Citigroup buying Wachovia banking operations
September 29th, 2008, 6:42 am · 10 Comments · posted by Mathew Padilla, Reporter
Citigroup is buying the banking operations of struggling Wachovia Corp., in a deal facilitated by federal regulators and one that protects all consumer deposits, the Federal Deposit Insurance Corp. announced today.
Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans, with the FDIC covering any remaining losses. In exchange, the FDIC gets $12 billion in preferred stock and warrants.
Unlike Washington Mutual last week, the FDIC says Wachovia didn’t actually fail and that deposits are safe.
Wachovia is keeping AG Edwards and Evergreen. Here are some other facts and sources of information on the deal, the latest in the ongoing financial meltdown:
- Wachovia has at least nine locations in Orange County. See the full list HERE.
- FDIC Chairman Sheila Bair said in a release, “For Wachovia customers, today’s action will ensure seamless continuity of service from their bank and full protection for all of their deposits. There will be no interruption in services and bank customers should expect business as usual.” Read the full FDIC release HERE.
- The Associated Press has a good story on the deal HERE.
By the way, Citigroup previously tried to make a go at subprime lending by buying last year the wholesale (Argent Mortgage) and loan servicing businesses of subprime king Roland Arnall, who died earlier this year. In May, Citigroup said it was closing all that down or integrating it, cutting nearly 2,000 jobs (about 400 local ones) and shutting offices in Orange and Irvine.
And here’s more meltdown coverage…
- Local lenders react to revised bailout news
- Bush likes bailout bill. Do you?
- Credit crunch creeps up on consumers
- Rohrabacher still opposes bailout plan
- Financial rescue vote a tough one, Calvert says
- Bush praises bailout deal
And other mortgage topics…
- O.C. foreclosure starts plummet amid new law
- When mortgage paperwork becomes a nightmare
- JPMorgan-WaMu means harder-to-get mortgages
- JPMorgan buys seized WaMu, deposits are safe
- Schwarzenegger vetoes bill regulating mortgage brokers, subprime lending
- Huntington Beach’s housing market still slipping, agent says
September 29th, 2008 at 7:43 am
Monday, September 29, 2008
Congresswoman Marcy Kaptur boldly slammed the bailout bill this past weekend as the work of criminal insiders who have shut down the normal legislative process to commit “high financial crimes” and defraud the American people, while Rep. Michael Burgess warns that “martial law” has been declared.
The two Congress members are part of a growing minority of representatives sounding the alarm about the dictatorial nature of the bailout bill, which is expected to be up for a vote in the House today, with most in Congress having not had the opportunity to even read the legislation.
The bill is expected to reach the Senate on Wednesday as a raft of outraged politicians cry foul about being strong-armed and accused of being unpatriotic for opposing the carte-blanche passage of a piece of legislation that [2] fundamentally centralizes control of the financial infrastructure of the country into the hands of the government and the Federal Reserve.
“We are Constitutionally sworn to protect and defend this Republic against all enemies foreign and domestic. And my friends there are enemies,” Kaptur told the House floor.
“The people pushing this deal are the very ones who are responsible for the implosion on Wall Street. They were fraudulent then and they are fraudulent now.”
“My message to the American people don’t let Congress seal this deal. High financial crimes have been committed,” added the Democrat from Ohio.
“The normal legislative process has been shelved. Only a few insiders are doing the dealing, sounds like insider trading to me. These criminals have so much political power than can shut down the normal legislative process of the highest law making body of this land,” Kaptur concluded.
Elsewhere, Rep. Michael Burgess (R-TX) said that the only information he had received about the bailout was what talking points to use on the American people and that he had been thrown out of meetings for not blindly supporting the bill.
Ominously, Burgess also comments, “Mr. Speaker I understand we are under Martial Law as declared by the speaker last night.”
Absent any proper hearings concerning the legislation, Burgess called for the legislation to at least be posted on the Internet for 24 hours so that the American people could “see what we have done in the dark of night.”
September 29th, 2008 at 8:02 am
So, when the $700 Billion is spent, the headlines go back to war and politics, and the public’s attention is on American Idol, what will we have? Four banks (BofA, Wells Fargo, Citibank, MorganChase) for the whole country? This is shaping up like more of a consolidation than anything else. Do we really want all these financial decisions concentrated into FEWER hands/minds? What happens to competition in the marketplace when you have to go to the same four windows for a mortgage, car loan, credit card, etc.?
