Wells, Wachovia and Sweet, Sweet Deals

During the early days of the financial meltdown, the news was that Wells Fargo Bank was set to acquire teetering Wachovia, but those reports were overshadowed by the news that the FDIC had brokered a deal with Citigroup for the acquisition.

If you read beyond the smear headlines that seem to dominate every major news source, you’ll discover the following:

  • The brokered deal by the FDIC would have Citigroup acquiring Wachovia for $1/share, down from over $4/share a year ago.
  • Citigroup’s offer only included the banking operation
  • The offer by Wells Fargo was for $7/share and included all operations of the company.
  • Wells Fargo has long been interested in expanding its presence to be competitive with Bank of America on the national banking landscape. An acquisition of Wachovia opens the door for them to become competitive while sparing the government $42 billion dollars of absorbed losses.
  • A Wells Fargo acquisition protects employees who hold shares of Wachovia in their retirement accounts from huge losses.

On its face, it would seem that a Wells Fargo acquisition of Wachovia is a far superior solution to the fire sale brokered by the FDIC.

Now both deals are mired in expensive, urgent litigation. As of this writing, New York State Supreme Court justice Charles E. Ramos had blocked the Wells Fargo merger. That injunction was lifted by an appeals court a few hours ago.

Meanwhile, the FDIC frets that other deals might not happen because…

The litigation could put regulators in a tough spot. The Wells Fargo deal may be better for taxpayers, but if it succeeds, in the future other financial institutions may not be willing to help the government, as Citigroup did, because of the risk that they might not reap the anticipated benefit.

I’ve heard this before. Specifically with respect to AT&T and illegal wiretaps. Where the Bush administration urged Congress to give immunity because otherwise there was no incentive for companies to cooperate.

Have you ever heard such bogus logic? The Citigroup deal was so sweet it was nearly saccharine. What more incentive would they have needed? The fact that the “benefit” to Citi would have come at the expense of employees and individual shareholders seems to carry no weight. Just as the Bush Administration’s whine about AT&T’s non-cooperation was bogus, given that they were operating under court orders and all…

I have never in my life seen such wanton greed and corruption displayed for the world to see. Let’s hope voters are keeping their eyes open.

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