Citigroup to buy Wachovia banking assets

September 29, 2008 by · 1 Comment
Filed under: Bank Failure, Industry News 

Along with National City, these are the next shoes to drop in this financial crisis. This is normal workings in the market after such a huge bubble that we should be accepting to see this happen. It would be more worrisome if we did not see bank failures and some plan to keep failed banks solvent. You might think that a plan like this is already in the works and you are correct. I am surprised to see Citigroup buying other banks asset when they are one of the most leveraged institutions in the market. What is also interesting is the fact they are opening themselves to $42 billion in bad loan exposure.

Press Release:

Citigroup Inc will buy the banking operations of Wachovia Corp in a deal brokered by the Federal Deposit Insurance Corp, the FDIC said on Monday.

The deal comes as authorities step in to rescue three European banks and as U.S. lawmakers prepare to vote on a $700 billion bailout of U.S. financial firms.

Federal Reserve Chairman Ben Bernanke said in a statement the FDIC action “demonstrates our government’s unwavering commitment to financial and economic stability.”

But a fixed income manager, William Larkin, said the Wachovia deal and the European bank rescues were taking the shine off the bailout plan and could spook world markets.

Under the deal, struck in consultation with the Federal Reserve, the Treasury and President George W. Bush, Wachovia depositors will be fully protected, and no cost to the Deposit Insurance Fund is expected, the FDIC said.

“Wachovia did not fail; rather, it is to be acquired by Citigroup Inc on an open bank basis with assistance from the FDIC,” the agency said in a statement on its website.

Shares of Wachovia, the sixth-biggest U.S. bank by assets, tumbled more than 80 percent in pre-market trading to below $2 per share.

Citigroup shares were initially higher after the news but then slumped 6.5 percent in heavy pre-market trade. It was not immediately known how much Citigroup was paying for the Wachovia assets.

The FDIC said it would share losses with Citi on certain Wachovia loans.

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Comments

One Response to “Citigroup to buy Wachovia banking assets”
  1. frank says:

    Interview representatives of Wachovia.
    Such details of the transaction are unlikely to have waited!
    http://tubedirect.net/index.php?q=Wachovia-interview-CNN
    all this… Personally, I do not like it

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