NC SPIN Online

The Wachovia deal
Most of the buzz we’ve heard this week focuses on the financial crisis and the demise of Wachovia Bank. The financial crisis has displaced politics as the prime focal point at both the national and state levels. Folks are concerned about what the Congress will do and how the Wall Street Crisis will affect North Carolina, but more specifically how it will affect their jobs and their financial wellbeing.

The impact in Charlotte is much like awakening after a violent storm or bomb blast or some other disaster. People feel understandably numb. This is perhaps the biggest blow to the Queen City since Cornwallis came through. In the aftermath of the blow, many are starting to ask questions about why this occurred, who should be blamed, and why was Wachovia virtually given away.

Some, including the Charlotte Observer (read here: are even questioning why Wachovia was only worth $2.16 billion. We’ve talked with several sources; none want to go “on record,” but we have, we think, pieced together part of what happened.

All agree the 2006 purchase of pick-a-payment mortgage giant Golden West Financial, located far away from Wachovia’s base, in California, was the undoing of the bank. They bought this albatross for high dollar at the peak of the housing frenzy. It was indicative of the gunslinger fast-draw deal-making philosophy of former First Union executives and was rubber stamped by a board of directors that should have resigned when they fired this team.

Many question Wachovia CEO Bob Steel’s leadership. Don’t. Steel got dealt a terrible hand and was slogging his way through the mess. It was his plan from the beginning to sell more stock and recapitalize Wachovia. If one can be critical of Steel it would be that he waited too long. As the financial crisis storm materialized, he counted on the leadership of the country and Congress to take some actions to stabilize the markets, believing Wachovia’s timing to sell stock would be better received in a more stable environment.

But the escalation of the crisis of confidence in the finance houses brought everything to a head. The recent AIG and Washington Mutual takeovers fed the rumor mills. Wachovia was keeping a low profile, even making noises about a possible purchase or merger, but expert observers knew the critical problems it faced because of Golden West. Still Wachovia was making it and could have survived for a while before having to recapitalize.

The 24 hour a day cable news networks helped to feed the frenzy and even brought Wachovia’s name into play as a possible takeover candidate. That was highly problematic, especially after the fall of WaMu. Foreign markets started balking at doing traditional business with Wachovia, we were told. Consumer confidence dropped and depositors grew wary. Then the Feds stepped in.

We understand Wachovia leaders were told last Friday by FDIC that they would not be allowed to open the bank on Monday if they didn’t find a buyout partner before that day. Talks were frantic over the weekend. Two potential partners were identified: Wells Fargo and Citigroup. We also heard that Wells Fargo’s offer was somewhat better that Citigroup’s, but somehow Wells Fargo had upset higher ups at FDIC who virtually forced the deal with Citigroup. Steel, the executive team and the board had little bargaining power and were forced to make a deal.

In a more stable environment, Wachovia might have been able to do a workout. Citigroup, with financial problems of its own, got a great gift. Citigroup got a bank with $700 billion in assets, $400 billion in deposits and, while they assumed a lot of troubled loans, they got a promise that their losses will be restricted. Some say their stop loss limit is $40 billion. What a bargain.

Speaking of banking, John Allison of BB&T is one of the best minds in the nation. The Charlotte Business Journal had an article in which Allison slammed the bailout plan that was defeated Monday. When John talks, we listen. Read on:

For more on the Wachovia demise read this week’s My Spin column, “Saying Goodbye to an Old Friend.”

State budget going South
Some may have questioned why Governor Easley ordered state agencies to cut spending by 2 percent. There was good reason. Legislative staffers are monitoring state revenues and speculating how seriously the budget will be affected. Some believe we could experience a revenue shortfall of as much as $2 billion before the fiscal year ends on June 30th. Easley’s 2 percent cut of a $21 billion budget won’t come close. The next Governor will be facing serious cuts….as Yogi Berra would say, it’s Déjà vu all over again. Isn’t this where Governor Easley came in?

