Monday, September 29, 2008 - 10:22 AM EDT | Modified: Monday, September 29, 2008 - 12:04 PM Citigroup to buy Wachovia’s banking operations for $2B The Business Review (Albany)
Citigroup Inc. has agreed to buy Wachovia’s banking operations.
The deal calls for New York City-based Citigroup (NYSE: C) to pay $2.16 billion in stock for about $700 billion in Wachovia (NYSE: WB) assets. It also will assume about $53 billion in Wachovia debt.
Wachovia will remain a public company and retain its asset management, retail brokerage and parts of its wealth management businesses. This includes Wachovia Securities, which operates in the Albany, N.Y., market with about 70 brokers, and 110 total employees, in offices in Albany, Colonie, Latham, Saratoga Springs and Johnstown.
Wachovia has no retail banking presence here.
“Our core businesses continue to perform well but amid uncertain markets and a fast-changing industry landscape, we found in Citi a strong partner to preserve the stability and quality of our banking franchise,” said Robert Steel, CEO of Wachovia.
Vikram Pandit, CEO of Citigroup, said was “extremely attractive from a strategic perspective,” and would improve the company’s access to stable funding and liquidity.
Under the agreement, Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans. The Federal Deposit Insurance Corp., which facilitated the deal, will absorb losses beyond that. The bank has granted the FDIC $12 billion in preferred stock and warrants as compensation for bearing this risk.
“This morning’s decision was made under extraordinary circumstances with significant consultation among the regulators and Treasury,” said Sheila Bair, chairman of the FDIC. “This action was necessary to maintain confidence in the banking industry given current financial market conditions.”
The deal, which must be approved by Wachovia shareholders, is scheduled to close by the end of 2008.
Feds play unusual role in takeover of Wachovia Bank BY MARCY GORDON The Associated Press
WASHINGTON — The FDIC’s agreement to share potential multibillion-dollar losses on Wachovia Corp.’s mortgage loans with buyer Citigroup Inc. is a way for the government to ensure a solution at the least cost to taxpayers, banking experts say. The government made similar deals with buyers of crippled institutions during the savings and loan crisis, and in more recent years, but never on this big a scale for an individual bank. It’s “a precedent-setting transaction,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics in Washington. The playbook for resolving troubled banks “seems to be made up as the regulators go along,” Petrou said, noting the different circumstances recently involving Washington Mutual Inc. and IndyMac Bank last summer. In the deal orchestrated by the Federal Deposit Insurance Corp., branch-hungry Citigroup is buying Wachovia’s banking operations and agreed to absorb as much as $42 billion in losses from Wachovia’s $312 billion loan portfolio. The FDIC will cover losses above that level. Citigroup is giving the agency $12 billion in preferred shares and warrants to compensate it for taking on the risk. Looming behind the deal Monday was the U.S. House of Representatives’ stunning rejection of the $700 billion bailout plan for the nation’s financial system. There had been hope over the weekend, when a deal was reached between the White House and leading congressional figures, that the plan could shore up the sinking economy and financial markets. The momentary optimism may have played into the weekend courtship in which Citigroup and Wells Fargo & Co. both reportedly pored over the books of Wachovia, which was weighed down by losses linked to its ill-timed 2006 acquisition of mortgage lender Golden West Financial Corp. Positive prospects for the bailout plan were “giving the bidders some confidence that there’s going to be a continuing market” for bad mortgage loans, Roger Cominsky, a partner in law firm Hiscock & Barclay’s financial institutions practice, said before the package was defeated Monday afternoon. While the proposed federal rescue package would prevent most banks from profiting on the sale of troubled assets to the government, an exception would be made for assets acquired in a merger or buyout. That would allow Citigroup to sell Wachovia’s distressed mortgage-related assets to the government for a profit, assuming its $2.1 billion acquisition goes through. The deal is subject to approval by Wachovia’s shareholders and regulators and must be completed by Dec. 31, according to Citigroup. Cominsky said the loss-sharing arrangement in the Citigroup-Wachovia deal is consistent with the FDIC’s goal to find a resolution that costs taxpayers the least. The FDIC and the Resolution Trust Corp. — which mopped up the thrift crisis of the late 1980s and early 1990s — have used loss-sharing agreements with banks that agree to buy troubled institutions or so-called put-backs — in which the acquiring bank flips through several hundred of the target bank’s loans and rejects the least desirable ones. “Loss sharing is nothing new for the FDIC,” agency spokesman David Barr said Monday. It’s one of the tools the FDIC can use to encourage buyers to assume a greater share of assets of troubled institutions. The government on Thursday seized Seattle-based Washington Mutual, the nation’s largest thrift, closed it and sold it to investment bank JPMorgan Chase & Co. for $1.9 billion. That transaction brokered by the FDIC in the biggest bank failure in U.S. history avoided any cost to the deposit insurance fund — which took an $8.9 billion hit in July from the collapse of Pasadena, Calif.