When Herb and Marion Sandler, the founders and co-chief executives of Golden West Financial, sold their 43-year old California mortgage lender to Wachovia in May 2006, investors were so sceptical of the deal they wiped $1bn off Wachovia’s market capitalisation in a day.

Three years later, the sceptics appear to have been vindicated. By September last year, Golden West’s $122bn portfolio of option adjustable-rate mortgage loans had racked up billions of dollars of writedowns and loss reserves for Wachovia.