How the Wachovia - Citi deal unraveled

Filings outline demise of Citi-Wachovia deal

Excerpt:

The gone-sour deal to sell Wachovia Corp.’s banking operations to Citigroup Inc. began with a 5 a.m. phone call Wachovia’s Bob Steel made to Citigroup’s Vikram Pandit on Sept. 26.

The deal was sealed 71 hours later at 4 a.m. Sept. 29 when federal regulators told Citigroup its $2.16 billion offer had been accepted.

It was dead 92 hours later when Steel called Pandit at 2:15 a.m. Oct. 3 to say he was taking a $15.1 billion offer from Wells Fargo & Co.

Comment: Interesting stuff. 12/30/12 will be the 4 anniversary of Wells Fargo's acquisition of Wachovia

Citi to cut 11,000

Citi's New Chief Launches First Cost-Cutting Salvo

Comments - Interesting bank stats from the Big 4:

Citigroup's North American consumer bank has long been seen by analysts as a likely target of cost-cutting efforts. Citi's North American consumer-bank revenue in the first nine months amounted to 4.3% of assets, compared with a 6.1% average at Wells and J.P. Morgan Chase, Goldman Sachs figures show.

Citigroup had 4,069 branches world-wide as of Sept. 30, down 3% from a year earlier, including 1,017 in North America. That compares with 6,200 at Wells Fargo, 5,596 at J.P. Morgan and 5,540 at Bank of America Corp

Citi Coup (d'état)

Citi Chairman Is Said to Have Planned Chief’s Exit Over Months

Excerpt:

Vikram Pandit’s last day at Citigroup swung from celebratory to devastating in a matter of minutes. Having fielded congratulatory e-mails about the earnings report in the morning that suggested the bank was finally on more solid ground, Mr. Pandit strode into the office of the chairman at day’s end on Oct. 15 for what he considered just another of their frequent meetings on his calendar.

Instead, Mr. Pandit, the chief executive of Citigroup, was told three news releases were ready. One stated that Mr. Pandit had resigned, effective immediately. Another that he would resign, effective at the end of the year. The third release stated Mr. Pandit had been fired without cause. The choice was his.

The abrupt encounter, described by three people briefed on the conversation, included a terse comment by the chairman, Michael E. O’Neill: “The board has lost confidence in you.”

A stunned Mr. Pandit chose to resign immediately. Even though Mr. Pandit and the board have publicly characterized his exit as his decision, interviews with people close to the board describe how the chairman maneuvered behind the scenes for months ahead of that day to force Mr. Pandit out and replace him with Michael L. Corbat, the board’s chosen successor.

Comment: Interesting read. Image is from The Hudsucker Proxy. Other possible titles to this post (Citi Coup is a turn on CitiGroup) were: "Et tu, O’Neill", "The Pandit Proxy", "As the Citi Turns" (because it seems like a soap opera over there!). As for the quote in red. I heard this exact quote from my board chairman at my last church. I was two years into that ministry (of 9 years). The board chairman called me late afternoon to tell me that the board had lost confidence in me and he was going to call for my resignation that night at the deacons' meeting. It was a fun meeting. He left and I stayed another 7 years. Turns out that "the board" was really just him.

Citigroup data breach .. an easy hack!

Thieves Found Citigroup Site an Easy Entry

Excerpt:

In the Citi breach, the data thieves were able to penetrate the bank’s defenses by first logging on to the site reserved for its credit card customers.

Once inside, they leapfrogged between the accounts of different Citi customers by inserting various account numbers into a string of text located in the browser’s address bar. The hackers’ code systems automatically repeated this exercise tens of thousands of times — allowing them to capture the confidential private data.

The method is seemingly simple, but the fact that the thieves knew to focus on this particular vulnerability marks the Citigroup attack as especially ingenious, security experts said.

Comment: Surprisingly easy!

Citigroup: "small compensation" for "jilting"

Jilted in Deal, Citi Will Get $100 Million

Excerpts:

Citigroup Inc. was jilted in 2008 when its bid for Wachovia Corp. fell apart and the battered bank fled to Wells Fargo & Co.

