Wachovia Deal Halted for Citi, Wells Fargo Discussions
- Oct 07, 2008
With a ceasefire in place, Wachovia, Citigroup and Wells Fargo stopped the litigation carousel–but only till noon Wednesday–after the Federal Reserve stepped in to the fracas to help mediate a solution. As CPN reported Monday, Citi claims in court filings that on Sept. 29, Citi and Wachovia had an agreement-in-principle for Citi to acquire all of the banking subsidiaries of Wachovia. On Friday, Wells Fargo and Wachovia announced a deal for Wells Fargo to acquire all of Wachovia’s banking operations in a whole company transaction requiring no financial assistance from the Federal Deposit Insurance Corporation (FDIC) or any other governmental agency.One economist told CPN Monday that talk on the street is that representatives from the U.S. Department of the Treasury are sitting down with both Wells Fargo and Citi to discuss dividing Wachovia assets among the two companies. “Both Citi and Wells Fargo want Wachovia’s depositor base. Wachovia has branches all over the South and West and it is a great way for either Citi and Wells Fargo to extend the franchise,” Bernard Weinstein, director of the Center for Economic Development and Research at the University of North Texas and of the Institute for Applied Economics, told CPN on Monday. The standstill in litigation–which includes injunctions, temporary restraining orders and more–was halted briefly with the Fed’s assistance. Citi and Wells Fargo have agreed to “cooperate in good faith to agree among themselves to secure orders where necessary in all applicable cases in all jurisdictions tolling any schedules for the filing of litigation papers or court appearances or any other formal litigation deadlines, with the goal of preserving the status quo during the litigation standstill period,” according to information from Wachovia. “This merger reflects how some banks are struggling with the lending they’ve done in the past,” Ravi Batra, professor of economics at Southern Methodist University and author of The New Golden Age: The Coming Revolution Against Political Corruption and Economic Chaos, told CPN. “I anticipated that a major jump in the price of oil and the housing meltdown two years ago. These two have had a negative impact on the economy starting out with the banking industry.” Batra said the bailout of financial institutions like Goldman Sachs and Morgan Stanley are a “big waste of money.” “They borrowed millions of dollars from banks and used that money to invest in subprime mortgages, but the banks need help as lenders, which will help the credit situation to lend more money. We’re wasting money for Goldman Sachs since they are the borrowers and they’re the problem,” Batra added.