Wachovia Corporation will pay $26 billion to acquire Golden West Financial Corporation, reports the New York Times. The price will be paid mostly in stock but does include a small amount of cash.

Golden West is being viewed as Wachovia’s move into the West, particularly California, although the company operates four branches of its World Savings in the Las Vegas Valley. Wachovia has been growing by acquisition in recent years with the 2001 purchase of First Union and the 2004 buyout of SouthTrust Corporation.

The deal raises yet again the question of the real estate bubble. Golden West has long concentrated on real estate loans and has done well in the smoking hot California market in recent years. But some analysts are skeptical that Wachovia might have bought a business whose time has passed, especially since Golden West has written so many adjustable rate mortgages.

That issue led one analyst to call the Golden West “the poster child for the U.S. real estate bubble.” And breakingviews commentator Rob Cox thinks the Golden West’s shareholders got a great deal. Its ARM business will hurt margins because it won’t be able to pass rising interest rates on to borrowers and when they do rise, defaults will rise dramatically.

CEO Kennedy Thompson told CNBC “We’re not trying to market time the real estate market.”