The New York bank finally got some revenge for being left at the altar, announcing on Friday that Wells Fargo will pay $100 million to settle "all claims related to this dispute," according to a joint statement by the two banks.

Citigroup had sought as much as $60 billion in damages from Wachovia and Wells Fargo, which announced their takeover agreement just four days after Citigroup thought it had won the Charlotte, N.C., bank.

The battle for Wachovia erupted barely two weeks after Lehman Brothers Holdings Inc. tumbled into bankruptcy and Merrill Lynch & Co. was sold to Bank of America Corp. Bank stocks were teetering, and rumors surged that customers were yanking deposits from weak banks. Wachovia was crumbling under the weight of bad mortgages.

Citigroup executives were enraged and humiliated by the disintegration of the Wachovia deal, which was hammered out with government assistance hours before Wachovia was set to be seized by regulators. Citigroup rushed in with a cut-rate offer of roughly $2 billion after Wells Fargo, of San Francisco, abruptly yanked its bid of more than $20 billion. The Wells Fargo offer didn't call for the U.S. government to back losses on bad loans.

Citigroup initially bragged that the takeover of much of Wachovia's operations made it a "pillar of strength." The deal would have tripled the size of Citigroup's retail-banking unit.

Within days, though, Citigroup Chief Executive Vikram Pandit was mulling the company's legal options. Wachovia agreed to sell itself entirely to Wells Fargo for $15.4 billion without any government aid. Wells Fargo became the largest U.S. bank in branches, though it assumed much more risk from Wachovia's mortgage portfolio than Citigroup had been willing to take.

...

Citigroup also claimed it had an exclusivity agreement with Wachovia not to negotiate or enter into competing bids, which was allegedly violated by Wells Fargo. A Wells Fargo court filing said Federal Deposit Insurance Corp. Chairman Sheila Bair had indicated to Wachovia that the Wells deal would be "superior" while Citigroup was attempting to finalize the announced agreement with Citigroup.

Citigroup sought more than $20 billion in compensatory damages and more than $40 billion in punitive damages from Wells Fargo for tortious interference.
...

Bert Ely, a banking consultant in Alexandria, Va., said the $100 million payment to Citigroup by Wells Fargo is "small compensation."

Comment: In the end it was better for Wachovia customers (being acquired by Wells Fargo). Hard to believe that was 2 years ago!

Wells Fargo - Citigroup chapter closes

Wells Fargo to pay Citi $100 million over Wachovia

Excerpt:

Wells Fargo & Co will pay Citigroup Inc $100 million to settle multiple lawsuits over the contentious 2008 purchase of Wachovia Corp, closing another chapter in the receding financial crisis.

The banks said the settlement will resolve all claims related to the dispute.

Citigroup had originally sought as much as $60 billion of damages from Wells Fargo for derailing its September 2008 agreement to buy large portions of Wachovia and quadruple its U.S. branch presence.

"This could have dragged on forever, and sometimes I think you're better just settling and moving on," said Anton Schutz, president of Mendon Capital Advisors in Rochester, New York, which owns shares of both banks.

"If Citigroup had gotten Wachovia, the financial returns would have been significant," said Schutz. "But it might have made it harder for Citi to do some of the things they're doing now, like getting leaner." He said the $100 million amount seemed low relative to the stakes in the dispute.

Citigroup had initially agreed to buy much of Charlotte, North Carolina-based Wachovia for $2.16 billion.

Wachovia was struggling with soaring losses on mortgage loans, and the agreement with New York-based Citigroup called for Federal Deposit Insurance Corp to share in those losses.

Wells Fargo, based in San Francisco, then bid a much larger sum for all of Wachovia, in a takeover that did not require FDIC support.

The $12.5 billion merger closed at the end of 2008, roughly doubling Wells Fargo's size and giving it the largest U.S. retail branch banking network.

Comment: See previous post from July 2009: Citigroup claim denied

CitiGroup 2 time loser

Filing Favors J.P. Morgan's WaMu Bid Over Citi's

Excerpt:

Citigroup Inc.'s unsuccessful bid for the teetering banking operations of Washington Mutual Inc. proposed that the U.S. government absorb a majority of the thrift's loan losses and limited Citigroup's financial exposure to $10 billion, according to a document released by regulators.

