There’s only one reason why Citigroup would be fighting to get Wachovia, and that is because they see the “value” of Wachovia as something that is beneficial to them.
Well, so does Wells Fargo, and they are willing to *pay* with their *own money* a drastically higher price than Citigroup is going to pay — and *without* any “guarantees” by the Fed.
Citigroup simply wants to make a killing at the expense of the American taxpayer and use the Fed to “guarantee” its “killling”.
There is a lot more value to Wachovia than a “fire sale” would indicate — and indeed a fire sale that was *forced* on Wachovia, by the Fed, in the first place.
They had better let the Wells Fargo deal go through since it’s totally with their own money and own funds and at a *lot higher price* than what Citigroup wants to do. (In fact, once could say that Citigroup wants to *steal it* — using the Fed for “cover”).
There is only one thing that Citigroup wants - and they need it fast: the deposit accounts of Wachovia.
If Citigroup does not get these then look for them to cease to exist as an ongoing entity.
I’m no fan of Citicorp but I think they’re going to either win Wachovia outright or Wells Fargo is going to have to write them a check for billions to go away.
The FDIC wanted a deal saving Wachovia done by market open last Monday. Wells Fargo was negotiating a deal last weekend walked away at the last minute, Citi and Wachovia worked out a deal by the deadline. If there was no deal by the market’s open, Wachovia probably would have failed and gone into FDIC receivership. So the only reason Wells Fargo can in with a new offer now is because Citi kept Wachovia alive (and Citi’s stock has dropped as a consequence of agreeing to the buyout).
Another thing is Citi was paying $2 billion to Wachovia, but it also gave the FDIC $12 billion in stock warrants. The Wells Fargo deal pays $15 billion direct to Wachovia, thus cutting Citi out of its deal and the taxpayers out of their $12 billion in warrants. Beyond that, from how Wells Fargo structure their deal, they’re using a tax loophole worth at least $29 billion. In other words, the taxpayers stand to gain at least $41 billion more from the City deal than the Wells Fargo one.
The FDIC is on the hook (under the Citi deal) for losses above $42 billion, but the converse is Citi has promised to cover the first $42 billion in losses. In contrast Wells Fargo is free to hit the $700 billion bailout fund immediately.