As was widely expected, Wachovia was purchased today, marking the end of another large financial institution. It was a little surprising that Citigroup was the buyer considering their weakened financial position, but the FDIC stepped in to help "finance" the deal.
Under the terms of the deal, Citi will buy Wachovia for $2 billion in stock and absorb as much as $42 billion of losses on Wachovia's $312 billion pool of loans, the FDIC said in the statement. It's quite amazing when you think about it, that one of the largest banks in the country, was basically worthless. Of course, this was also true of WaMu, Bear Stearns, Lehman, etc. The financial services industry is imploding under the weight of years of bad loans.
Citi is purchasing Wachovia's deposits so all deposit holders will presumably become customers of Citi once the deal is finalized and the bank conversion occurs. Although it hasn't been spelled out, it's almost a given that Wachovia's banking franschise will be absorbed into Citibank.
It's business at usual at Wachovia today. Wachovia is offering a competitive 3.5% APY money market account as well as a competitive 4.10% APY + CD rate.
Related Articles:
Throw Out Wachovia and Bank of America and Grab a McDonald's Hamburger by MBANewlyMinted - Oct 19, 2007
Wachovia Bank by BankMan - Jun 21, 2008
Which will fail first - Lehman, Wachovia, Merrill or Citibank? by JRodgers - Jul 15, 2008
Anyone Want to be the CEO of Citi? by Sam Cass - Dec 05, 2007
Citi Could Be Sold to JP Morgan by PhilR - Dec 10, 2007
Wachovia and Citi in Merger Talks by Sam Cass - Sep 26, 2008.
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