The Federal Deposit Insurance Corp. this morning said Citigroup Inc. will acquire the banking operations of Charlotte-based Wachovia Corp. in a transaction facilitated by the FDIC.
All depositors are fully protected and there is expected to be no cost to the federal deposit fund, the FDIC said. Wachovia did not fail, the FDIC said. Instead, it is to be acquired by the New York bank with FDIC assistance.
"For Wachovia customers, today's action will ensure seamless continuity of service from their bank and full protection for all of their deposits," said FDIC Chairman Sheila Bair in a statement.
New York-based Citigroup will buy most of Wachovia's assets and liabilities, including five depository institutions and assume the senior and subordinated debt of Wachovia, the FDIC said. Wachovia will continue to own brokerage A.G. Edwards and the Evergreen asset management arm.
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In premarket activity, Wachovia shares fell 92 percent to 73 cents from Friday's $10 closing price.
The FDIC reached an agreement to share losses on a pool of Wachovia loans. Under the agreement, Citi will takes losses of up to $42 billion on a pool of $312 billion in loans. The FDIC will take losses after that. Citigroup has granted $12 billion in preferred stock and warrants to the FDIC to compensate the FDIC for taking on this risk.
The deal was brokered in consultation with Treasury Secretary Henry Paulson, President Bush and the Federal Reserve. The FDIC said it determined that assistance was necessary to "avoid serious adverse effects on economic conditions and financial stability."
Read the full story at CharlotteObserver.com.