the NYT dismisses, but the WSJ, FT, and hometown Charlotte Observer say is possible.

The NYT says Thompson was “stunned” by the turn of events, which the Journal implies was precipitated by the board’s view he was in La-La Land: “What he has been telling the board hasn’t been realistic,” said a person close to the board (which in non journo-speak means “a board member”).

So how golden is Thompson’s parachute? Take your pick. The Journal and Bloomberg say about $8.7 million, while the Times says $34.5 million.

The Journal has the Quote of the Day in a separate C1 story, on what faces the acting CEO:

“Everybody’s looking to Lanty for the moment,” said a person who has worked with Mr. Smith. “He can’t know where all the bodies are buried.”

WaMu chief forced from chairmanship

Wachovia wasn’t the only financial-industry turmoil making news yesterday. Washington Mutual forced its CEO to give up the chairmanship of the company (something that ought to happen at every public firm), and financial stocks took a beating.

WaMu’s CEO Kerry Killinger had been chairman for seventeen years. No more. That’s what will happen when your share price is down eighty percent in a year, including a sizeable drop after you’ve had to get rescued by private equity on bad terms for your stockholders. Aggressive subprime mortgage lending has done in the bank.

The Journal on C3 quotes an analyst saying Killinger could be the next CEO to go:

Not everyone was convinced that Mr. Killinger’s job is secure, however. “His [Killinger’s] arc will probably be the same as Ken’s,” said Nancy Bush, an independent bank analyst at NAB Research in Aiken, S.C., referring to Mr. Thompson.

We wonder what took WaMu so long? The bank’s shareholders voted in April to remove him as chairman, Bloomberg notes. A decent board would have snapped to then.

Lehman’s first loss as public company

The Journal goes above the fold on A1 with a scoop that Lehman Brothers is considering raising billions of dollars in new capital. Its shares led a broad financial-sector decline, tumbling 8 percent. The paper says the bank is about to report its first loss as a public company.

The WSJ says Lehman will likely raise between $3 billion and $4 billion. That would add to the big cash the investment bank has raised in the last year and would dilute shareholders who are down 50 percent in 2008.

In the past year, Lehman has raised $6 billion in capital, including $4 billion last quarter. The firm’s financial position was further strengthened in March when Lehman, like all U.S. investment banks, was allowed to borrow directly from the Federal Reserve against a variety of collateral, which gives it ready access to considerable funding. The availability of Fed funding significantly reduces any worries that Lehman and other firms might suffer a cash crunch.

Nonetheless, some investors remain concerned that relative to its size, Lehman is holding more securities tied to both residential and commercial real estate than any other big Wall Street broker, according to Bernstein Research.

All this bad news makes financial stocks tumble

Financial stocks were down broadly yesterday on the Wachovia and WaMu news, plus credit downgrades of Lehman, Merrill Lynch and Morgan Stanley.

The NYT and WSJ report on their respective C2’s that a British mortgage lender’s shares plunged 24 percent as it “was forced Monday to seek emergency help from investors and cut the price of a planned share sale as more borrowers defaulted on mortgages, sowing fears that the global credit crisis was weighing heavily on the broad economy,” the NYT says.

The FT says all total, the news raised worries that the credit crisis is not over.

Grasso still chasing his money

The NYT on C1 looks at whatever happened to Dick Grasso, the nonprofit executive who retired with a $185 million package. It finds that things for the extraterrestrialish former head of the New York Stock Exchange are looking up, what with some of his foes and former cohorts vanquished. Tormentor Eliot “She Knows What… You Want” Spitzer is in out of the governor’s mansion and in hiding somewhere while Bear Stearns CEO Jimmy Cayne, who approved Grasso’s package, is retired somewhere on a golf course or at a bridge table (which, come to think of it, is where Cayne would be if Bear were still a going concern anyway—he’d just still be drawing tens of millions of bucks for the privilege).

The Times says Grasso’s legal challenge to keep his staggering retirement deal is looking good (for him) with a New York court “imposing a high legal burden… to prove that Mr. Grasso had used devious means to secure his pay.”

At the height of the public furor over Mr. Grasso, such a burden may well have been cleared. Now, Mr. Spitzer’s reputation as a crusading prosecutor lies in ashes, and some of the chief executives who approved Mr. Grasso’s contract—like Mr. Cayne and E. Stanley O’Neal, then of Merrill Lynch—have been at center of the Wall Street subprime credit collapse, losing many billions of dollars of shareholder funds. A juror, new to the case, may very well ask, who is the bad guy here?

A glimmer of hope in manufacturing

In economic news, a manufacturing index showed recessionary levels for the fourth straight month, but was slightly better than expected. The WSJ says on A3 that the report shows “the economy is stagnant but not collapsing.” The weak dollar boosted exports, which partially made up for anemic domestic demand.

Construction spending dropped 0.4 percent on a seasonally adjusted basis.

Investors on hot seat for food crisis

The Times on C1 says commodities regulators are stepping up their oversight of markets by requiring more data from investors to determine whether they’re “artificially driving up world food prices.” It will also investigate whether a cotton price spike in February was driven by illegal activity.

The commodity futures markets play a key role in establishing worldwide prices for wheat, corn, soybeans and other foodstuffs, as well as energy products like crude oil and natural gas.

But in recent years, these markets have also become an attractive haven for investors seeking both profits from rising prices and protection against inflation and a withering dollar. As a result, billions of dollars have poured into the commodity futures market…

The commission has come under fire… for not doing enough to monitor the impact of these investors on markets that have such influence on family budgets nationwide.

Which regulators haven’t come under fire (justifiably) lately for not doing enough in their respective jobs?

Big advertisers want Google to stop piggybacking

The Journal on B1 says Google faces “growing” anger from some big advertisers who are ticked that it sells ads to smaller companies who use their trademarks to draw clicks—a phenomenon known as “piggybacking.”

Basically, a competitor to Marriott buys a Google ad at auction using keywords like the chain’s slogan. When someone searches for that, it brings up the competitor in the ad box on the side of the search results. It’s something that’s been going on for at least four or five years, though the Journal acknowledges it’s been building for a while.

As a result, Google could face a backlash as it attempts to grab a bigger share of other advertising niches, including display advertising and video ads. Big advertisers say they may punish Google if they aren’t satisfied with the way the piggybacking dispute is dealt with. “This does play into our decision of overall spending—it has to,” says Michael Menis, vice president of global marketing services at InterContinental.

Maybe this will send all the advertisers running back to newspapers. Kidding!

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.