-based IndyMac. IndyMac, with its $32 billion in assets, was one-tenth the size of WaMu. The insurance fund, supplied by premiums paid by U.S. banks and thrifts, is currently at around $45.2 billion — below the minimum target level set by Congress. With 13 federally-insured banks and thrifts having succumbed so far this year, and more expected to fail as the impact of the mortgage crisis continues to churn, the size of the insurance fund is an issue. Next month, FDIC Chairman Sheila Bair plans to propose increasing the premiums paid by banks and thrifts to replenish the fund. The events of IndyMac, which was closed and is being operated by the FDIC under a conservatorship, WaMu and Wachovia present three differing scenarios of bank resolution. The Citigroup plan to buy Wachovia represents what regulators call an “open-bank” resolution — a desirable result in many circumstances. The FDIC is “bottom-line oriented” and tailors each resolution to the prevailing conditions, Barr said.
IF the government would just get their nose out of this deal, this is EXACTLY what the free market would be (and should be) doing to take care of the banking "crisis."
And they fully well expect everyone to use their credit cards....over and over and over. And banking on the fact that no one will or can pay them off monthly...hence, profits from the interest.
Come on main stream American...pay down your debt. Or at least don't create any new debt. WE personally won't have the luxury of a taxpaid bail-out!!
When the INSANE are running the ASYLUM In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. -- Friedrich Nietzsche
“How fortunate for those in power that people never think.” Adolph Hitler
Well Wachovia must be a great investment. Now is the time to buy up these businesses that are going under. And the feds should give the private investors tax incentives to do just that. The feds should NOT own them.
When the INSANE are running the ASYLUM In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. -- Friedrich Nietzsche
“How fortunate for those in power that people never think.” Adolph Hitler
NEW YORK — A battle broke out Friday for control of Wachovia, as Wells Fargo agreed to pay $14.8 billion for the struggling bank while Citigroup and federal regulators insisted that Citi’s earlier and lower-priced takeover offer go forward. The surprise announcement that Wachovia Corp. agreed to be acquired by San Francisco-based Wells Fargo & Co. in the all-stock deal — without government assistance — upended what had appeared to be a carefully examined arrangement and caught regulators off guard. Wells’ original offer totaled about $15.1 billion, but since the value of its shares closed down 60 cents Friday, the deal is now valued at about $14.8 billion. Only four days earlier, Citigroup Inc. agreed to pay $2.1 billion for Wachovia’s banking operations in a deal that would have the help of the Federal Deposit Insurance Corp. The head of the FDIC said the agency is standing behind the Citigroup agreement, but that it is reviewing all proposals and will work with the banks’ regulators.
Wachovia's woes hit area schools College of St. Rose, Skidmore among local colleges with investments partially frozen by embattled bank
By MARC PARRY, Staff writer Last updated: 1:35 a.m., Saturday, October 4, 2008
At least two local schools, the College of Saint Rose and Skidmore College, have multimillion-dollar investments in a popular fund that was partially frozen by Wachovia Corp. this week.
The move left colleges around the country fretting over how to pay bills. Nearly 80 colleges in New York — home to the world's largest private higher education sector — have $1.2 billion parked in the $9.3 billion Short Term Fund, an investment tool used by about 1,000 colleges and private K-12 institutions.
The 34-year-old fund is similar to a money-market or interest-bearing checking account. Colleges use it to deposit revenue such as tuition. They redeem the investments as needed for expenses such as payroll, maintenance and utilities.
The developments are "a very unpleasant surprise" for colleges who considered the fund "as solid as the dollar," said Marcus Buckley, vice president for finance and administration at the College of Saint Rose.
