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Citigroup to Acquire Wachovia's Banking Operations with Help from the Feds

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Update 10/03/08: This Citigroup deal is dead. Wachovia is now merging with Wells Fargo. See post for more details.

The FDIC just issued this press release that Citigrop will acquire the banking operations of Wachovia:

Wachovia did not fail; rather, it is to be acquired by Citigroup Inc. on an open bank basis with assistance from the FDIC.


Since it did not fail, there are no effects on any deposits. The FDIC claims that there is expected to be no cost to the Deposit Insurance Fund. However, the FDIC is taking on some risk:

The FDIC has entered into a loss sharing arrangement on a pre-identified pool of loans. Under the agreement, Citigroup Inc. will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb losses beyond that. Citigroup has granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing this risk.


There had been reports that Wells Fargo would be the one in this takeover. According to an analyst interviewed in this Bloomberg article "Citigroup isn't in a better position to bid than Wells. They've got their own problems." But I guess the help form the Feds allowed Citigroup to agree to this deal. Refer to this CNN article for more news of this deal.

How will this effect those with Wachovia CDs and Way2Save Accounts? I assume Citigroup will allow the CDs to continue at the same rate to maturity. It seems that in acquisitions that do not involve bank failures, CDs continue without change and without any new options of penalty-free early withdrawals. I have not seen or heard anything official on this.


  Tags: Citibank, Wachovia Bank

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Comments
9 Comments.
Comment #1 by Bozo (anonymous) posted on
Bozo
RIP Wachovia. I just hope Citi keeps the branch in Lafayette (CA) open and continues to offer free safety deposit boxes for CD holders. But, then, I suspect the era of free "anything" may be lurching to a halt.

Toasters, anyone? Almost a quaint joke these days.

Preserving my capital, as always,

Bozo

1
Comment #2 by OkieOso (anonymous) posted on
OkieOso
Citibank's Ultimate Money Market account now paying 3.0% APR. Up from last week's 2.65

1
Comment #3 by gaelicwench (anonymous) posted on
gaelicwench
I have a Way2Save account, which I like. Each month I have a set amount put aside to transfer in the savings account, plus enough on what I feel will be around 25 transactions, which equals $25. Barring no issues with CitiGroup, I'll stay long enough to benefit from the interest rate, unless something else comes up. By something else, I mean a high interest yield, or just a good enough reason to keep it open.

1
Comment #4 by Anonymous posted on
Anonymous
Now with the constant merging of banks I find myself with over the limit funds with retirement accounts covered by FDIC.

I was informed that all funds will be covered under separate charters until they mature.

But, I have 5 year retirement accounts with Wachovia. Since they wave any penalty for removing funds for those over 70 1/2 if the rates in the market exceed my cd rates and I want to remove them.

Will Citi accept Wachovia's guidelines?

Rates, legal wording on accounts, branch closures, etc maybe effected.

These mergers will have a greater impact beyond the FDIC coverage.

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Comment #5 by Anonymous posted on
Anonymous
This is crap. When did the FDIC get in the business of selling banks that haven't failed?

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Comment #6 by Anonymous posted on
Anonymous
The fun part with the Wachovia takeover is that the stock is down 81% today. Citi only took over the banking portion. They left the Wachovia Securities portion. That includes all of what used to be A.G. Edwards. Still the stock went down 81%. I bet all of the A.G. Edwards employees are really happy !!!

1
Comment #7 by Anonymous posted on
Anonymous
WaMu (now JP Morgan Chase) is still granting 5% APY CD's for 12-13 months in branches, despite what the website says about branch rates.

Has anyone gotten Citi-Wachovia to match this?

The last time I checked today, the WaMu (JP etc.) website was also offering this deal on an on-line basis.

The FDIC rep says that the post-takeover CD's are covered under JP's FDIC number--but no written verification on that.

1
Comment #8 by Anonymous posted on
Anonymous
In my experience over the last several years, Wachovia will not match any rates. When I closed a CD in person earlier this year, they didn't even try to keep my money.

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Comment #9 by Anonymous posted on
Anonymous
""I was informed that all funds will be covered under separate charters until they mature.""

you might want to verify this statement with something in writing. with the recent wamu takeover, the fine print they gave was the FDIC limits would be seperate for 6 months unless otherwise noted or extended.

1