Citigroup to buy Wachovia banking operations

AP

Published: September 29, 2008

Updated 8:29 a.m.
The government says Citigroup will acquire the banking operations of Wachovia in a deal facilitated by the Federal
Deposit Insurance Corp.
The FDIC says Wachovia didn’t fail, and that all depositors are protected and there will be no cost to the Deposit Insurance Fund.

The sale of Wachovia Corp. comes just days after the government’s seizure of Seattle-based Washington Mutual Inc. - the largest bank failure in U.S. history.

Wachovia has been among the banks hardest hit by the ongoing crisis in the mortgage market. Its current problems stem largely from its acquisition of mortgage lender Golden West Financial Corp.
in 2006 for roughly $25 billion at the height of the nation’s housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West’s specialty, which let borrowers skip some payments.

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Published reports say at least two major banks are in talks to buy Wachovia Corporation, the latest U.S. bank saddled with mounting losses tied to toxic assets.

The New York Times reports on its Web site that Citigroup and Wells Fargo are bidding in a possible emergency takeover of Charlotte, North Carolina-based Wachovia.

The Wall Street Journal also lists Spain’s Banco Santander SA as a possible bidder.

No comment from Wachovia.

Wachovia’s current problems stem largely from its acquisition of mortgage lender Golden West Financial Corporation in 2006 at the height of the housing boom. Wachovia inherited a deteriorating 122
billion dollar portfolio of Pick-A-Payment loans, which let borrowers skip some payments.

Like many other banks, Wachovia stands to benefit from the passage of the government rescue plan.