Citigroup Inc. agreed to acquire Wachovia Corp.'s banking operations on Monday for $2.1 billion in stock and will assume another $53 billion in Wachovia debt. Federal banking regulators pushed the deal by agreeing to share a portion of future losses that Wachovia's failing mortgage portfolio could generate.
Wachovia's deal with Citigroup was pushed by federal banking regulators and welcomed by the Fed. Citi's purchase of the fabled Charlotte bank marks another deal orchestrated by the federal government, this time by the Federal Deposit Insurance Corporation, and one in which the agency could be on the hook for loan losses.
"The FDIC has agreed to provide loss protection in connection with approximately $312 billion of mortgage-related and other Wachovia assets," Citigroup said in a statement.
The Federal Reserve and Treasury Department were also part of the effort, another sign of how proactive the government has been in preventing ailing financial firms from failing and instead pushing for stronger firms to acquire some assets of the weaker companies.
Wachovia shares fell more than 90% in premarket trading, and the New York Stock Exchange did not open the shares for trading. Citigroup was off 1% at $19.95 shortly after the market opened.
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