"This is really unprecedented," said Buckley, whose Albany college had about $33 million in the fund. "And I think it goes to show just how enormous a ripple in the pond has been created by the financial dislocation in the markets."
Although some schools nationally are experiencing serious cash crunches because of the freeze, both Skidmore and Saint Rose said they have enough money to cover expenses.
Wachovia, the fund's trustee, announced on Monday plans to terminate the fund and set up a liquidation of its assets. Wachovia initially told investors they could withdraw only 10 percent of their money. By Friday, that had risen to 38 percent.
Laura Fay, a Wachovia spokeswoman, told the Associated Press that partially freezing the Short Term Fund as officials prepare for liquidation prevents a run on money and protects investors.
"It was not something we took lightly," Fay said. "In this environment, we felt this was the best way to proceed."
Money deposited in the fund is invested in short-term securities, said Keith Luke, managing director of the Connecticut-based Commonfund, which is an adviser to the Short Term Fund and one of the country's largest investment managers for nonprofits.
But with what's happening in the financial markets, "even the most liquid, highest-quality securities can no longer be sold and traded," Luke told the Times Union Friday morning.
Luke hoped congressional passage of the financial bailout would help unlock the credit markets, bring liquidity back to the market and enable the sale of those securities.
For some schools — especially smaller ones — the Short Term Fund "may be their only source of liquidity," Luke said.
"We hope that for most institutions, the fact that they can get 38 percent of the fund right now goes a long way to help them," he said. "We're also working with banks and other financial institutions to try to find ways in which those banks can extend temporary credit to institutions that might need it."
On Thursday, Commonfund also announced a 30 percent limit on withdrawals from its Intermediate Term Fund after investors in the Short Term Fund tried to withdraw money from that fund, according to the Associated Press. Locally, Skidmore has $38.5 million invested in the Short Term Fund and $4.5 million in the Intermediate Fund. "The Commonfund accounts are not expected to incur any losses," Skidmore spokesman Dan Forbush said in a statement. "Skidmore has access to other operating funds to meet operating needs."
The University at Albany and Rensselaer Polytechnic Institute did not respond to messages.
Siena College has less than $500,000 in the fund, far below previous balances. Union College is not invested in it.
The College of Saint Rose already has recovered about $13 million of its investment, Buckley said. That, combined with regular receipts, means the college will be able to cover expenses.
The Short Term Fund had returned earnings slightly better than U.S. Treasury bills. Buckley said the nuisance is switching to another short-term account — and the anticipated loss of interest earnings that will entail.
Marc Parry can be reached at 454-5057 or by e-mail at mparry@timesunion.com
So that's how the tuitions go up and up and up and up and up etc................keep the masses in the dark about the 'real' investments......you're talkin' billions of dollars 'hiding' knowledge.....the skirts are up even higher........
...you are a product of your environment, your environment is a product of your priorities, your priorities are a product of you......
The replacement of morality and conscience with law produces a deadly paradox.
STOP BEING GOOD DEMOCRATS---STOP BEING GOOD REPUBLICANS--START BEING GOOD AMERICANS
NEW YORK — Federal antitrust regulators on Friday cleared Wells Fargo’s $11.7 billion acquisition of Wachovia Corp., capping a weeklong battle for the Charlotte, N.C.-based bank. The rapid approval comes a day after Citigroup Inc. walked away from its own efforts to buy Wachovia. Late Thursday, Citigroup broke off talks with Wells Fargo and federal regulators after the suitors failed to reach an agreement over how to split up the bank. San Francisco-based Wells Fargo & Co. said Thursday that it would proceed with the purchase and plans to complete the deal by the end of the fourth quarter. The acquisition still needs the approval of Wachovia shareholders. The Federal Trade Commission included the deal on a list of transactions released Friday that received an “early termination” of their antitrust reviews. Early termination refers to the completion of a review by the FTC or Justice Department before the end of a 30-day period required under antitrust law. Citigroup agreed last week to buy Wachovia’s banking operations for $2.1 billion in a deal brokered by the Federal Deposit Insurance Corp. Four days later, Wells Fargo stunned Citigroup by announcing that Wachovia’s board had agreed to an $11.7 billion all-stock offer. Originally, the deal was valued at $15.1 billion, or $7 a share, but Wells Fargo stock has declined since it was announced.
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