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Citigroup to buy Wachovia banking operations
Published in Saudi Press Agency on 29 - 09 - 2008


In the latest byproduct of the widening
global financial crisis, Citigroup Inc. will acquire the
banking operations of Wachovia Corp. in a deal facilitated
by the government agency that insures the country's bank
deposits, AP reported.
Citigroup will absorb up to $42 billion of losses in the
deal, with the Federal Deposit Insurance Corp. covering any
remaining losses, the government agency said Monday.
Citigroup also will grant the FDIC $12 billion in preferred
stock and warrants.
The deal greatly expands Citigroup's retail outlets and
leaves it among the U.S. banking industry's Big Three along
with Bank of America Corp. and J.P. Morgan Chase & Co.
The deal comes after a fevered weekend courtship in which
Citigroup and Wells Fargo & Co. both were reportedly
studying the books of Wachovia, which was suffering from
mounting mortgage losses linked to its ill-timed 2006
acquisition of mortgage lender Golden West Financial Corp.
The FDIC asserted that Wachovia didn't fail, and that all
depositors are protected and there will be no cost to the
Deposit Insurance Fund.
Federal Reserve Chairman Ben Bernanke, in a statement
Monday, said he supports the «timely actions» taken by
the FDIC «which demonstrate our government's unwavering
commitment to financial and economic stability.»
Treasury Secretary Henry Paulson also welcomed the sale of
Wachovia to Citigroup, saying it would «mitigate potential
market disruptions.» Paulson said he agreed with the FDIC
and the Fed that a «failure of Wachovia would have posed a
systemic risk» to the nation's financial system.
«As I have said before, in this period of market stress,
we are committed to taking all actions necessary to protect
our financial system and our economy,» Paulson said.
The sale of the Wachovia assets comes just days after the
government's seizure of Seattle-based Washington Mutual
Inc. _ the largest bank failure in U.S. history. As details
of its takeover unfolded, Wachovia shares plunged 91
percent in Monday premarket trading to 91 cents. The stock
had closed Friday at $10, down 74 percent for the year.
Wachovia has been among the banks hardest hit by the
ongoing crisis in the mortgage market. It paid roughly $25
billion for Golden West at the height of the nation's
housing boom. With that purchase, Wachovia inherited a
deteriorating $122 billion portfolio of Pick-A-Payment
loans, Golden West's specialty, which let borrowers skip
some payments.


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