Wachovia - Wells Fargo - Citigroup - A Tangled Web

Wachovia’s collapse has been well chronicled but where it will land is still up in the air. The battle over the assets (and substantial liabilities) of Wachovia is now being bitterly fought over by both Citigroup and new suitor Wells Fargo.

I think that Citigroup thought that they are owed the company by offering to be the FDIC’s white knight. But in the FDIC’s charter they are required to accept the best offer for a company to reduce the risk to the taxpayers. Not that illogical.

So when Well Fargo put their offer of 14.7 billion for Wachovia on the table the FDIC is duty bound to accept it as it is much stronger than the 2.1 Citigroup offer that also placed a 40+ billion dollar burden on the taxpayers.

Talking to people I know at Wachovia though this battle over the assets is causing customers to flee the bank. Too much bickering will not serve anyones interests in the matter.

It was clear from documents filed in federal court Sunday that Wachovia was in considerable trouble when it agreed to the deal. Wachovia disclosed that it agreed to the deal “with the understanding that a seizure of its banking assets later that day by the Federal Deposit Insurance Corp. would occur” unless it accepted Citigroup’s proposal.

Four days later, San Francisco-based Wells Fargo & Co. stunned Citigroup by announcing that Wachovia’s board had agreed to its $14.8 billion all-stock offer. Originally, the deal was valued at $15.1 billion, or $7 a share, but Wells Fargo stock declined after it was announced.

Wells Fargo also said it would need no FDIC assistance to complete the takeover, which would be aided by a new IRS rule designed to make it easier for banks to offset losses from loans and other bad debts held by other banks they acquire