Citigroup To Take Over Wachovia
In the latest byproduct of the widening global financial crisis, Citigroup Inc. will acquire the banking operations of Charlotte, N.C.-based Wachovia Corp. in a deal facilitated by the Federal Deposit Insurance Corp.
Citigroup will absorb up to $42 billion of losses in the deal, with the FDIC 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.
© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Citigroup will absorb up to $42 billion of losses in the deal, with the FDIC 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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1. The President of U.S.
2. The White House Administration
3. The Chair of SEC and executives
4. The entire U.S. Supreme Court
5. The disolve of the F.B.I.
6. The Secretary of Treasury and executives.
7. The Federal Reserve Chairman.
8. U.S. Senatorial and Congressional leaders who
host this financial Bail-Out Scheme.
9. All investment bank CEOs who are directly responsible for this insolvency. AND
10. U.S. ATTORNEY and its administration
with charges of TREASON and SUBVERSION OF THE SOVERIEGNTY OF THE UNITED STATES.
If none of my U.S. Congressional leaders will declare this vote of NO CONFIDENCE. I plead the U.S. military leaders to take siege of this totally corrupt government and declare marshal law; until a U.S. Constitution government may be restore.
The giant brains in Washington are attempting to find a way to buy up $700 billion in delinquent debt. The latest estimate that I have heard is an expected overall loss of 50% when this thing washes out years down the road.
For decades, ''hard equity'' lenders have been making a healthy profit loaning money a a 65% LTV (loan-to-value).
Why haven''t at least one of these geniuses thought of going to the source to cut our losses instead of handing this massive amount of money over to the same morons that caused the problem?
If homeowners were offered a no-interest loan of up to $100K and then the mortgage holders were offered a one time chance to renegotiate to a payoff equal to 65% LTV plus up to $100K at a ''market'' interest rate, those lenders would minimize their losses and the taxpayers would enjoy a return considerable greater that 50% of the investment.
At $100K per family in trouble, $700 billion would help seven million families and save their homes.
In reality, the average amount needed per family would probably be more like $50K... 14 million families would have their lives turned around. Plus, no golden parachutes for the theives that caused this mess in the first place.
Someone please tell me how I''m wrong.
excellent. let''s consolidate the banks even more ... so that when one fails ... they too will require a big pile of cash that won''t be called a ''bailout''.
let''s continue deregulating everything so that each business sector can consolidate into one entity per sector (one bank, one ins co, one telcom co, etc) ... which will lower prices due to reduced competition (bizzaro economics) ... provide greater options to consumers (bizzaro economics) ... produce greater tax revenue (bizzaro economics) ... and enhance stability in the market (end of sarcasm and the description of the current bizzaro economic policies forwarded by one of our two parties for the last 30 years).
Yea...it didn''t fail b/c Citigroup bought them. Under this assertion I''m assuming neither did Bear Sterns or Merrill, right? Seems to me like the Fed is trying to do a lil damage control to keep people from panicking. I guess asserting that a bank didn''t fail maintains the public''s trust in national banks.
What is next?
Times getting so very tough that, in desperation, the American people will permit the destruction of seventy-five years of tough work crafting labor and enviromental laws?
Stay tuned, ''cuz if you look up the mortality rates for the 1890s you have your life invested in the answer, whether you know it or not.