Terms of the offer by the New York bank previously were kept secret by the Federal Deposit Insurance Corp., which sold the failed banking units to J.P. Morgan Chase & Co. for $1.88 billion in September 2008. The document was disclosed following a Freedom of Information Act request by The Wall Street Journal.

The document appears to weaken claims by Washington Mutual's now-bankrupt parent company that the FDIC bent over backward to give J.P. Morgan a sweetheart deal on Washington Mutual. Citigroup offered no upfront cash as part of its bid and didn't want to assume Washington Mutual's uninsured deposits.

Citigroup also wanted the FDIC to cover 80% of "first losses" on the thrift's loans, including mortgages battered by declining real-estate values. Losses by the New York bank on the remaining 20% would have been capped at $10 billion, the document shows, with the FDIC stuck with any additional loan losses.

In comparison, J.P. Morgan sought and received no loss-sharing agreement from the FDIC. It also took control of all deposits held by Washington Mutual, whose collapse was the largest bank failure in U.S. history. "It would appear from publicly available documents that J.P. Morgan was far and away the best bidder," said Kevin Starke, an analyst with CRT Capital Group LLC in Stamford, Conn. "In hindsight, Citi's bid was too conservative."

J.P. Morgan and Citigroup were the only banks to bid for Washington Mutual as part of the auction process that is customary when insured U.S. banks and savings institutions fail. Under federal law, the FDIC must accept the "least-cost" offer from potential acquirers.

"The FDIC was able to sell WaMu through an unassisted transaction that protected all depositors and resulted in zero exposure to the government," an FDIC spokesman said. "No other bid accomplished this." Citigroup, J.P. Morgan and the Washington Mutual holding company, now in bankruptcy proceedings, declined to comment.

Comment: Also lost out on Wachovia

What Prince did not say

After the Crash, a Crashing Bore

Excerpt:

"Let's be real. This is what happened the past 10 years. You, for political reasons, both Republicans and Democrats, finagled the mortgage system so that people who make, like, zero dollars a year were given mortgages for $600,000 houses. You got to run around and crow about how under your watch everyone became a homeowner. You shook down the taxpayer and hoped for the best.

"Democrats did it because they thought it would make everyone Democrats: 'Look what I give you!' Republicans did it because they thought it would make everyone Republicans: 'I'm a homeowner, I've got a stake, don't raise my property taxes, get off my lawn!' And Wall Street? We went to town, baby. We bundled the mortgages and sold them to fools, or we held them, called them assets, and made believe everyone would pay their mortgage. As if we cared. We invented financial instruments so complicated no one, even the people who sold them, understood what they were.

"You're finaglers and we're finaglers. I play for dollars, you play for votes. In our own ways we're all thieves. We would be called desperadoes if we weren't so boring, so utterly banal in our soft-jawed, full-jowled selfishness. If there were any justice, we'd be forced to duel, with the peasants of America holding our cloaks. Only we'd both make sure we missed, wouldn't we?"

Comment: Obfuscation

Citigroup claim denied

Judge rejects Citigroup claim

Excerpt:

A federal judge in New York City rejected the claim by Citigroup Inc. that its unsuccessful attempt to purchase Wachovia Corp. last fall was protected by an exclusivity arrangement.

Wachovia was bought by Wells Fargo & Co., which offered a higher price.

Judge Shira Scheindlin on Wednesday ruled the Emergency Economic Stabilization Act made the Citigroup exclusivity contract unenforceable

Comment: Didn't think it would go far. Earlier post: "While I'm not a lawyer, I think that the Citicorp legal challenge will soon evaporate. "

Updated (thanks to Jeremy Cobb): Federal Judge Finds Bailout Act Voids Citigroup's Bid for Wachovia

Excerpt:

The emergency bailout package passed by Congress in October voided an exclusivity agreement that Citigroup had for buying embattled Wachovia Corp. in a deal that was ultimately trumped by Wells Fargo, a federal judge has ruled.