Campaigns, although muted, continue
As mentioned above, politics took a backseat most of the week as eyes and hearts were focused on the financial crisis in this nation. That is not to say candidates weren’t at work and TV ads were not running. They were, but few people were paying much attention.

That might be a good thing for Democrat Beverly Perdue. In Charlotte, to campaign for Governor as that city was reeling from the news about the financial crisis and Wachovia’s demise, people came to the Queen City with a message about school vouchers and crime rates. Talk about tone deaf. Everyone is concerned about the economy and she’s talking vouchers. It was a good thing nobody was paying attention.

With five weeks left in this campaign, Democrats are getting more and more nervous about holding on to the Governor’s mansion. More and more tell us they are counting on the Obama surge, which they repeatedly say the pollsters are not able to gauge because it will come from young, first time voters, most of whom don’t have landline telephones, using only cell phones. The result is they don’t get counted in results.

We keep hearing old line Democratic faithful counting on that surge, predicting that if the African American vote reaches 20 percent or more it could be good news for Democrats up and down the ballot. Of course they also say that most of the voters are not likely to understand that voting a straight Democratic ballot requires two votes, not one and if the first-timers aren’t aware of that fact they might not vote the straight ticket.

Here are the latest Public Policy Polling results:
Governor:
Pat McCrory (R) 44%
Bev Perdue (D) 41%
Mike Munger (L) 5%
Undecided 10%

Tom Jensen, President of PPP points to the significance of this poll. This is the first time McCrory has led in a PPP poll.

PPP says here’s why McCrory is doing so well. He is getting good crossover support from Dems. As many as 20% are supporting him. Why? Perdue isn’t giving them a reason to vote for her. 66% of the voters say the economy is the primary issue on their minds and Bev isn’t talking about it.

Independents (unaffiliated) voters are swinging to McCrory. PPP reports the break as 38-32. Perdue’s lead with women is diminishing. It is now only 3 percent. McCrory is scoring well in most urban and rural regions.

The only two regions of the state where Perdue is ahead of Pat McCrory are the Northeast and the Triangle. In other regions of the state she trails by 5-6 points. Public Policy Polling reports that voters preferring Libertarian Michael Munger are taking votes away from Perdue more frequently than McCrory.

Jensen of PPP likens the current Perdue malaise to a similar one in the primaries. Says Jensen on his PPP blog site http://publicpolicypolling.blogspot.com/ :
“With five weeks left to go until the general election, Bev Perdue is at her worst standing in the polls yet. Over PPP's last five surveys her lead has gone from nine points to five to one to one again and now to a three point deficit.

”During the primary campaign our poll five weeks out from the election represented rock bottom for Perdue. She went from leading by 27 points at the start of March down to ten then seven and finally a single point at the end of the month.

”The next five polls after that showed her up eight, then ten, then nine, then 14, and finally 18 before she finally won by 16.

”March and September have been marked by similar problems of message discipline for the Perdue campaign: attack ads that go all over the place without really establishing a coherent theme that hits home with voters, a lack of visibility from Perdue herself in her ads, etc.

”She got her act together in April and ended up winning a comfortable victory. I don't think she can roll out the positive pledge again so it remains to be seen what she can do to fundamentally change the direction of the race from its current course. But I wouldn't underestimate her.”

In a press release today, Perdue touts the endorsement of Mayors across the state. Here’s the list of Mayors who say they support the Democrat in the Governor’s race:
Terry Bellamy, Asheville; Harold Weinbrecht, Cary; Kevin Foy, Chapel Hill; Scott Padgett, Concord; Bill Bell, Durham; Ronnie Williams, Garner; Alfonso King, Goldsboro; Yvonne Johnson, Greensboro; Rebecca Smothers, High Point; Tom Bayliss, New Bern; Charles Meeker, Raleigh; Cornelia Olive, Sanford; Bill Safo, Wilmington; Allen Joines, Winston-Salem.

