R.I.P Wachovia…

Yesterday afternoon, after the $700 billion bailout legislation failed, Hank Paulson came out of the White House and said, “We have experienced significant turmoil in our financial markets in the last few days, including the collapse of Washington Mutual and Wachovia here and the failure of two major financial institutions in Europe.” Of course, Wachovia (WB) was somewhat different from WaMu in that it didn’t technically fail. Instead it was purchased by Wells Fargo on the cheap. But Paulson’s description of Wachovia was certainly interesting.

As Andrew Ross Sorkin points out in his column today, Wachovia CEO Robert K. Steel appeared on CNBC just two weeks ago to reassure investors that Wachovia had “a great future as an independent company.” That day, Wachovia shares closed at $10.71. But Steel’s comments, which Sorkin rightly skewers, weren’t the only bullish move that might have led some people to believe that Wachovia could have weathered the storm.

A quick skim of the Form 4s from two weeks ago shows that there was also a string of insider buying by two Wachovia directors: William Goodwin Jr. and John Baker. Goodwin, a director since 1993, bought 1 million shares at $11 on Sept. 15 according to Insider Score, bringing his total holdings to 2.6 million shares. And Baker, who had been a director since 2001, bought 25,000 shares at $12.25. In addition to being long-time directors, Goodwin sat on the risk committee and Baker sat on the Audit Committee, which seems like solid perches to have all the facts.

Together, these two directors bet over $11 million just two weeks ago that Wachovia would have a happy ending. But as we know now, it didn’t exactly happen that way. So were these directors part of the ruse or were they simply two more people fooled into thinking that things at Wachovia were better than they appeared to be?