Rejecting Citigroup's bid for as much as $60 billion in damages against Wells Fargo, Judge Shira A. Scheindlin ruled Wednesday that §126(c) of the Emergency Economic Stabilization Act (EESA), passed on Oct. 3, 2008, renders the exclusivity agreement unenforceable.

The judge's resolution of the issue gets rid of most, but not all, of Citigroup's case for damages pending before Manhattan Supreme Court Justice Charles Ramos. The action before Ramos had been stayed pending Scheindlin's decision.

The ruling does not affect a constitutional challenge to the Emergency Economic Stabilization Act that Citigroup may pursue in federal court, where a conference before Scheindlin is scheduled for July 22.

Citigroup had what it thought were exclusive rights through Oct. 7, 2008, to close a deal for $2.1 billion, or $1 per Wachovia share. The transaction would have been made with some assistance by the FDIC, which was invoking its authority under §13 of the Federal Deposit Insurance Act to take action where there is the possibility of "systemic risk" to the economy. The FDIC insisted that, unless the deal was closed by Oct. 6, Wachovia would be forced into receivership.

On Oct. 2, Wells Fargo jumped in with a $15 billion offer for Wachovia, approximately $7 per share. Significantly, the deal required no assistance from the FDIC. The merger was announced on Oct. 3, the same day the act was passed.

On Oct. 4, Citigroup sued in state court, charging Wachovia with breach of contract and Wells Fargo with tortious interference with contract. The case was first removed to federal court but later was remanded back to state court and Justice Ramos.

The same day, Wells Fargo and Wachovia filed their own actions in federal court seeking a declaratory judgment that their transaction was valid. Within a week, Citigroup dropped its attempt to block the sale but insisted it would continue its damages claim.

Scheindlin's decision in Wachovia Corp. v. Citigroup, Inc., 08 Civ. 8503, was the first by a federal judge interpreting §126(c), which renders unenforceable an agreement restricting the ability to acquire any insured depository institution where the FDIC exercises its authority under Federal Deposit Insurance Act §§11 or 13.

New-look Citi

Citigroup moves toward break up

Excerpts:

Citigroup is to break itself up by separating higher risk US consumer finance and securities businesses from its global commercial banking operations in a dramatic attempt to ensure its survival.

People close to the situation said Citi would place unwanted assets and businesses worth more than $600bn - a third of its balance sheet - into a “non-core” unit to isolate them from healthier parts of the company.

...

The move to split the company into two would go a long way towards dismantling the 1998 merger between John Reed’s Citicorp and Sandy Weill’s Travelers that created Citigroup and could be a template for other troubled banks.

The new-look Citi would be more similar to the old-style Citicorp: a global commercial and retail bank but with the addition of the advisory and underwriting business of Travelers’ investment bank Salomon Brothers.

Citi would, however, seek to dispose of some of the risky securities and consumer finance businesses, including subprime mortgages and the Primerica door-to-door insurance sales force, that came with Travelers.

The investment bank would remain a core part of Citi but its operations and capital would be constrained, especially in proprietary trading and securitisation, in an effort to reduce risk and earnings volatility, insiders said.

Comment: I'm not close to the situation, but my observation is that somewhat like ITT of yesteryear, Citigroup was too disparate to manage.

Citigroup is the Chrysler of banking

Citigroup; Smith Barney for Sale

Excerpt:

... developments highlight how badly Citigroup has been damaged by the global financial crisis. Deepening losses, declining confidence in its leadership and a desperate need to raise capital have forced the bank to rethink the strategy it has clung to for years.

“This is either a one-off or the first inkling of a dismantlement of the company, taking apart of what John Reed and Sandy Weill did,” a senior executive with ties to the company said, referring to the two leaders who forged the landmark deal to bind Citicorp and Travelers Group in 1998.

With pressure mounting on Vikram S. Pandit, Citigroup’s chief executive, the company’s executives say the decision to split off Smith Barney, the “crown jewel” brokerage business he said he loved a few months ago, suggests the bank’s troubles are so deep that he is looking to reshape the company in a former image of itself.

While a deal is not yet final, such a change would position Citigroup to look more like Citicorp — a global franchise with strengths in trading, corporate and investment banking, and international consumer banking — than the bloated and unwieldy company it has become.

