FDIC Announces Citigroup to Buy Wachovia

Binyamin Appelbaum, Neil Irwin and Howard Schneider
Washington Post
Monday, Sept 29, 2008

Citigroup has agreed to buy Wachovia bank in a deal backstopped by taxpayers and brokered by the Federal Deposit Insurance Corporation to avoid another major corporate failure in the midst of the ongoing financial crisis.

Citigroup will pay the Charlotte-based Wachovia about $2.16 billion, or $1 per share, for its banking operations. Wachovia will retain its wealth management and brokerage operations.

The deal boosts Citigroup as a third rival for Bank of America and J.P. Morgan Chase in the new category of financial behemoths that are emerging from the current financial crisis. Those three banks will now control almost a third of the nation’s deposits.

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Citigroup, based in New York, also will become the largest bank in the Washington area. The company said it would raise $10 million in new capital to help it absorb Wachovia’s troubled loan portfolio. Citigroup also plans to cut the dividend on its shares, among the most widely held stocks in America.

The FDIC announced the deal on its Web site this morning, and said that the deal hinged on a loss sharing arrangement between Citigroup and the agency, which is responsible for insuring bank deposits.

Wachovia has been saddled by mortgage-related losses. Under the terms of the deal, Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will be responsible for any losses beyond that, but was given $12 billion in Citigroup preferred stock and warrants in return for that guaranty.

The Wachovia purchase is the second major bank buyout orchestrated by the FDIC in the last week. The agency also helped arrange the sale of the failed Washington Mutual to J.P. Morgan Chase.

Full article here

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4 Responses to “FDIC Announces Citigroup to Buy Wachovia”

Elliott Says:
September 29th, 2008 at 6:56 pm
Citigroup weds Wachovia. This is just a matter of the dead marrying the dead.
Tod G. Says:
September 29th, 2008 at 8:26 pm
Yeah, all the minor derivative players are getting socked, why are the major players not? Either they arranged all this to gobble up banks on the cheap, or they are awaiting a massive blowup.
IvoryTowerLumberjack Says:
September 30th, 2008 at 1:09 am
I agree that this is 1929 all over again. This banking titans get their hostile takeovers for pennies on the dollar. Remember the biggest banks that are doing the buying right now are major stockholders in the Federal Reserve System itself and control the Fed and consequently the currency. They are not going to fail because they have a front door key to the printing press. Remember that the Fed just injected 680 billion dollars into the system on news that the taxpayer bailout failed. This was a natural consequence of too much credit by the Fed arising from artificially low interest rates, and the banking behemoths will take every advantage of this as the boom/bust cycle goes further bust. The non-insider banks like Wachovia and WA are already being hijacked by the titans in the biggest consolidation process the world may ever see.
Lorenzo Thomas Says:
September 30th, 2008 at 7:10 am
They want a fascist planet with the superwealthy ruling it all
Since we’re too independent, America must be led to fall
When our credit’s been exhausted to subdue the Middle East,
They’ll install our debtor nation in the body of The Beast
Traitor…Dare call it treason

http://www.youtube.com/watch?v=uw5dP5gy2Vs