No.
THIS is how it ought to be done:
Posted on 09/29/2008 5:39:46 AM PDT by 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.
Looks decent. A $270 Billion insurance policy with a $42 Billion self-insured retention for $12 billion premium. If the value of the loans falls below 85% then the insurance applies.
>> how could I forget BofA? After all they are helping the ILLEGALS!!
Si. Es verdad.
They are an evil force from the dark side. But for now they’re MY evil force from the dark side...
stock pays a pretty good dividend too
“Two spent swimmers that do cling together and choke their art.”
Shakespeare
wells fargo was part of the bid
>> BTW, I thought CitiGroup just got propped up by the money folks out of Dubai?
I was under the impression that Citi didn’t have the capital to pay attention, let alone pay for a failing bank.
Perhaps my understanding is wrong, or out of date.
Or... perhaps they are *counting* on a boost from the bailout.
fka Bank of Italy
Does this mean I will get a new ATM card? ;)
No. The CEO lost his job recently. And the shareholders, who are SOL, will sue the board anyway. It was done this way to avoid a future payout under the deposit insurance.
Yes, but we did so in a good way and year end bonus should be solid.
>> Does this mean I will get a new ATM card? ;)
You won’t need one.
Rumor has it that withdrawals will be obsolete; the new bank (I think it’ll be called City Wacko Bank) is shifting to a deposit-only format.
(Sort of like the “write-only memory” concept.)
No.
THIS is how it ought to be done:
“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.”
I do not understand your argument. If the FDIC ends up with a loss from insuring the loans, they would have had a larger one from insuring the deposits in a failed bank. This hurts no one, and helps everyone — except Wachovia.
“Need to return to state banking regulations of the 1970’s.”
I hated those regulations that made using a checking account from one state near impossible in another state....
BUT....
Given the fact that some banks are now deemed to big to allow to fail, IMO, they’re too big to allow to continue to exist at that size. If the economy can’t take the failure of any single bank, that bank needs to be split apart into chunks small enough that the failure of any one piece is not enough to take down the entire economy....
I don’t know about where you are, but where I am Wachovia is the company I now deal with, not AG Edwards that I formerly dealt with. As far as I can tell, they are merged. This doesn’t go back and undo a merger.
In addition, they are talking about the banking operation of Wachovia, not the brokerage operation.
I think the two things (Citigroup buying Wachovia’s bank operation, and the prior merger of AG Edwards brokerage with Wachovia brokerage) are not connected in any way.
Wells is pretty conservative when it comes to investing.
I was with AG Edwards as well, and from everything I can tell, the switch had already been made anyway. I’m actually happy though to see that we’re back to an investment company only and not an investment company AND bank....
Shaft the the shareholders because of CRA.
Gezz redistribute wealth without even taxing them.
Gramm-Leach-Bliley Act of 1997. It paved the way for approval of the Citigroup/Travelersgroup merger. Citigroup is at the start and finish of this mess.
What is the status of all that preferred stock that Wachovia has issued?
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