The New York Times reports on its Web site that Citigroup acquired the banking operations of Wachovia for $1 per share or about $2.2 billion.
Federal regulators worked around the clock this weekend to orchestrate the sale, finally reaching an agreement at 4 a.m. on Monday morning. In the end, the government agreed to provide Citigroup with a financial guarantee on Wachovia’s most risky assets. It is similar to the deal that the Federal Reserve established with JPMorgan Chase’s emergency takeover of Bear Stearns.
Citigroup will assume the first $42 billion on losses tied to Wachovia’s riskiest mortgages and will pay the Federal Insurance Deposit Corporation $12 billion in preferred stock and warrants. In exchange, the F.D.I.C. will absorb all losses above that amount.
Federal regulators said the move was necessary to stave off what could have been the second big bank failure in less than a week. On Thursday, the government seized Washington Mutual and sold the bulk of its operations to JPMorgan Chase.
“This morning’s decision was made under extraordinary circumstances with significant consultation among the regulators and Treasury,” said Sheila C. Bair, the chairwoman of the F.D.IC in a statement. “This action was necessary to maintain confidence in the banking industry given current financial market conditions.”
Wachovia customers should not notice any changes. “There will be no interruption in services and bank customers should expect business as usual,” Ms. Bair added.
The deal further concentrates Americans’ bank deposits in the hands of three banks: Bank of America, JPMorgan Chase and Citigroup will control more than 30 percent
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