Anxiety High on News of Citigroup's Purchase of Wachovia
There are some details that haven't been discussed publicly yet, but there are a number of specifics that we can tell you this afternoon. - Wachovia is selling off its retail bank, corporate and investment banks and wealth management businesses. Those three units make up a large percentage of the Charlotte Bank. - Though no longer part of Wachovia, the retail banking operation will continue to be based in Charlotte. -Wachovia will remain a public company, and continue to operate Wachovia Securities and Evergreen Asset Management. This morning's news brought to an end a run-up to prominence for the Charlotte bank, itself a regular buyer of other companies. One of its last purchases, the 2006 acquisition of Golden West Financial, is viewed as THE deal that ultimately brought Wachovia to the conclusion the company came to today. Purchased at the peak of the housing boom, Golden West had made significant numbers of interest-only loans, many of which are now in default. Talks of a merger first surfaced Friday afternoon. Top Wachovia officials spent the weekend in New York, in talks with representatives from CitiGroup and San-Francisco-based Wells Fargo. Then last night, The Wall Street Journal and The New York Times reported that federal regulators were involved in the intensifying talks, and that they were encouraging the sides to get a deal done quickly. Then shortly after 8 o'clock this morning, the FDIC sent our a press release, announcing the deal. CitiGroup's buyout comes with help from the federal government. Citi will be on the hook for up to $42 billion in losses on a pool of designated $312-million loans. The FDIC will be responsible for any losses on top of that.