The firm indicated that, along with the new hire, it will expect to declare a second quarter loss of around $2.6 billion later this month - adding to its $708 million loss for the first three months of the year.
Mr Steel, 56, was formerly the vice-chairman at Goldman Sachs - and has also worked as Treasury Undersecretary.
The Wachovia post has been vacant for five weeks, following the board's sacking of Kennedy Thompson.
Mr Steel said: "Wachovia isn't the only company facing challenges and working through themâ¦It's impossible to predict how things will go, but I'm optimistic we're making progress."
Reacting to the move, Wall Street analysts noted that Wachovia remains one of the banks worst hit by the credit crisis.
"I think [Mr] Steel is starting at an ideal time because he can't do anything worse to this company than has already been done,'' Ladenburg Thalmann's Richard Bove told Bloomberg.