Citigroup Inc. to Acquire Banking Operations of Wachovia

WSJ | 9/29/08 | FDIC

[FlameThrower]

FDIC: Citi to Buy Wachovia’s Banking Operations The FDIC made the following announcement this morning on Citi’s purchase of Wachovia’s banking operations.

Citigroup Inc. to Acquire Banking Operations of Wachovia

FDIC, Federal Reserve and Treasury Agree to Provide Open Bank Assistance to Protect Depositors

Citigroup Inc. will acquire the banking operations of Wachovia Corporation; Charlotte, North Carolina, in a transaction facilitated by the Federal Deposit Insurance Corporation and concurred with by the Board of Governors of the Federal Reserve and the Secretary of the Treasury in consultation with the President. All depositors are fully protected and there is expected to be no cost to the Deposit Insurance Fund. Wachovia did not fail; rather, it is to be acquired by Citigroup Inc. on an open bank basis with assistance from the FDIC.

“For Wachovia customers, today’s action will ensure seamless continuity of service from their bank and full protection for all of their deposits.” said FDIC Chairman Sheila C. Bair. “There will be no interruption in services and bank customers should expect business as usual.”

Citigroup Inc. will acquire the bulk of Wachovia’s assets and liabilities, including five depository institutions and assume senior and subordinated debt of Wachovia Corp. Wachovia Corporation will continue to own AG Edwards and Evergreen. The FDIC has entered into a loss sharing arrangement on a pre-identified pool of loans. Under the agreement, Citigroup Inc. will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb losses beyond that. Citigroup has granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing this risk.

In consultation with the President, the Secretary of the Treasury on the recommendation of the Federal Reserve and FDIC determined that open bank assistance was necessary to avoid serious adverse effects on economic conditions and financial stability.

“On the whole, the commercial banking system in the United States remains well capitalized. This morning’s decision was made under extraordinary circumstances with significant consultation among the regulators and Treasury,” Bair said. “This action was necessary to maintain confidence in the banking industry given current financial market conditions.”

Wachovia customers with questions should call their normal banking representative, service center, 1-800-922-4684 or visit www.wachovia.com. The FDIC’s consumer hotline is 1-877-ASK-FDIC (1-877-275-3342) or visit www.fdic.gov.

[FlameThrower]

This is how it ought to be done! Give the FDIC the money and mandate!

[ari-freedom]

citigroup wouldn’t do this if it was going to fall tomorrow

[Nascar Dad]

http://biz.yahoo.com/ap/080929/wachovia_citigroup.html?.v=10

[unixfox]

When all of this shakes out there will be 3 banks. Chase, Citi, and Wells Fargo.

Talk about monopolies!

[steveyp]

Who do the vultures perch over once this carcass is clean?

[Mr. Jeeves]

citigroup wouldn’t do this if it was going to fall tomorrow

You guys are funny. You do understand that this is a shotgun wedding - with Bernanke holding the shotgun.

[Phantom Lord]

Thats why you join a credit union!

I am employed at a decent size credit union and the commercial banks problems have driven a ton of business and deposits our way. We have destroyed virtually all budget goals for the year.

[Red Badger]

I doubt Bank of America will be gone.........

[Nervous Tick]

>> When all of this shakes out there will be 3 banks. Chase, Citi, and Wells Fargo.

You forgot Bank of America.

[Red Badger]

We have destroyed virtually all budget goals for the year.

So has the Federal government..............

[Mr. Jeeves]

Under the agreement, Citigroup Inc. will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb losses beyond that. Citigroup has granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing this risk.

Ummm...I'm not real sure about the math on that one. ;)

[Red Badger]

GMTA.............

[org.whodat]

The trouble is I think it was done this way to hide the gross mismanagement of Wachovia and to protect the top ECO's, from legal charges.

[Desdemona]

When all of this shakes out there will be 3 banks. Chase, Citi, and Wells Fargo.

How long ago was it when the banking industry started consolidating? I know it was under Clinton, but even then, the stated goal, if memory serves, was to get down to a smaller number of banks.

The funny thing is, the banks that are in trouble are the ones that did a lot of the consolidating. Bigger isn't necessarily better, especially in this case.

[Wallace T.]

Thousands of community banks that have contributed to the FDIC’s Deposit Insurance Fund may well have the losses related to Wachovia’s subprime or worthless assets taken from the funds set aside to pay off insured depositors. The FDIC will have to borrow funds from the Treasury or the Federal Reserve if that happens. The effect of such increased borrowings will lead to monetary inflation, higher taxes, or both. The FDIC’s promise to insured depositors will come with a higher price tag that anyone had expected.

Another Federal government promise will have been broken.

[org.whodat]

Talk about monopolies!

Need to return to state banking regulations of the 1970's.

[unixfox]

Geez, how could I forget BofA?

After all they are helping the ILLEGALS!!

[screaminsunshine]

Citigroup was going to fail. Taht is why they want to get at our deposits in wachovia. Wachovia failed. Thegovernment fdic took this over so they do not have to come up with the cash. They do not have the cash. This way it all stays on paper.

[umgud]

“On the whole, the commercial banking system in the United States remains well capitalized.

Which is why we need to spend $700 billion? BTW, I thought CitiGroup just got propped up by the money folks out of Dubai?

[em2vn]

Does this effect the merger with A.G.Edwards, due to close in February.