Comment: The "behemoth" of banking is just not working!

Urbano Colectivo

Inbursa buys up to $150m in Citi shares

Excerpt:

Inbursa, the bank owned by Carlos Slim, the Mexican billionaire, has bought up to $150m in Citigroup shares over the past week as the US financial group’s stock plunged in value.

Inbursa, Mexico’s sixth largest bank, began buying the stock as prices fell on Wednesday last week, and continued the next day when they punctured the $5 mark. The bank’s brokerage arm is believed to have bought as many as 29m Citigroup shares for about $150m.

Comment: "Urbano Colectivo" is my translation of CitiGroup into Spanish

Citigroup: Risk management missteps

Citigroup Saw No Red Flags Even as It Made Bolder Bets

Excerpt:

In September 2007, with Wall Street confronting a crisis caused by too many souring mortgages, Citigroup executives gathered in a wood-paneled library to assess their own well-being.

There, Citigroup’s chief executive, Charles O. Prince III, learned for the first time that the bank owned about $43 billion in mortgage-related assets. He asked Thomas G. Maheras, who oversaw trading at the bank, whether everything was O.K.

Mr. Maheras told his boss that no big losses were looming, according to people briefed on the meeting who would speak only on the condition that they not be named.

For months, Mr. Maheras’s reassurances to others at Citigroup had quieted internal concerns about the bank’s vulnerabilities. But this time, a risk-management team was dispatched to more rigorously examine Citigroup’s huge mortgage-related holdings. They were too late, however: within several weeks, Citigroup would announce billions of dollars in losses.

Normally, a big bank would never allow the word of just one executive to carry so much weight. Instead, it would have its risk managers aggressively look over any shoulder and guard against trading or lending excesses.

But many Citigroup insiders say the bank’s risk managers never investigated deeply enough. Because of longstanding ties that clouded their judgment, the very people charged with overseeing deal makers eager to increase short-term earnings — and executives’ multimillion-dollar bonuses — failed to rein them in, these insiders say.

Comment: Internal controls, auditing, and fiscal transparency are essential!

Citigroup issues are not new

Woes at Citigroup Began With Failed Bid for Wachovia

Excerpts:

As the global financial crisis drove Wachovia toward collapse, the government frantically engineered their marriage. At a bargain price of $1 a share, Vikram S. Pandit, Citigroup’s chief executive, was happy to oblige: The deal would have greatly enhanced Citi’s retail banking presence and added more stable consumer deposits to a balance sheet staggered by billions in write-downs on bad mortgage loans and related securities.

But like so many other things for Citigroup over the last several years, it fell apart. Less than a week later, Wells Fargo, the powerful San Francisco-based bank, swooped in with a higher offer. Citi was left in the lurch, without a business that was vital to its future.

...

Many analysts argue that the globe-spanning conglomerate, largely built by Sanford I. Weill, had never really worked as a cohesive unit. Different divisions have consistently battled, and promised synergies between units have rarely emerged.

“They never spent the time, the money or the energy to integrate all of the businesses,” said Meredith Whitney, analyst at Oppenheimer. “And so the credit card business speaks Mandarin while the mortgage business speaks Cantonese. It’s not a functional family. And because it’s not a functional family, it’s extraordinarily expensive to operate all the separate businesses, and you don’t get any of the advantages.”

Many of these problems were masked during the credit boom this decade. But with the financial crisis in full swing, the bank’s failure to unite its empire has become more exposed than ever.

“A lot of the issues facing Citigroup are not new issues, they have simply grown greater in severity,” said Michael Mayo, an analyst at Deutsche Bank.

Comment: The failed to integrate their business lines and thus could not leverage their synergies.

Drop GM and C from DJIA

Kick GM out of the Dow...now!

Excerpt:

General Motors has a market capitalization of less than $2 billion. The stock, which now trades for a little under $3 a share, hit a 70-year low of $1.70 on Thursday morning before recovering a bit.

Normally, when a blue-chip company sinks to such depths of despair, it gets tossed from the S&P 500. But not only is GM (GM, Fortune 500) still a member of that index, it remains a component of the granddaddy of market barometers: the venerable Dow Jones Industrial average.