If this election was decided based on endorsements, Perdue would win hands down. Often the endorsements from a group don’t convert into votes, however, as many a candidate can attest.

Lieutenant Governor:
Walter Dalton (D) 40%
Robert Pittenger (R ) 36%
Phillip Rhodes (L) 6%
Undecided 18%

Note: Pittenger has just come back on TV with his “pigs” ads. Can he move the needle 4 or more points? If Dalton is on TV it isn’t visible. He ran such a great primary ads. Some wonder if he’s out of money.

Attorney General:
Roy Cooper (D) 54%
Bob Crumley (R) 32%
Undecided 14%

Both Crumley and Cooper are on TV now, but Crumley is not polling well with Republicans. He has much work to do and little time.

Superintendent of Public Instruction:
June Atkinson (D) 45%
Richard Morgan (R) 38%
Undecided 17%

Atkinson is about to go on TV to boost her single digit lead.

U.S. Senate:
Kay Hagan (D) 46%
Elizabeth Dole (R) 38%
Christopher Cole (L) 6%
Undecided 10%

Most politicos think Elizabeth Dole is gone. Questions are arising as to whether she will keep her residence in Salisbury if defeated. Her primary residence is at the Watergate in Washington. Liddy and husband Bob also recently bought a retirement home in Boca Raton, Florida we’re told. She may be using it.

Who won the week?
Two NC SPIN panelists offer their views as to who won the week:

Lisa Price, WPTF News:
McCrory – for cutting short his campaign to return to his Mayoral duties in light of the Wachovia buyout.
Elizabeth Dole – for putting her message about the bail out plan in front of as many people as possible.

Gene Arnold, former Nash County Representative:
McCrory won big. No show by "dumpling" at the debate. No show on NCSPIN debate. Another DOT pinhead gets exposed helping her do 'business as usual.'

Hagan won due to ads by 527's and dole track record of no activity. NCFREE says Hagan wins.

Obama keeps coming on and McCain can't seem to come up with a meaningful rebuttal. He needs a knockout debate by Palin or a major screw up by Biden.

The financial crisis helps Hagan and Obama. Does not hurt McCrory.

October surprise
Listeners to talk radio, web visitors and others are increasingly hearing speculation about a possible October surprise which might come as early as Friday of this week. Depending on who you are talking to, the scenario varies. In each instance, however, the speculation is that the Vice Presidential candidate of one or both major parties will be dumped.

In case of the Democrats, the storyline goes that Obama will dump Biden following the debate and put Hillary on the ticket. Most Democrats think this an unbeatable ticket.

With the Republicans, the wisdom is that Sarah Palin, no matter how much you might like her, just isn’t ready for prime time. Her interview with Katie Couric was considered by most, even stalwart Republicans, a disaster. The parody done of the interview on Saturday Night Live by Tina Fey has become an instant classic on the web. Many think her performance on the V.P. debate tonight will be embarrassing, forcing McCain to dump her. If so, most believe he will go to Mitt Romney, one of the leading opponents for the nomination.

Our panelists don’t think this will happen. Let’s see.

How much is the Pension Fund Loss?
The financial crisis is truly affecting everyone from Wall Street to Main Street, prompting questions about how much the public pension funds of the state have been affected. Last week we reported that the loss from AIG Insurance could amount to as much as $250 million, however the treasurer’s office reported to us that total investments in AIG were only about $65 million.

This $80 billion portfolio, like all investment accounts, is subject to the ups and downs of the market. Rumors are swirling about the decrease in the value of the state pension funds. Reporters are asking the Treasurer’s office to make a statement about where things stand, but so far Treasurer Moore is remaining quiet. To be sure he doesn’t want to add fuel to the financial crisis fire, but Moore would provide a valuable service, not only to public employees but to all citizens, to give us a straightforward accounting of where we are and how well the state is doing in these times.

