From Market Movers….

Wachovia’s real problem with Golden West, it turns out, is not the headline acquisition cost, so much as the inherited Golden West loan portfolio, which includes a staggering $121 billion – no, that’s not a misprint – in “pick-a-pay” mortgages.

These loans behave just like you think they do: borrowers get to decide how much money they’re going to pay back each month. Predictably enough, that isn’t working out too well.

On Monday, Wachovia conceded total losses from Pick-A-Pay loans could eventually amount to a staggering 7% to 8% of the loans’ combined value, a range of $8.5 billion to $9.7 billion.