Why? Or in the words of mid-'90s self-help guru Susan Powter, "Stop the insanity!" The editors of The Wall Street Journal and Dow Jones Indexes, who decide who's in and who's out of the Dow, soon have to come to grips with reality and remove GM from the DJIA.

Comment: WFC should replace C. DJIA components

How the Wachovia - Citi deal unraveled

Filings outline demise of Citi-Wachovia deal

Excerpt:

The gone-sour deal to sell Wachovia Corp.’s banking operations to Citigroup Inc. began with a 5 a.m. phone call Wachovia’s Bob Steel made to Citigroup’s Vikram Pandit on Sept. 26.

The deal was sealed 71 hours later at 4 a.m. Sept. 29 when federal regulators told Citigroup its $2.16 billion offer had been accepted.

It was dead 92 hours later when Steel called Pandit at 2:15 a.m. Oct. 3 to say he was taking a $15.1 billion offer from Wells Fargo & Co.

Comment: Interesting stuff

Citi backs out

Citi ends negotiations, won’t stop Wells-Wachovia merger

Excerpts:

Citigroup said this afternoon that it had stopped negotiating with Wells Fargo & Co. over a possible splitting up of Wachovia Corp.’s operations, citing “dramatic differences” in possible transaction structures.

In a statement, Citi said the New York bank will continue to pursue legal claims against Wachovia and Wells Fargo but will not seek to stop a Wachovia-Wells merger. All three banks have been under a legal ceasefire until 8 a.m. Friday.

Citi agreed on Sept. 29 to buy most of Wachovia for $1 per share with assistance from the Federal Deposit Insurance Corp. That deal left behind Wachovia’s asset management and brokerage businesses. Wells, however, swooped in four days later with a deal to buy all of the Charlotte bank for $7 per share.

Citi said in a statement: "We are proud to have been part of an historic transaction that was supported by all of the federal banking agencies and the Secretary of the Treasury, after consultation with the President, and that we carefully designed to avoid systemic stress and to advance the interests of our shareholders."

Comment: Just off the wire so not sure how complete this news is. Updated below: Citi wants damages:

Citi Withdraws From Wells Fargo Talks

Excerpts:

Citigroup said in a statement that it is no longer seeking to block the Wells Fargo-Wachovia merger, but it will seek compensatory and punitive damages.

Comment: A Norwest mug is in the mail!

Wachovia wrangling - snag?

Wells Fargo, Citigroup, Wachovia negotiations continue

Excerpt:

However, The Wall Street Journal, is reporting that the negotiations have hit a snag. The newspaper cites unnamed sources familiar with the negotiations as saying both New York-based Citi (NYSE:C) and San Francisco-based Wells (NYSE:WFC) are worried that Wachovia’s bad mortgage loans could lead to steeper losses than initially expected.

...

In some ways, it is interesting to note which parties aren’t involved. Wachovia, which on Friday accepted a $15.1 billion offer from Wells, is not at the table. Nor is the Federal Deposit Insurance Corp. directly involved at this time.

Citi, walk away from Wachovia!

Excerpt:

Call me crazy. But isn't the solution simple?

Citigroup should walk away -- even if it has to be paid to do so -- and go find something else to buy.

Wells Fargo (WFC, Fortune 500) wants to buy all of Wachovia for about $15.7 billion, or $7 a share. Citigroup (C, Fortune 500) announced four days before Wells swooped in with its bid that it planned to buy just the banking assets of Wachovia for about $2.2 billion, or $1 a share.

Do the math. $7 or $1? Which is the better deal for Wachovia shareholders? Hmm.

Comment: Maybe they both should walk away?

The King Solomon solution

Angry Feds May Force Citi and Wells to Share Wachovia

Excerpt:

Worried about a protracted legal battle further wrecking the credit markets, banking system, and economy, the Feds have stepped into the fight for Wachovia. The solution? Citi and Wells Fargo may have to share it:

Comment: My solution: Let the stockholders decide! The King Solomon solution refers to 1 Kings 3:25-27.

