Wells Fargo agrees to buy Wachovia; Citi objects
The head of the FDIC said the agency is standing behind the agreement it made with Citigroup Inc. to buy Wachovia Corp. despite Wells Fargo & Co.'s new $15.1 billion deal trumping Citigroup's plan.
Federal Deposit Insurance Corp. Chairman Sheila Bair said Friday the agency "stands behind its previously announced agreement with Citigroup."
The FDIC will review all proposals and work with the regulators of Wachovia, Citigroup and Wells Fargo "to pursue a resolution that serves the public interest," Bair said.
Citigroup, for its part, demanded that Wachovia call off its deal with Wells Fargo, saying its agreement was exclusive.
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Under the $2.1 billion deal struck earlier, Citigroup agreed to absorb as much as $42 billion in losses from Wachovia's $312 billion loan portfolio. The FDIC agreed to cover losses above that level.
The surprise announcement early Friday by Charlotte, N.C.-based Wachovia that it had agreed to be acquired by Wells Fargo in the all-stock deal - without government assistance - upended what had appeared to be a carefully examined arrangement and caught regulators off guard.
The Federal Reserve, which has regulatory oversight of the three big banks, said it hasn't had time to review the proposed sale of Wachovia to San Francisco-based Wells Fargo but will work to ensure that all creditors and depositors of Wachovia are protected.
In a brief statement, the Fed said while it and the Treasury Department's Office of the Comptroller of the Currency had conducted an extensive review of the Wachovia-Citigroup deal, it had not yet had time to review the new offer from Wells Fargo.
The Fed said regulators will be working with Wachovia and Wells Fargo "to achieve an outcome that protects all Wachovia creditors, including depositors, insured and uninsured, and promotes market stability."
Bair noted in her statement that "under either proposal, all banking customers of the merged institutions would be fully covered with no disruptions in service."
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AP Economics Writer Martin Crutsinger contributed to this report.
(Copyright 2008 by The Associated Press. All Rights Reserved.)
