What's with the Wells Fargo/Wachovia/Citigroup Deal ??

[kentuck]

http://www.washingtonpost.com/wp-dyn/content/article/2008/10/03/AR2008100301042.html?hpid=topnews

<snip>
Wachovia will snub Citigroup and jump into the arms of Wells Fargo instead, seeking to upend a government-arranged rescue of the troubled bank in favor of a more traditional merger, Wells Fargo announced this morning.
The reaction from federal regulators was chaotic, suggesting the announcement had surprised them.

The Federal Deposit Insurance Corp., which arranged the Wachovia-Citigroup deal, said it intended to uphold that deal.

<snip>
The new deal would pay Charlotte-based Wachovia shareholders $15.1 billion instead of the $2.2 billion offered by Citigroup. Wells Fargo also said it will not need a government backstop, something Citigroup had demanded.

<snip>
Under the now-defunct sale to Citigroup, which was urged by federal regulators and announced last Monday, the New York-based banking colossus would have purchased Wachovia's banking business. In exchange, the FDIC promised to limit Citigroup's losses on a $312 billion portfolio of Wachovia's most troubled loans. The government agreed to absorb all losses beyond $42 billion in exchange for a $12 billion stake in Citigroup.

<snip>
The deal marks a sharp reversal of fortunes for Citigroup, which on Monday appeared to have paid a pittance for something it wanted and needed -- a major presence in the retail banking business. Wachovia's large deposit base offered Citigroup a massive and cheap source of funding at a time when other sources of funding are becoming more expensive and harder to tap. Citigroup's executives hailed the deal as offering a rare combination of great opportunity and low risk because of the government backstop.

A Citigroup spokesman did not immediately return a call for comment.

[elehhhhna]

1. the price went from 2B to 15B and gee, too bad the whole rush

got slowed down, huh?

Poor Saudibank. Wah.

[kentuck]

2. Interesting, isn't it?

Citigroup thought they had the bailout money in the bag? And Wells Fargo has upset the deal?

[girl gone mad]

7. Did citi not have an exclusivity agreement?

[hunter]

3. Wells Fargo Wachovia will be far "too big to fail."

I think they're shooting for the moon here -- merger now, big fed bailout later.

[kentuck]

4. Could be.

Also, isn't Citigroup owned by the Saudis primarily? And is that what Paulson was talking about when he said $billions would go to save foreign banks??

[orwell]

6. Saudi Prince al-Walid, one of the world's richest men,

...owns less than 5% of Citigroup I believe. At one point it represented 1/2 of his total wealth.

He has owned it for over 15 years.

[orwell]

5. Wells will buy the whole bank...

...not just the retail banking operation and branch network that Citicorp agreed to buy.

No government backstop will be involved.

It is a much better deal (short term) for the existing shareholders.

The boards have both already agreed (due diligence has been done) so the deal could go through very quickly.

Wells stock is up as well as Wachovia's. Citi's stock is down.

The deal would give Wells a coast to coast banking footprint. I believe it would also vault Wells to #1 in deposits but I am not sure about that.

Wells also admits it may have to write down 70+ billion in bad loans sitting on Wachovia's books.

Wells will try to sell 20 Billion in new stock to pay for the deal.

Citicorp is crying in their beer.

[Dover]

8. Battle of the banks

So is this part of a plan to push Citi over the cliff? Citi is strongly aligned with Gramm/GOP is it not?



....A revised version of the bailout plan was passed on Wednesday by the Senate and goes up for a House vote on Friday. The plan still centers on enabling the government to spend billions of dollars to buy bad mortgage-related securities and other devalued assets from troubled financial institutions.

Citigroup has not turned a profit for three straight quarters, and lost a total of $17.4 billion during that period after writing down its assets by about $46 billion. That's the most write-downs of any U.S. bank.

While Wells Fargo has logged three straight quarters of profit declines, the bank has been weathering one of the nation's worst credit crises much better than most of its competitors, in part because it had less exposure to the subprime mortgages whose failure undermined the financial sector.

That means it hasn't been forced to take the huge number of write-downs that other banks have needed. Under Stumpf the bank also has continued raising its dividend at a time when many other financial institutions are slashing theirs to preserve capital....>

http://www.sun-sentinel.com/business/sfl-1003wellsfargo-wachovia,0,7403656.story

[Imagevision]

9. The beginning of the end as we watch the banking business end up with fewer owners

similar to what's going on with the airline industry.

[shadowknows69]

10. Bingo, that's what this is really more about

Consolidation. More corporate mergers to strengthen the monopolies.

[Dover]

11. And where do the anti-trust laws come into play?...n/t

[shadowknows69]

12. That's why this smells to me. It almost seems like a back door through those.

I mean there obviously has been some major malfeasance going on by someone to get in this mess. Lack of oversight can probably be attributed to much of it.