Wachovia - behind the scenes

FDIC says Wachovia deal in the 'public interest' may come today

Excerpts:

... legal filings show dire concerns about the Charlotte bank’s health.

Following the failure of Washington Mutual on Thursday Sept. 25 and the House of Representatives initial rejection of a government bailout, Wachovia’s stock faced significant pressure, Wachovia chief executive Bob Steel said in an affidavit filed over the weekend.

In response to these concerns, the bank began negotiating on Saturday with Citi and Wells Fargo about a possible merger, Steel said. Wells chairman Dick Kovacevich indicated he was interested in buying all of Wachovia, but by 6 p.m. Sunday stepped aside. Steel then received a call from FDIC chairwoman Sheila Bair, who said the situation posed “systemic risk” and directed Steel to talk to Citi.

At a Wachovia board meeting at 6:30 a.m. on Monday Sept. 29, Steel told directors that the bank had two choices: file for bankruptcy or negotiate with Citi and the FDIC, which provided assistance in the transaction. The deal was announced late that morning.

At the time, Wachovia “was on the verge of collapse, burdened by bad loans and caught up in a liquidity crisis that threatened its very survival,” Citi said in the complaint it filed today. “Had Citigroup not stepped up in this way, Wachovia would have failed the following day and the debt issued by its holding company would have collapsed, with potentially devastating implications for the stability and security of the financial markets.”

Negotiations on the final merger agreement with Citi, however, proved “extremely complicated and difficult,” Steel said, adding that Wachovia was under “tremendous” pressure from regulators and Citi to reach an agreement before today. Wachovia suggested a transaction that would buy all of the company, but Citi refused, Steel said.

At 7:15 p.m. on Thursday, Steel said he received an unexpected call from FDIC chairwoman Sheila Bair telling him to be on the lookout for an offer from Wells. He was preparing to board a flight from New York to North Carolina so he told her to call the bank’s general counsel Jane Sherburne. When he landed, he talked with Bair again before receiving a 9 p.m. call from Wells Fargo chairman Dick Kovacevich. A few minutes later, Kovacevich e-mailed Steel a signed merger agreement.

Early Friday morning, Wachovia chief executive Bob Steel said that he and the bank’s advisers told the Wachovia board that it faced being put into FDIC receivership unless it completed a deal with either Citi or Wells Fargo. The board then approved the Wells deal.

Meanwhile ...

Citigroup in 'standstill agreement' on litigation

Wachovia, Citigroup and Wells Fargo said this afternoon that they have reached an agreement to standstill on all litigation activity effective immediately.

The agreement will terminate at noon on Wednesday, unless extended.

"We are pleased to participate with the Federal Reserve Board in a fair-minded, good faith process to achieve a prompt and successful outcome,” Citi said in a statement.

...

New York-based Citi said it remains “very excited” about its plan to buy the bulk of Wachovia, and that the Citi-Wachovia deal would have been finalized last Friday “if it had not been subverted by the unlawful conduct of Wachovia, Wells Fargo, and their officers and directors and outside advisors.”

The $60 billion figure stirred ridicule from the Web site wachoviavote.com, which was organized by shareholders who oppose the Citi deal. Citi's offer last week to buy Wachovia for $2.1 billion essentially valued the Charlotte bank at $1 per share. The $60 billion demand “is a pretty twisted way of saying Wachovia is worth $28 a share…,” the Web site said in a post today.

Comment: Visit the wachoviavote.com site for information from a Wachovia shareholder perspective.

We oppose this transaction [Citigroup transaction] for several reasons.
To begin with, any deal should be structured as an exchange of Wachovia stock for shares of the acquiring entity so that the deal involves not just the bank but the entire Wachovia, which is worth a lot more as an entire company.
The way this deal is structured Wachovia is selling its biggest asset, the bank, for practically nothing. The shareholders of Wachovia get nothing in return, and we are left holding shares of a much, much smaller Wachovia without its biggest asset.
It's hard to imagine that the fourth largest bank in the nation, with $800 billion in assets, $450 billion in deposits, 3300 branches in 21 states, 15 million household and business customers; 15.4 million online product and service enrollments and 5.1 million active online customers is only worth an amount equal to $1.00 per share of Wachovia stock.