September 29th, 2008 at 8:37 am
“Wachovia”
OLD - Watch-ova-ya
NEW - Walk-ova-ya
September 29th, 2008 at 8:41 am
Opher - Your point is?
Do you think the system that got us here - where 10 banks were fighting each other to loan a half-mil to a ‘lawnmower operator’ - was better?
September 29th, 2008 at 11:54 am
I wrote this for Matt on Friday.
Here is my comments on WACHOVIA for when they get taken over which will be any minute. As a REALTOR and a Mortgage Broker for 30+ years in OC I have seen them come and go! Wachovia is best known in OC because of the take over of WORD Savings.
Wachovia is another case of GREED and poor management. I have seen dozens of banks over the years get involved with loans and products they should not have. Wachovia, like WAMU jumped on the bandwagon and attacked the option arm market like all the others, however they also got involved in the subprime mess through their securities branches. I also have noticed that with WORLD, WAMU, and especially WACHOVIA, the one thing they all had in common over the last 30 years is their insatiable appetite to take over other banks and along with that all the problems. The management for all these companies must have had some nice bonus packages as otherwise theses takeovers would not have made sense. It is a shame that these companies have been around for a hundred years and their greed finally caught up to them. It will be interesting to see who ends up with them it will probably be another bank, like wells. I hope people who deposit their money with these banks look at their track record as it is scary to think they could turn around and make home loans that should not be made. Maybe if they had some better expertise in home loans they would be better off
Lou Pacific
Real Estate and Mortgage Company Consultant
September 29th, 2008 at 11:57 am
And to think I was going to move my account from the former WaMu to Wachovia today…..guess it’s under the mattress time…..
September 29th, 2008 at 12:34 pm
What we have here is a grand lavage of the banks. “Greedy Bank” is redundant. They are, after all, in the business of money. Their job is to make money. As much as possible. That’s why they exist. That’s the job of ANY publically-owned company, as a duty to the stockholders. What we have here is the convergeance of unchecked greed, and a social program to force banks to provide loans to people who can’t afford them. In 1999 the Clinton administration pressured the Fed to relax guidelines and restrictions to allow “disadvantaged minorities” greater access to homeownership. While well-intentioned, this governmental interference relaxed restrictions that would otherwise have held the lending from running amok. So where are those “disadvantaged minorities” today? Much worse off. Before, they had little. Today, they have nothing, or worse. If you can’t afford to buy a home, you should be renting. There is no shame in that. Many can afford a home and CHOOSE to rent. What is this obsession with homeownership as a “Right”!?
September 29th, 2008 at 2:14 pm
No banks were “forced” to lend money to people who couldn’t pay it back. For one thing, most of these bad loans were made by pure mortgage companies, which the Fed repeatedly said it had no power to regulate like they did banks. None of these banks or mortgage companies had any interest in helping anyone, and they did not have to have their arms twisted to make them originate loans.
Plus, minorities, disadvantaged or otherwise, are only a part of the problem, as lots of people (white folks included) took these loans out, refi’d several times, and thought they were buying exponential moneymaking machines.
I think most people are smart enough to realize that the problem originated with the Fed’s outrageously low interest rate, huge liquidity provided by foreign interests, the greed of Wall Street and the mortgage companies (and certain banks), and the total lack of regulation which allowed NINJA, neg-am, and other creative loans, to be offered to anybody.
For Lou: Wachovia’s greed lead them to blindly add World Savings, but look back at all the articles praising Golden West Financial (their parent) and talking about the conservative lending and prudent management that was the hallmark of the Sandlers. In fact, they were one of the “Most Admired” companies at the time.
September 29th, 2008 at 9:21 pm
World, Wachovia,Wamu……these types of lending institutions had no choice. They had to keep up with the demand and the demand was for liar loans, sub-prime loans, option arm loans, etc. If they didn’t offer these products, they probably would have gone out of business sooner. Those loans were time bombs, just like the 125’s of a few years ago….the only difference was appreciation saved the 125’s. Wells, BofA, Chase, and Citi all offered liar loans, it’s just that these lenders didn’t put all their eggs into this cestpool of a basket.
November 6th, 2008 at 8:46 pm
My friend works at Citi and says they are now glad they didn’t buy them now!