Citigroup, FDIC Object to Wells Fargo's Purchase
Fri October 3, 2008
Citigroup, FDIC Object to Wells Fargo's Purchase of Wachovia
This morning we learned Wells Fargo plans to buy Wachovia in its entirety for $15 billion dollars without help from the federal government. Now, Citigroup and the FDIC are objecting to the deal. The head of the FDIC told the Associated Press that it stands behind Citigroup's agreement to buy portions of Wachovia for $2.2 billion dollars. And in a strongly worded statement, Citigroup says Wachovia's deal with Wells Fargo is a clear breach of an exclusivity agreement between Citi and Wachovia. Citigroup called Wells Fargo's actions "tortuous interference." In addition, Citigroup said in its statement that it's provided financial support to Wachovia since Monday. Bob Morgan, President of the Charlotte Chamber of Commerce, says it's tough to make any predictions on the future. "The dust if you will that has been in the air for some time now has just gotten thicker. I think it will take some time for that to settle to bring any clarity to what that really means to Charlotte," Morgan says. In any case, Wells Fargo's offer is clearly a better deal for Wachovia and Charlotte according to UNC-Charlotte economist John Connaughton. "This is not an acquisition, this is a merger. It's a stock swap, Wachovia will have positions on the board, and that will have a big influence on how much stays in Charlotte," Connaughton says. Details of the proposed merger are still unclear, but Wells Fargo does say it intends to make Charlotte the East Coast headquarters of its retail banking operation. Shrujal Vakharia, became an employee of Wachovia this year. Before that he worked at Wells Fargo. He welcomed the news this morning. "I personally think it's a very good think considering Wells Fargo isn't relying on any federal funds. They're acquiring Wachovia fully, unlike Citi," Vakharia says. "And as far as our traditions are concerned and our work culture is concerned, we can really strong relate to." If the merger is approved by shareholders and federal regulators, Wells Fargo and Wachovia would be one of the largest banks in the country with a presence in 39 states and the District of Columbia. The FDIC says it hasn't had a chance to closely review the agreement between Wells Fargo and Wachovia. Correction: This story includes a correction. Citigroup accuses Wells Fargo of "tortuous interference," not Wachovia.