Wachovia, One of if not Georgia’s largest banks, agreed today to be taken over by Wells Fargo. Funny thing is, Wachovia agreed earlier this week to sell its banking operations to Citigroup, with the FDIC agreeing to shield Citigroup from certain losses.
Wachovia was experiencing what was called a “silent run” on the bank, where large corporate customers were withdrawing non-FDIC insured funds at alarming rates. The FDIC assisted in the sale to avoid having to take over Wachovia. That calmed the run, and Wachovia found a better offer.
Citigroup, however, is calling BS:
The Citigroup deal would have been done with the help of the Federal Deposit Insurance Corp., but the Wells deal would be done without it. The head of the FDIC said the agency is standing behind the agreement it made with Citigroup.
Citigroup says its agreement with Wachovia provides that Wachovia will not enter into any transaction with any party other than Citi or negotiate with anyone else.
So, Peach Punditers, how do you like the first evidence that the Bailout and Fed actions are allowing banks to reneg on deals when better offers show up? Or is this just evidence that the markets need to be calmed so that better transactions can take precedent over panic transactions?
UPDATE: NEW YORK JUDGE INTERVENES ON BEHALF OF CITIGROUP
I’m beginning to believe that the FDIC is willing to sacrifice Wachovia shareholders in order to save Citigroup, and thus, their shareholders.
ANOTHER UPDATE: NY APPEALS COURT OVERRULES LOWER JUDGE