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What’s Going on With Wachovia, Citi, and Wells Fargo

This article was written by in Banking. 8 comments.


This would-be acquisition is turning into a mess. First Citi agreed to buy Wachovia’s deposits with the help of the FDIC. Wachovia accepted this deal under duress, apparently. The FDIC warned Wachovia that if they did not agree to the deal, the government would seize Wachovia’s deposits. That left Wachovia little choice but to accept.

Not much later, Wells Fargo stepped in with a better offer for Wachovia. This offer called for an acquisition of the entire operations of Wachovia, not just deposits, without the help of the government, for $15.1 billion in stock.

On Saturday, the FDIC succeeded in having the New York State Supreme Court block the deal between Wells Fargo and Wachovia, but on Sunday night, the ruling was overturned on appeal. Citi will appeal this decision.

It seems that the Wells Fargo deal is better for Wachovia, Wachovia’s shareholders, and the public. Wells Fargo will keep Wachovia intact and the FDIC will not be required to use taxpayer money to cover any losses. I don’t see any reason that anyone would favor the Citi deal.

Published or updated October 5, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 4 comments… read them below or add one }

avatar SteveDH

Wachovia signed a promise that they would not negotiate with or enter into other agreements and Citi was feeding them cash. When the dust settles we’ll all probably find out that the deal wasn’t so much about the shareholders, employees, and the American taxpayer as it was about the boards executives. Wachovia showed that it lacks basic honesty in its business dealing. What about the depositors and investors doing business with Wachovia. Will the promises to them be so easily broken?

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avatar Frank Miller

It is a sign of the times. Now, our big banks are fighting each other in a break neck race to consolidate which is being done for business survival rather than business gain. Unfortunately, the bailout will not help them much. They are suffering and when they suffer, we all hurt. Individual investors should start looking for ways to protect their money. This basically comes down to either taking your money out of the market and cutting discretionary spending or diversifying and investing some overseas preferably in Asia or parts of Europe. I personally use offshore bank accounts and they have helped me with diversification and asset protection.

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avatar Robert H

This is also about the faith in the FDIC. The fact that the FDIC seems to be showing preference to Wall Street after the deal was apparently sealed with Citi has caused people to already start talking about losing faith in the FDIC. Considering the role the FDIC provides for our banking sector, that is a pretty big effect. You have to start looking not only at the ramifications of the deal (whether Wells or Citi is better for the economy, the Wachovia, etc.), but also the ramifications on a lack of faith an yet another government agency supporting the economy (Fannie, Freddie).

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avatar Anca

As someone who banks at Citi, this drama makes me want to move all my money over to my credit union. Drama belongs on tv, not in my bank.

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