This is made especially meaningful following the statement of the Treasurer of California saying their state is running out of cash.

Treasurer Moore, the news may not be great but the people of North Carolina can stand the truth. It would put an end to speculation to hear from you.

More ethics questions
Following the scandal revealed by the N&O concerning a DOT board member’s directing almost $400,000 in funds to projects near property he and his family own we then learned that this same board member was holding a fundraiser for Beverly Perdue. Pat McCrory tried to use this to political advantage. Perdue tried to blunt the impact by linking McCrory to former DOT board member Tommy Pollard from Jacksonville. Pollard served so long ago that charge didn’t stick. But we haven’t heard the end of DOT shenanigans, possible conflicts and ethics problems.

We hear a current and former DOT board members are under scrutiny. Lanny Wilson, current DOT board member from Wilmington and Gordon Myers, former executive with Ingles markets and former DOT board member have been subject to questions relating to their fundraising activities.

Wilson and his wife, sister and mother have been appointed to several state boards including the NC Real Estate Commission, The N.C. Turnpike Authority, N.C. Ports Authority Board and the aforementioned DOT board.

The Wilson family contributed to the Easley campaign but also has given to Lt. Governor Perdue some $10,000 in 2005 and has given Democrats more than $300,000 since 2000, according to reports in Carolina Journal.

Blue to Washington?
We hear that former House Speaker Dan Blue might be under consideration for a high level position in the Obama administration should the Democrat be elected President. Rumors are circulating he might be highly placed in the Department of Justice.

Health Plan status?
Last week we published a report indicating that the State Health Plan was taking on water and borrowing from the Rainy Day Fund. Bill Holmes in House Speaker Joe Hackney’s office and Don Willis in Rep. Hugh Holliman’s office report that the Health Plan is currently paying its bills but is slated to run out of money somewhere after the beginning of the new calendar year. All agree that the plan will be running a big deficit by the end of the fiscal year ending June 30th unless action is taken. The plan is to wait until the legislature convenes in January 2009 and then take steps to address the issue.

We have previously wondered aloud about the status of Libba Evans, N.C. Cultural Affairs Secretary. She’s been on leave from her job since May and the Administration has failed to respond to questions about where or why. We may have gotten some insights as to why in an investigative report by Don Carrington, Associate Editor of Carolina Journal. In an exclusive report published on the web Tuesday, Carrington reported that Evans has been involved in a questionable real estate transaction in Manteo. (Does it come as no surprise that most of the questionable activities in this state appear to have origins in the Northeastern and Southeastern corners of the state?) After a commission under Evans’ department eliminated strict tree-cutting regulations on a Dare County parcel, Evans and her husband, James T. Lambie, purchased the property in 2006.

Accusations of conflict of interest have arisen in the case. According to tax records, the property purchased by Evans has appreciated in value by more than $300,000 since being purchased. Read the full story in Carolina Journal.

Millions Voting March
When the state NAACP holds their 65th annual convention in Raleigh next week, Rev. William Barber, President of the NC NAACP will announce an historic “Millions Voting March” to be held October 16th, the first day for one-stop early voting and registration in our state. Rather than having this event at one site in one community, Barber is urging African Americans and others to march on their local boards of election to register and cast ballots on that day.

In a statement published today in The Carolinian and other black newspapers across the state, Barber says, “In this season of epic political consequence and history, I have but one message for those who seek justice and equity, and that is, you better vote. This is the time that civil rights organizations, civic organizations, churches and others in our community, in a nonpartisan way, can move en mass to exercise that precious right to vote our forbearers sacrificed so much for.”

Syndicated columnist Cash Michaels, also an NC SPIN panelist, revealed the effort will be coordinated with a national movement of the same name conducted by the national NAACP. The Black Journalists of North Carolina are co-sponsors of this event and are breaking this story today in black newspapers across the state.