In yet another weekend deal, it has been announced that Citigroup is buying the banking part of Wachovia, in exchange for taking a percentage of its bad loans, with the FDIC covering its other losses. “Citigroup also will issue $12 billion in preferred stock and warrants to the FDIC.” In these deals which are evidently necessary (according to all parties) there is a shortage of facts as to the terms of the agreement and plus since no one can see into the future, there is really no way to tell if Citi, in this case (or BoA in several other cases) is getting a great deal or is being asked to absorb another company’s losses, for some future gain or protection. At any rate, here is some information about the “sale” of Wachovia to Citigroup. Regardless, there will no doubt be job losses and losses of savings and/or retirement as these deals proceed (not for those executives who ran the companies and made the “fatal” decisions which are now coming home to roost but for the regular employees of these initiations). Our thoughts and prayers are with them and their families while they move forward in this crazy economy.

“Wachovia, like Washington Mutual Inc., which was seized by the federal government last week, was a big originator of option adjustable-rate mortgages, which offer very low introductory payments and let borrowers defer some interest payments until later years.
Delinquencies and defaults on these types of mortgages have skyrocketed in recent months, causing big losses for the banks.

The FDIC asserted Monday that Wachovia did not 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.

As details of its takeover unfolded, Wachovia shares plunged 91 percent to 94 cents. The stock had closed Friday at $10, down 74 percent for the year.”

Here is a link to one article:
http://biz.yahoo.com/ap/080929/wachovia_citigroup.html

Michael